By Alan Murray and John Kell
May 24, 2017

Good morning.

Lots of skepticism this morning about the Trump administration’s assumption that it can achieve 3% annual growth—rather than the 1.9% assumed by the Congressional Budge Office. That growth assumption is critical to making the budget work, generating an additional $2.1 trillion in revenue over the next ten years.

Budget Director Mick Mulvaney said the forecast was compiled by himself, economic adviser Gary Cohn, and Treasury Secretary Mnuchin, based on their belief that higher growth will result from administration policies on taxes, regulatory relief and health care repeal—all of which should help raise the productivity of American workers.

That’s a big leap of faith—but one some might be willing to make, were it not for the fact that the administration is counting on the very same growth dividend to fund its tax plan (and also assuming this outsized growth won’t lead to higher interest rates.) That’s hardly the first time an administration has resorted to gimmicks to make its budget math work, but may take the cake for size and audacity.

Meanwhile, for those who live on this side of the looking glass, speculation is increasing about when the next recession will hit. Goldman Sachs—former employer of both Cohn and Mnuchin—predicts there’s a 31% chance of a recession in the next nine quarters. If one doesn’t hit, this recovery will become the longest on record. A separate effort using artificial intelligence predicts March 2019 as the start date for the next recession.

Apologies for a couple of sleep-deprived missteps yesterday morning. I referred to electric engines—should have been motors. And Tom cited budget savings of 3.5 “billion,” rather than trillion.

More news below.

Alan Murray
@@alansmurray
alan.murray@fortune.com

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