JAMES CARTER: It’s Only Up From Here

President-elect Donald Trump is not inheriting a rock-solid economy on Jan. 20. Far from it.

The Congressional Budget Office’s (CBO) newly issued economic forecast anticipates the country’s economic growth rate will fall below 2% next year and remain below 2% for the foreseeable future. By comparison, the U.S. economy grew an average of 3.5% per year between 1947 and 2000 — averaging 4.3% as recently as 1996 to 2000.

In a nearly $30-trillion economy, even small growth-rate differentials matter.

Moreover, as the U.S. economy slows, CBO anticipates a significant downturn in job creation. The U.S. economy added an average of 185,000 jobs each month in 2024. CBO expects net job creation will plummet 51 percent next year to just 90,000 per month!

By 2027, CBO anticipates net monthly job creation will have collapsed by 74 percent to a net of just 46,000 per month, placing modest upward pressure on the unemployment rate.

Fortunately, the incoming president, unlike the outgoing president, understands the problem and is poised to enact policies explicitly designed to “reignite explosive growth.”

Economic growth occurs when a country is committed to free markets, limited government, sound money, and legal protections.

Economic growth occurs when a country’s labor force grows and is given the training and tools to be increasingly productive. That progress largely reflects the growth of a country’s potential labor supply, the degree to which potential workers are enticed into the labor force, and the productivity of that force.

Admittedly, labor force growth is partly a function of demographics. But public policy matters as well. President Joe Biden’s so-called American Rescue Plan Act of 2021, with its generous, refundable benefits for non-work, for example, discouraged labor force participation and hampered economic growth.