Goldman Sachs cuts US economic forecast after Joe Manchin rejects Build Back Better.

CNN Business. Senator Joe Manchin's opposition to the Build Back Better Act prompted Goldman Sachs to swiftly dim its US economic outlook.

The Wall Street firm told clients Sunday it no longer assumes President Joe Biden's signature legislation will get through the narrowly divided Congress, citing the West Virginia Democrat's announcement that he's a "no" on the $1.75 trillion bill."A failure to pass BBB has negative growth implications," Goldman Sachs economists, led by Jan Hatzius, said in the research report.
    Citing the "apparent demise" of Build Back Better, Goldman Sachs now expects GDP to grow at an annualized pace of 2% in the first quarter, down from 3% previously.
      The bank also trimmed its GDP forecasts for the second quarter to 3% (from 3.5% previously) and the third quarter to 2.75% (compared with 3% previously). It specifically pointed to the expiration of the child tax credit and the lack of the other new spending that had been anticipated
          Goldman Sachs (GS) reiterated that upcoming inflation reports are not likely to help swing the tide back in favor of Build Back Better. The consumer price index (CPI) rose in November by 6.8% from the year earlier, the biggest 12-month jump in 39 years.
          “With headline CPI reaching as high as 7% in the next few months in our forecast before it begins to fall, the inflation concerns that Sen. Manchin and others have already expressed are likely to persist, making passage more difficult," Goldman Sachs economists wrote. "The omicron variant is also likely to shift political attention back to virus-related issues and away from long-term reforms."

          The lowered chances that Build Back Better has "negative implications for near-term consumption" but will likely have some "offsetting positive effects" for financial markets, Goldman Sachs said.Specifically, the chances of corporate tax hikes have faded — and those higher tax bills would have eaten into the bottom lines of S&P 500 companies. It's also a positive for biotech companies that would have been hit by $100 billion in price reductions in the Medicare program, Goldman Sachs said.Still, Goldman Sachs said there is a chance that Congress passes a few smaller short-term provisions aimed at virus-related issues.

            There is a lot of uncertainty over the fate of the expanded child tax credit that was a key part of Build Back Better and Goldman Sachs called this the "most important question for the near-term outlook."While there is "some chance" that Congress extends the credit retroactively, Goldman Sachs said "the odds of this happening seem to be less than even at this point."

            Matt Egan, CNN Business, December 19, 2021.


            December 20, 2021

            Voices4America Post Script. Manchin threatens to reject Biden’s Build Back Better. That will tank the economy. Goldman Sachs says so. Will he change his mind again? Will Murkowski? Or Collins? Call your elected officials. We can win this yet!

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