- GDP has been stronger than projected by the Congressional Budget Office (CBO), with the level in the third quarter of 2019 1.45 percent greater than projected in the CBO’s August 2016 release.
- Consensus forecasts for the fourth quarter expect this outperformance to continue into this year.
- This translates to $277 billion in additional annual output relative to CBO’s projections.
One way to consider the impact of policy changes is to compare a forecast before the policy change with the actual values after the policy changes. The impact of deregulation and tax reform is therefore reflected in the real GDP difference between the CBO’s August 2016 real GDP forecast and actual GDP.
Thus, comparing the CBO’s August 2016 GDP forecast to actual GDP allows us to tease out the impact of policy changes implemented since. This suggests that pro-growth reforms such as deregulation and tax reform have had a positive effect.
This is especially true given that the global economy has slowed over this time period, with the U.S. economy currently the only G7 country posting growth north of 2 percentage points.