Will Politics Trump Economics?

A disquieting gulf has opened up between the front pages and business sections of major newspapers. The real estate above the fold on page one is all Trump, all the time. Stories describe a disorganized White House, testy relationships with foreign leaders, discord with Capitol Hill and demonstrations in college towns across the US. Meanwhile, business news sources, more decorous but still somewhat breathless, list record highs for major equity indexes, subdued asset-price volatility and economic data that consistently beat expectations.

Most economists apparently skip straight to the business section. In the latest Wall Street Journal survey of over 70 of the guild (as shown in the chart), forecasts for US real GDP over this year, as well as the next two years, cluster tightly around 2.25%. How tightly? As the table shows, about nine-in-ten economists expect real GDP growth to fall between 1% and 3% over the next three years. In the event, the historical record spans a much wider range, as plotted by the shaded area in the chart and summarized at the bottom of the table. Only 30% of the post-World War II observations were in that narrow window.

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