White House chief economist Kevin Hassett said Tuesday that a recession next year is “not impossible,” but that the Trump administration is “pretty confident” the economy will grow.
“Recessions often happen and few people see them coming,” Hassett said in a press briefing to introduce the president’s annual economic report.
Hassett, the chairman of the president’s Council of Economic Advisers, added that the administration is monitoring the potential for a global slowdown.
“We’re watching closely, especially Europe, which seems very close to recession in part over uncertainty due to Brexit,” he said.
In the annual Economic Report of the President released on Tuesday, the administration pledges to begin negotiating a free trade agreement with the United Kingdom “as soon as it leaves the European Union.”
Despite growing concerns about the ripples of Brexit across the global economy, due in part to the U.K.’s outsize influence on global financial markets, the administration paints a rosy economic picture for the next year.
[Related: 90 percent of big manufacturers high on Trump economy, set 4.4 percent growth target]
Hassett predicts the economy will grow by 3.2 percent from the end of 2018 to the end of 2019. That would be slightly better than the growth seen over the same period of time from 2017 to 2018, when the economy enjoyed the initial impact of individual and corporate tax cuts to grow at a 3.1 percent clip.
Hassett said that he and his colleagues expect an uptick in manufacturing, which they argue will sustain momentum from tax cuts and other incentives for businesses to invest provided by the 2017 tax law.
“Our argument is that it’s really not a sugar high at all,” said Hassett, pushing back against an argument made by other economists that the impact of the 2017 tax overhaul won’t last.
“We actually cut taxes to encourage people to build new factories. We got new factories last year, we’ll get more factories this year,” he said. “We expect that the surge that we got … will continue to create growth and jobs for some time.”
