A Democratic “blue wave” in November could unleash the fiscal floodgates and fuel the amount of stimulus flowing from Washington, Goldman Sachs told its clients on Monday.
The bank’s chief economist, Jan Hatzius, wrote in a note that a large Democratic Senate majority could coordinate more Covid-19 relief, infrastructure spending and new minimum wage legislation.
A “congressional Democratic majority would likely result in substantially more fiscal support. We expect that spending would increase the most under a Democratic sweep of the House, Senate and White House,” Hatzius wrote.
“This would likely include a stimulus package in Q1, followed by infrastructure and climate legislation,” he added. “In this scenario, we would expect legislation expanding health and other benefits, financed by tax increases, to pass” by the third quarter of 2021.
Goldman Sachs also reiterated its finding that the boost to U.S. economic growth from fiscal stimulus favored by the Biden campaign would “outweigh the negative effects of tax increases, particularly in light of the fact that the increased tax revenue would go to funding new spending.”
The bank noted that public opinion polls, prediction markets and statistical models imply that Democrats are likely to win the presidency, the House and the Senate. The 2020 elections are scheduled for Nov. 3.
RealClearPolitics’ polling average gives Biden an 8.9-point advantage over President Donald Trump, 51.3%-42.4%. PredictIt odds show markets are pricing in a 63% chance Democrats control both the House and the Senate after the 2020 election.
Reference: CNBC
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