February 20, 2019: The US economy should continue growing this year at the same pace seen in 2018, and there is only a very slim chance of recession, the chief White House economist said Tuesday.
US companies last year used the tax cuts passed at the end of 2017 to boost investment, which should translate in higher output in 2019, Kevin Hassett, chairman of the White House Council of Economic Advisers, told CNBC.
“We're sticking with our guns and we're going to say we're going to have another three percent year,” he said of expectations for growth in the world's largest economy.
That upbeat assessment contrasts with widespread expectations the US economy will cool as the bump from tax cuts and fiscal stimulus last year dissipates.
The non-partisan Congressional Budget Office last month forecast growth of 2.3 percent this year, down from 3.1 percent in 2018, while the International Monetary Fund expects a slightly stronger 2.5 percent growth in 2019, slowing to 1.8 percent next year.
As of last month, the New York Federal Reserve Bank put the odds of a recession with a year at nearly 24 percent — the highest since the Great Recession more than 10 years ago.
But Hassett said given the likely boost to factory output as a result of higher capital investments, the odds of a sustained decline in the economy in 2019 are very low “maybe like one percent or two percent or something like that.”
Companies “built factories last year. They're going to flip the factories on this year and we're going to get growth from that,” he said.
Capital expenditures outside the defense and aviation sectors, seen as a proxy for business investment, softened in the latter part of 2018, government data show, which occurred in tandem with a slowdown in the broader economy.
Critics of 2017's corporate tax cuts have said that rather than just boosting investment, the windfall encouraged record spending on share buybacks, transferring wealth from taxpayers to shareholders.