THE WEIGH OF EXPECTATION
WASHINGTON, DC – Will America’s economy run too hot in 2018?
USUALLY politicians pretend that good economic news on their watch is no surprise. But America’s recent growth figures have been so positive that even the administration of President Donald Trump has allowed itself to marvel. “It’s happening faster than we expected,” mused Mick Mulvaney, the White House budget chief, in September, after growth rose to 3.1% in the second quarter. (Mr Trump in fact came to office promising 4% growth, but the goal now seems to be 3%). Mr Mulvaney warned that hurricanes would soon bring growth back down. Instead, in the third quarter, it rose to 3.3%—a figure that was celebrated with more conviction. The administration’s initial caution was wise: quarterly growth figures are volatile, and few economists expect growth above 3% to carry on for long. Yet there is no denying that the economy is in rude health.
In part, that reflects the strength of the global economy in 2017. But it is also the culmination of a years-long trend. As politics have consumed America’s attention for the past two years, common complaints from earlier in the decade have, one by one, begun to look dated. The median household income is no longer stagnant, having grown by 5.2% in 2015 and 3.2% in 2016, after adjusting for inflation. During those two years, poorer households gained more, on average, than richer ones. Business investment is no longer tepid: it drove growth in the third quarter of the year (see chart 1). Jobs are plentiful—unemployment is just 4.1%. From Wall Street to Main Street to the C-suite, businesses ooze confidence. What is more, Republicans are poised to stimulate the economy with tax cuts. Analysts no longer ask when growth will at last pick up. Instead, they wonder whether the economy might overheat.