Economic forecast looking rosier for 2020 and beyond

Michael Busler
4 min readDec 31, 2019

By nearly every metric, the US economy did well in 2019, although growth was slower than in 2018. For next year, contrary to the consensus view from most economists, economic growth will accelerate. And growth could increase even more after 2020. Trump has set the stage for a prolonged period of high growth, full employment and low inflation: nearly perfect economic conditions that should lead to a rosy economic forecast for 2020 and beyond.

Economic growth to slow a bit?

Most economists now forecast that economic growth will slow next year. In 2018, growth hit almost 3%, an annual rate not seen since 2005. This year, while all of the data is not available as yet, it looks like growth slowed to about 2.4%. Most economists are forecasting growth in 2020 to be 2% or less. They are likely underestimating. Why?

The tax cut passed by Congress in 2017 and implemented in 2018 accelerated economic growth. At the time, many economists, especially those in the Trump Administration, predicted higher than 3% annual growth. That didn’t happen. As President Trump correctly pointed out, it was the Federal Reserve’s (FED) Monetary Policy that held down growth. Fortunately, the FED realized their mistake in mid-2019.

Because some key interest rates were near zero, the FED was worried about inflation. So they raised interest rates eight times from the end of 2016 to the end of 2018. Just as growth was accelerating in 2018, the FED checked the economy with the rapid increase in interest rates.

Making things worse, the FED decided to reduce its balance sheet. That meant the FED would sell nearly half a trillion dollars of bonds they held. When the FED sells bonds, they remove money from the economy. The reduction in the money supply tends to slow economic growth.

Midway through 2019, the FED realized its mistake. Interest rates were lowered three times and the FED stopped reducing its bond holding. They also injected some cash back into the system, partially reversing the damage done previously. It typically takes six to nine months for the FED’s actions to be felt in the economy. This should lead to a more robust economic forecast.

Looking ahead

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Michael Busler

Dr. Busler is an economist and a public policy analyst. He is a Professor of Finance at Stockton University. His op-ed columns appear in Townhall, Newsmax.