World Economy

US Economy Could Go Off the Cliff in 2020

US Economy Could Go Off the Cliff in 2020US Economy Could Go Off the Cliff in 2020

US economic growth could face a challenging slowdown as the Trump administration’s powerful fiscal stimulus fades after two years, according to former federal reserve chairman Ben Bernanke.

Bernanke said the $1.5 trillion in personal and corporate tax cuts and a $300 billion increase in federal spending signed by President Donald Trump “makes the Fed’s job more difficult all around” because it’s coming at a time of very low US unemployment, Bloomberg reported.

“What you are getting is a stimulus at the very wrong moment,” Bernanke said Thursday during a policy discussion at the American Enterprise Institute, a Washington think tank. “The economy is already at full employment.”

The stimulus “is going to hit the economy in a big way this year and next year, and then in 2020 Wile E. Coyote is going to go off the cliff,” Bernanke said, referring to the hapless character in the Road Runner cartoon series.

Bernanke, who stepped down from the US central bank in 2014, is a distinguished fellow in residence at the Brookings Institution in Washington.

The Congressional Budget Office forecast in April that the stimulus would lift growth to 3.3% this year and 2.4% in 2019, compared with 2.6% in 2017. GDP growth slows to 1.8% in 2020 in the CBO projections. Fed officials predicted 2% growth in 2020 in their March median projection.

The degree of slowdown as stimulus fades is a matter of debate among economists, with some predicting the effects could last beyond two years if the US boosts its capital stock and upgrades its workforce during this period of strong growth. Congress could also write new spending laws to smooth out the program, Bernanke noted.

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