Sunday, January 16

Goldman Sachs lights up alerts on the US economy

New storm clouds loom over the US economy. The investment bank Goldman Sachs just slashed US economic growth forecasts by 2022 after Senator Joe Manchin said Sunday that he will not support the $ 2 trillion tax and spending plan that is at the center of President Joe Biden’s economic agenda.

In this way, the entity’s economic team believes that the United States economy will grow 2 percent from the 3 percent forecast for the first quarter. For the second quarter, the cut is half a point, from 3.5 percent to 3 percent. For the third quarter, the revision is a quarter of a point, from 3 percent to 2.75 percent.

And it is that Manchin’s comments effectively put an end to the Democrats’ plans to pass the legislation at the beginning of an election year.

The enactment of the Build Back Better (BBB) ​​bill “already seemed close and, in light of Manchin’s comments, we are adjusting our forecast to remove the assumption that the plan promoted by President Biden will become law.” , Goldman economists noted in a report Sunday.

In conclusion, they confirmed that “not approving the project has negative implications for growth.” Opinion shared by Bankinter. The broker believes that this may trigger a wave of downward revisions to GDP.

A plan based on three axes

Biden’s plan was based on three axes.

First, a stimulus plan against Covid-19, which was approved in March, which was endowed with $ 1.9 trillion. The aid package turned into law contemplated 400,000 million dollars for direct payments of 1,400 dollars to citizens with lower incomes, 350,000 million in aid to state and local governments and greater financing for the distribution of vaccines against Covid-19 , among other points.

Secondly, an infrastructure program, the oldest in 65 years. In total, that country will allocate $ 555 billion (480,000 million euros) between now and 2030, in roads, railways, electricity grid, broadband access, and drinking water.

And now the BBB, which was endowed with two trillion dollars. This package provides tax incentives for the use of clean energy, free childcare, childcare subsidies, improvements in health coverage, housing aid and expansion of tax deductions per child, among other measures.

For its financing, it contemplates a minimum tax of 15 percent on the profits of large companies, an additional tax rate of 5% for taxpayers with income greater than 10 million dollars and an additional 3 percent when income exceeds 25 million. dollars and a 1 percent surcharge on corporate share buybacks.

… With a fiscal cost that has been lowered

The controversy generated by the expense made the fiscal cost of the project reduced from $ 3 to $ 2 trillion (that is, of 2.7 to 1.8 billion euros) in 10 years.

“My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that will leave our country even more vulnerable to the threats we face,” Manchin added in a statement posted on Twitter. “I can’t take that risk with a staggering $ 29 trillion debt and inflationary taxes that are real and harmful to every American worker.”

Impact on Fed policy

The result would introduce some risk in the forecast for the FOMC to rise in Marchanalysts say.

Thus, this lack of stimulus together with the expansion of the omicron could put the three increases of the Federal Reserve on standby for 2022, the first would be dated in March.

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