The Trump administration has said it would like to see 3% sustained GDP growth.
Billionaire private equity chief David Rubenstein, cofounder of The Carlyle Group, thinks that’s a lofty target.
“First though, I want to point out that my projections of GDP growth are invariably wrong. So I would say that 3% growth is a challenging number to reach for an economy that’s roughly $20 trillion,” Rubenstein said in an interview with Yahoo Finance’s Andy Serwer at the World Economic Forum in Davos, Switzerland.
“Obviously, I, as an American citizen, as an investor, would be thrilled if it happened, and I hope it does. But we don’t know how to project 10 years into the future, it’s very difficult. The budgets of the United States are 10-year projections now. And really, projecting more than one or two years in advance is difficult. So if they can do 3%, I think it’s great, and the tax cut will help them get there, but I just don’t know if it’s possible to get there for 10 years in a row.”
In Davos, there’s been a great deal of optimism in the business community as the U.S. stock market has continued to reach new highs on the heels of tax reform.
Rubenstein thinks the “party could continue” thanks to the tax cuts, but at some point soon, there will be a recession.
“We’ve had economic growth uninterrupted since June of 2009 when the recession ended. So now, you know, we’re going to be 9 1/2, 10 years. So maybe there’s a new economic norm and maybe people can go 10, 15 years without a recession,” Rubenstein said. “But there’s no history of going 100 years or 25 years without a recession. So I suspect we’ll have a recession sometime soon. But it could be pushed out now by two or three years. I think the tax cut probably will push it out for another year or so.”
On Friday, U.S. GDP for the fourth-quarter came in at 2.6%, lighter than the 3% forecast. Speaking with Yahoo Finance’s editor-in-chief Andy Serwer, Treasury Secretary Steven Mnuchin brushed off concerns about the results.
“In regards to GDP, what we’ve said consistently is we’re focused on 3% or higher sustained GDP. So any one quarter, there’s going to be movements up and down any one quarter. We’re not particularly concerned,” Mnuchin said.
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.