U.S. on track for a long but costly expansion

The vast majority of economists predict this expansion will break the record for the longest one. There are few signs of a recession coming soon, and the GOP tax cuts and additional infusion of government spending approved by both parties are expected to cause growth to pick up in the coming months.

Goldman Sachs now says there’s a 90 percent chance this expansion will break the prior record set during the 1990s tech boom when the economy grew uninterrupted for a decade. Of course, nothing is certain with the economy, but if the current expansion lasts past July 2019, it would become the longest.

Right now, the Blue Chip consensus of over 50 top economic forecasters anticipates solid growth of 2.8 percent this year and 2.6 percent the following year. No one in the group is anticipating a recession, although they note a full blown trade war between the U.S. and China could alter the predictions and counteract much, if not all, of President Donald Trump’s tax-rate reductions.

“It will be the longest expansion ever,” predicted Allen Sinai, chief economist at Decision Economics. “I don’t even think an attempt at impeachment would stop the underlying fundamentals of the U.S. and non-U.S. economies of giving us good results.”

In an attempt to boost growth, Trump passed massive tax cuts, scaled back regulations and boosted government spending in his first year in office. The result is a large-scale stimulus that appears to be causing growth to rise but at a cost: Trump has also triggered an unprecedented expansion of the federal deficit.

“The U.S. economy is projected to grow considerably faster than potential for a few years,” the International Monetary Fund wrote in its World Economic Outlook released Tuesday. But “the U.S. tax reform will reduce growth momentum starting in 2020.”

The IMF predicts U.S. growth will hit 2.9 percent this year and 2.7 percent in 2019, a level of growth that hasn’t been achieved since 2006. But the IMF also predicts the United States will be the only advanced economy in the world to have its debt-to-GDP ratio get worse in the next five years as the government budgets become even more unbalanced, adding to the debt.

“Given the increased fiscal deficit, which will require adjustment down the road, and the temporary nature of some [tax] provisions, growth is expected to be lower than in previous forecasts for a few years from 2022 onward, offsetting some of the earlier growth gains,” the IMF warned Tuesday.

The current expansion, which hasn’t necessarily felt record-breaking for many Americans, has been a long but slow recovery from the Great Recession and financial crisis that struck a decade ago. Growth has averaged about 2 percent a year, far slower than the 3.6 percent annual average during the 1990s expansion, and wages have grown well below the usual pace in good economic times.

Trump called growth during President Barack Obama’s tenure weak and insisted he could make it better, while Democrats counter that Obama had the tough task of lifting the nation out of a particularly deep crisis that saw unemployment hit the worst level in a quarter century.

The consensus among the world’s top economic forecasters is that the United States is in for good times through 2019 or even 2020, but that will likely be followed by an economic hangover of sorts.