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Trump’s Economic Gamble Might Actually Make Sense

He’s betting that deficits can spur productivity.
Make your bets.

Make your bets.

Photographer: Christopher Furlong/Getty Images

President Donald Trump is conducting a risky experiment on the U.S. economy: He’s allowing the government to run large budget deficits -- some of the largest ever outside wartime or recession -- in the hopes that this will somehow put growth on a higher trajectory. Irresponsible as that might sound, it actually makes some sense.

In the long run, economic growth is a function of two variables: population and productivity. For decades, America had plenty of both. Birth rates were ample, and any additional labor could be attracted from elsewhere. From 1947 to 2007, workers’ output per hour grew at an average annual rate of 2.3 percent. So for the most part, American presidents could focus on improving rather than reviving growth.