Our coverage of the Commerce Department’s report on Friday about the gross domestic product — a basic indicator of the economy’s overall performance — in the second quarter of the year prompted a lively discussion not only of the numbers but also of the political context.
We invited readers to pose questions to Times journalists on both of those dimensions.
Here are answers to a selection of questions fielded by two economics reporters: Ben Casselman, who wrote the main article on the report, and Patricia Cohen, co-author of a fact-check examining statistics cited by President Trump to back his case for his administration’s achievements.
The questions have been lightly edited.
Is It Sustainable?
Q. Who are these “expert economists” you keep referring to who believe 4 percent G.D.P. growth is not sustainable? Are they the same ones who predicted that 3 percent growth was not attainable? It seems no matter the good news coming out of Trump’s administration, The Times always looks for something negative in its columns and editorials. — Maurice H., Florida
A. Policymakers at the Federal Reserve estimate that in the long run, the sustainable growth rate of the United States economy right now is about 1.8 percent per year. The Congressional Budget Office — a nonpartisan agency whose director was selected by Republican leaders — comes up with a similar estimate, as do most economists on Wall Street.
Those estimates do not mean that the economy can’t grow at a 3 percent or even 4 percent rate for a quarter or two here and there, or even for a full year. Indeed, many economists on Wall Street think growth for the full year could hit 3 percent for the first time since 2005.
But most economists — again, not just those on the left — think that the United States will struggle to maintain growth much above 2 percent for more than a year or two.
A big part of the reason is demographics: The aging of the baby-boom generation means we’ll have fewer workers to support more retirees, dragging down growth. (Immigration could help offset that trend, but current policy is pushing in the other direction.)
And for reasons not fully understood, rates of growth throughout the developed world have slowed since about 2000.
That said, economists are notoriously bad at forecasting long-term trends. (They’re not always so great at short-term ones either.) Not many saw the post-2000 slowdown coming, so it’s certainly possible that there’s an acceleration around the corner that economists don’t know about yet.
A quarter or two of 4 percent growth, though, doesn’t tell us much about those long-run trends. BEN CASSELMAN
The Tariff Impact
Q. What percentage of the 4.1 percent was an uptick in orders ahead of a tariff? Were there any other one-time items that would have caused a temporary surge? — Jo Fuller, Port St. Lucie, Fla.
A. The big jump in exports accounted for just over a percentage point of the second quarter’s 4.1 percent growth rate. Not all of that jump was necessarily tied to the tariffs, but a lot of it probably was — Ian Shepherdson of Pantheon Macroeconomics estimates that soybeans alone accounted for about half of the surge in exports, and that was almost certainly because of buyers trying to get out in front of the tariffs.
There were some other quirks in the report as well: Consumer spending rose sharply, a trend that was probably due mostly to a real increase in demand, but also reflected a rebound from a weak showing the previous quarter.
Government spending picked up because of the recently passed spending bill — that factor won’t disappear immediately, but it will fade next year. And then there was a big, unexpected decline in inventories, which detracted from G.D.P.
Rather than worry too much about all these one-off factors, economists often recommend looking at the average G.D.P. growth over a couple of quarters. Through the first half of this year, the economy grew at a 3.1 percent rate, which marks a clear acceleration over recent years. BEN CASSELMAN
The Inflation Risk
Q. I want to understand if inflation is a risk today because of the economic growth, or is it because there is an increase in the supply of money? — Janess Pinto, India
A. There is a robust (and sometimes acrimonious) debate within economics over the underlying causes of inflation, and I’m not going to get into it in depth here. But in terms of what’s happening right now, the concern at the Federal Reserve and on Wall Street is that unemployment is well below the rate many economists consider sustainable in the long term.
According to standard economic theory, that should lead to faster inflation — although some economists, particularly on the left, note that there’s little evidence of an acceleration so far.
The Fed is trying to keep inflation under control by gradually raising interest rates — in effect pulling money out of the economy. But its job is being made more difficult by the tax cuts and by government-spending increases that took effect earlier this year, which are essentially acting as a fiscal stimulus.
In other words, fiscal policy (which Congress controls) and monetary policy (which the Fed controls) are working at cross-purposes. BEN CASSELMAN
Targets of Investment
Q. Is it possible to research business investments since the tax cut to see where, besides stock buybacks, money is going? How much investment is going toward automation and robotics? — Robert Wessner, Ann Arbor, Mich.
A. There is little evidence yet of a tax-based investment surge, but it is still early, and getting exact figures on the amount invested this year specifically in automation and robotics is tough.
Total private fixed investment in real terms — after taking account of inflation — has grown, just as it has for the past few years. It was $3.31 trillion in the second quarter of 2018 (seasonally adjusted on an annualized basis). In the first quarter of 2018, it was $3.27 trillion, compared with $2.96 trillion in the first quarter of 2015. PATRICIA COHEN
Deficits and Debt Service
Q. If the federal deficit grows as tax revenue falls, won’t the cost of federal debt service affect the economy? Add analysis of the federal deficit to your coverage. Thanks. You’re a wonderful paper! — Richard Williams, Wilkes-Barre, Pa.
A. Thanks, glad you are liking the coverage, and the federal deficit is very much in our sights. The increasing cost of federal debt service is worrying economists. As my colleague Jim Tankersley wrote recently, corporate tax revenues have fallen to historically low levels and are pushing the debt burden up by an additional $1 trillion over a decade. The cost of that debt to taxpayers is also going to increase as the Federal Reserve moves to nudge up the benchmark interest rate.
