Goldman Sachs downgraded the country’s quarterly GDP estimates for 2022, as Sen. Joe Manchin (DW.Va) reaffirmed his stance to reject the Build Back Better package, a move that would bolster President Joe Biden’s $1.75 -Trillion could derail the bill.
According to analysts at the Wall Street firm, failure to pass the bill will result in less economic growth. Goldman Sachs said, “We already expected a negative fiscal impulse for 2022 as a result of fading support from the COVID-relief legislation implemented in 2020 and 2021, and without the BBB enactment, this fiscal impulse would be our will turn slightly more negative than expected,” Goldman Sachs analyst Jan Hetzius wrote in a note on Sunday.
The note said that the GDP growth estimate for the first quarter of 2022 will be reduced from three to two percent, in the second quarter from 3.5 to three percent and in the third quarter from three percent to 2.75.
Munchkin said his firm “no” on the heavy spending law is primarily due to its effect on inflation. He was also not keen on subsidies for electric vehicles because Toyota is one of the largest employers in West Virginia. Coming to Fox News, he said that he “can’t vote to continue with this piece of legislation. I just can’t. I’ve done everything humanly possible.”
Munchkin’s vote is significant in the 50-50 Senate. Since there is no Republican support, every Democrat must support the law for it to pass. Manchin warned about the risks of inflation, that it could “really hurt a lot of Americans,” especially those at the lower end of the income scale. “So I think that’s where our attention needs to be directed immediately,” he said.
Economists at Goldman Sachs now believe the bill will not pass in its current form, taking into account the consumer price index (CPI) released for November, which rose to 6.8 percent from a 39-year high.
Analysts at Goldman Sachs said, “With the headline CPI falling to 7 percent in our forecast over the next few months, the inflation concerns already expressed by Sen. Manchin and others are likely to continue, leading to further downside.” will be more difficult.” wrote. “The Omicron version is also likely to shift political attention back away from virus-related issues and long-term reforms.”
Goldman also noted that most Federal Reserve officials expected the Build Back Better bill to pass, and the fact that it likely won’t indicate “some risk” to the interest rate hike anticipated in March.
The firm noted that there is “still a good chance” that a toned-down version of the bill could be passed that focuses on supply chain disruptions.
“There is still a chance that Congress extends the extended child tax credit with some amendments, although we think that’s even less likely to happen,” Goldman said.
Munchkin’s decision apparently shocked the White House. “Senator Munchkin’s remarks on Fox this morning are in stark contrast to his discussions with the president, with White House staff, and with his own public statements,” White House Press Secretary Jen Psaki said in a statement Sunday.