White House National Economic Council Director Kevin Hassett said the U.S. economy is now heading toward strong growth, but some "external" factors could prevent the Trump administration from achieving its goal of at least 3% growth.
Speaking at an event hosted by the Economic Club of New York on Monday, Hassett said that given rising U.S. productivity and wages, economic growth "should be around 4%, not 3%." He said this was his "baseline forecast, assuming no interference from the outside world."
Trump administration officials, including Treasury Secretary Bessent, have consistently set a goal of sustained gross domestic product (GDP) growth of 3% during Trump's current term, while non-official economists expect growth closer to 2%.
In recent quarters, an AI investment boom has been supporting GDP growth, but economists point out that slowing labor force growth is a major drag, and areas such as the housing market also remain under pressure.
Turning to the fiscal outlook, Hassett suggested that some complicating factors could hinder the goal proposed by Bessent of reducing the fiscal deficit to 3% of GDP. When asked whether the deficit ratio was expected to fall to 3% by the end of Trump's term, Hassett said: "It basically depends on whether there will be some 'force majeure' factors preventing that goal from being achieved."
Bond yields. One of the factors recently driving the widening of the U.S. fiscal deficit is the increase in debt interest costs caused by rising U.S. Treasury yields.
When asked about the recent sharp rise in bond yields, Hassett said it partly reflects a more attractive investment environment. He said that when projects such as data centers remain profitable even as financing costs rise, companies will continue to borrow to build, and debt issuance will push interest rates higher.
Hassett said: "The 30-year U.S. Treasury market is telling you that the real return on capital is higher than before."
After total U.S. public debt surpassed $40 trillion in August, Hassett played down concerns about high federal debt. He proposed a narrower measure, saying that "a lot of our debt is actually owed to ourselves." He estimated that so-called "external" U.S. debt is about $15 trillion, but did not explain the specific calculation method for that measure.
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