When the government increases the debt and spends money, it can help juice the economy. But over the longer term, economists worry that an outsized debt will ultimately be a drag on growth, as a larger share of public money has to go toward paying off the debt and the interest that has accumulated. If the government is competing too much for available investment money, that could also drive up interest rates, making it more expensive to borrow, and slowing the economy. That leaves less money available for investment and other uses. PATRICIA COHEN
The Tax Bill’s Impact
Q. Without the tax “windfall” passed last year, what would the projected G.D.P. be? — Tim Harkavy, Cincinnati
A. Figuring out what might have happened if an alternate route were taken is always tricky, but you could look back at analysts’ projections for 2018 growth before the tax cuts were enacted.
In December, for example, Goldman Sachs projected that the tax bill would add three-tenths of 1 percentage point to growth in the next two years. Back then, Goldman, the Federal Reserve and several Wall Street analysts forecast G.D.P. growth for 2018 would be in the 2.5 to 2.6 percent range, and expected it would fall below 2 percent in 2019. At the moment, the economy is on track to do better than that — coming in at or just below the 3 percent mark in 2018.
Most economists agree that the tax cuts gave the economy a temporary upward push in 2018. But they warn that it will have the effect of a sugar rush — pushing up G.D.P. in the short run, but undermining growth over the longer term. PATRICIA COHEN
The Export Outlook
Q. To what extent did economists expect a slump in economic growth following the extended trade war of the last few months? Your article mentions a surge in soybean exports, but I was under the impression that many agricultural exports would suffer as a result of new tariffs both on our part and on the part of our trading partners. — Eli Parker, Chapel Hill, N.C.
A. Almost every economist expects a trade war to drag down economic growth around the world, although its impact will vary widely depending on the country and sector. Over all, the United States — because it has such a large and diversified economy — is probably in a better position to withstand the disruption than other industrialized nations.
As for soybeans, there may have been a temporary surge in exports as buyers rushed to get as many shipments of soybeans delivered before the tariffs went into effect. The result is that most economists expect that surge to reverse itself. Net exports were responsible for about a 1.1 percent increase in G.D.P. last quarter — although a lot of that was offset by declines in inventories. The U.S. Department of Agriculture, for example, reported that China canceled $140 million in soybean contracts at the end of June. PATRICIA COHEN
Reconciling Sources
Q. There seems to be a direct factual conflict between two generally reliable sources: The Times and The Wall Street Journal. The Times claims that business investment has not grown but The Journal gives numerical results claiming it has. While it is not surprising to me that The Times and The Journal are on opposing sides in interpreting numbers (since that is why I read both), it is rare that a measurable quantity is reported in opposite ways. Please explain. — Gardner Friedlander, Mequon, Wis.
A. Business investment has definitely grown. Where our story and The Journal's might seem to disagree is on whether it is growing faster or slower this year than last. The Journal story noted, correctly, that “nonresidential fixed investment,” a measure of overall business investment, has risen more quickly this year. Our story noted, also correctly, that investment in equipment has grown more slowly this year. Our story focused on equipment because it's the type of investment that the Republican tax law was designed to promote, and because it is less influenced by the volatile oil and gas sector. I stand by that choice of measure, but there is no factual disagreement between us and The Journal (where, I should add, I used to work). BEN CASSELMAN
Which President Deserves Credit?
Q. Why are you not telling your readers that the economic growth President Trump is taking credit for began with the Obama administration’s turnaround of the recession? Mr. Trump inherited a growing economy. He didn’t create it. It doesn’t take an economist to figure out that the trade deficit numbers are a result of other countries squirreling away U.S. goods in anticipation of the tariffs that will soon be put in place. You do a disservice to your readers when you downplay these facts and don’t provide factual and historical context to the numbers. — Dawn Sparks, Carmel, Ind.
Q. Why keep trying to give Obama any credit? This is ALL thanks to Trump! How refreshing having a business person leading our country instead of a community organizer. — Judy Orders, Scottsdale, Ariz.
A. Most economists argue that presidents’ influence over the economy is often overblown. There are steps they, along with Congress, can take to help during a recession or financial crisis, and there are probably things they can say or do that could rattle markets and consumers enough to slow down the economy.
But most of the ways presidents affect the economy are long-term: They can help promote tax and regulatory environments that are conducive to business investment; they can help foster education and welfare systems that ensure a healthy population with valuable skills; they can promote policies on trade, immigration and spending that set the country up for sustainable growth. All those policies are important, but their effects take years, if not decades, to play out.
Focusing on the shorter term, growth does appear to have picked up this year. Some of that probably stems from a pickup in global growth that is outside Mr. Trump’s control. Some may be because of improving business confidence that stems from corporate leaders feeling as if Mr. Trump is “on their side.” (My colleague Patricia Cohen recently wrote about this effect.)
And some probably stems from the tax and spending policies adopted by Mr. Trump and Republicans in Congress, which have thrown fuel on the economic fire. As I noted above, though, many economists worry that those policies are shortsighted, raising the specter of inflation and increasing the risk of a recession. BEN CASSELMAN
Who Is Benefiting?
Q. G.D.P. growth is robust, but earlier in the week we heard that wage growth is not. Does that mean that the benefits of the hot economy are going to corporate shareholders and the very wealthy, not to most Americans? — Nora Stockhausen, Beaver, Pa.
A. The figures for the nation’s overall growth don’t reveal how that prosperity is being distributed. What we have seen is that labor’s share of G.D.P. has fallen over the decades, while corporate profits have gobbled up a larger and larger share of the nation’s wealth.
Corporate profits in the first quarter of 2000 accounted for less than 8 percent of gross domestic income; in the first quarter of 2018, that figure had risen to nearly 11 percent. By contrast, labor’s share of national income was close to 57 percent in the first quarter of 2000, and was 53 percent this year. PATRICIA COHEN
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