NEW YORK (CNNMoney.com) – The U.S. economy should experience slower growth than originally anticipated for the remainder of the year and in 2007, the White House said Tuesday. The President’s Council of Economic Advisers projected that economic growth would be slower than forecasted last June, with real gross domestic product growing 3.1 percent for all of 2006, down from June projections of 3.6 percent pace. In 2007, the White House expects the economy to expand at a pace of 2.9 percent, lower than earlier predictions of 3.3 percent. “The economic forecast clearly reflects the fact that the U.S. economy is moderating to more sustainable growth levels, firmer labor markets and steady inflation rates,” Treasury Secretary Henry Paulson said in accompanying remarks.
More sustainable growth and firmer labor markets? Now, that is putting a happy face on a rather sour forecast. Over the past six years, average real GDP growth has been a mere 2.5% per year and yet we heard the Bush cheerleaders crying this is the greatest economy ever. Whenever some private forecaster suggest that weakening housing demand would lead to slower economic growth – the same cheerleaders attacked.
Now I HOPE the economy exceeds expectations, but can we once and for all put a rest to the free lunch nonsense from the supply-siders that tax cuts are the magic cure all for long-term growth? Then again – Dick Cheney was uttering the “R-word” back in December of 2000 to make the case for the first Bush tax cut. I’m sensing a repeat performance.