The Trump tax cuts are not likely to live up to the official growth projections because they came at the wrong time of the economic cycle, according to a new Federal Reserve analysis published Monday.
The forecasts that the tax overhaul will boost growth in the years ahead “may be overly optimistic,” economists affiliated with the Federal Reserve Bank of San Francisco concluded in a note published by the regional bank.
The reason the tax cuts may not boost economic growth as much as projected, the economists write, is that they came as the economy is in the middle of an expansion. Tax cuts are believed to have a bigger effect during downturns.
The two authors note that the Congressional Budget Office, Congress’ nonpartisan group of budget experts, projected the tax law to increase growth by 1.3 percentage points this year. They conclude that the boost will be less than that – or even zero.
The Trump administration, on the other hand, has maintained that the law will accelerate growth even faster than the CBO has projected.
