Welcome to economic reality, Mr President

How fast can the US economy grow? There is a lot riding on the answer, not just for Americans themselves but for the global economy too.

During the recent election campaign, Donald Trump said he thought growth could reach 5–6% with the benefit of his policies — but that is fanciful for a large, mature economy; even one that is home to many wonderfully innovative, well-managed businesses.

Trump has since settled on a target of 4% or so, but even this will be difficult to reach and sustain. The only period of sustained growth above 4% in the last half century was 1997 to 2000, when the tech sector boomed and productivity grew strongly.

Records show the US economy registering high growth rates in short bursts when bouncing back from recession, but the first reality facing Trump is that recovery from the Great Recession of 2008-09, although tepid by historical standards, has been going on for seven years and the economy is working close to capacity. Performance from here on will be determined by underlying trends.

The second reality greeting Trump is that established trends in labour force and productivity growth at the outset of his presidency are not strong enough to sustain growth above 4%, or even 3%. And Trump’s mixed bag of economic policies — as far as they can be discerned — contains at least as much that will stifle future productivity growth (such as his trade policies) as will lift the trend.

This is not to rule out the possibility of a short burst of faster growth if the pool of discouraged workers left over from the Great Recession is enticed back into the labour force, and there is an accompanying burst of business confidence and investment. But this would be quite different from a sustained period of strong growth at the rates Trump has targeted.