Even Amidst Recovery, Tax Reform Helps Growth
With the Federal Reserve acknowledging that our economic recovery is beating expectations, it’s important to recognize how pro-growth policies like the Tax Cuts and Jobs Act (passed just three years ago) not only succeeded in ending the last sluggish recovery, it set the stage for stimulative CARES Act provisions to provide a more durable and inclusive recovery from the current crisis. That is why it’s important to maintain a focus on economic growth the likes of which was demonstrated under Republican leadership: stronger wage gains and lower unemployment for people of all backgrounds with all levels of education.
New projections from the Federal Open Market Committee (FOMC) show even stronger economic growth expected in the months ahead than initially projected in September. For example, back in September, the FOMC predicted GDP would grow by -3.7 percent in 2020, and 4 percent in 2021—but have since revised those numbers upward to -2.4 percent in 2020 and 4.2 percent in 2021. If the Federal Reserve Bank of Atlanta’s GDPNow’s current forecast of an annualized 11 percent growth for the fourth quarter of 2020 becomes true, GDP for 2020 would beat even the FOMC’s current forecast with a -2.2 percent growth rate.
Similar good news lies ahead for unemployment—in September, the FOMC had predicted 7.6 percent unemployment for 2020 and 5.5 percent in 2021. Those numbers were revised positively to 6.7 percent in 2020 and 5 percent in 2021. The unemployment rate currently stands at 6.7 percent with one last opportunity to see the unemployment rate drop further before the year ends.
Yes, economic activity and employment remain below its pre-pandemic level—but if we ever want to get back to an economy that benefits all Americans, it is imperative that we keep the reforms to the tax code that promoted all-encompassing prosperity. When our economy beats expectations further, it will likely be because these reforms have been kept in place.