According to a report from the Associated Press, the United States may be in for a major recession in 2020. A report by the National Association for Business Economics suggests that the significant tax cuts made by President Donald Trump could boost economic growth for 2018 and 2019, but by 2020, the country could enter into a new recession. A number of factors could contribute to this development, including a wave of retirement among workers of the Baby Boomer generation, dwindling productivity rates and more.
Two Years of Economic Growth, But Caution Nonetheless
The report, created by a panel of 45 economists, suggests that the economy, as measured by GDP, will expand throughout this year and next. However, the predicted expansion rate for 2018 of 2.8% is down marginally from the panel's previous forecast, made in March. At that time, the expected growth rate was 2.9% for this year. NABE vice president Kevin Swift, the chief economist at the American Chemistry Council, explains that the panel members are "slightly less optimistic about the U.S. economy in 2018 than they were three months ago," suggesting that the drop-off may be due to Trump's tough approach on trade and its impact on growth prospects domestically. Indeed, three-quarters of the panel believes that current trade policies, such as those involving steep penalties on steel and aluminum imports from U.S. trading partners like the EU, Canada, and Mexico, could have a negative impact on the economy.
On the other hand, the forecasting panel was more optimistic about the short-term effects of the $1.5 trillion tax cut passed by Congress last December. Panel members predicted a median growth of 0.4% and 0.3% next year as a result of this cut.
After two years of growth, many panel members believe that a recession may be on the way in 2020. Two thirds of the economists on the panel expect a recession to start by the end of 2020, and 18% of panel members were more pessimistic than that, expecting a recession to begin by the end of 2019.
Key to the predictions of these panelists is the expectation that Trump's tax cuts will only have a short-term benefit, and that the gains from this move will exhaust themselves within a period of roughly two years. Beyond that, weak productivity gains and retirements are among the leading factors contributing to panel member pessimism about the state of the economy about two years from now.
Currently, the economy has been recovering since 2009. This marks the second-longest economic expansion period in U.S. history. If economic growth continues through the end of June 2019, as many panelists expect, it will become the longest period of continued expansion.