Economists cut US growth forecasts for 2022 due to blocking of Biden’s plan

Some economists hope that U.S grow more slowly next year after a key Democratic lawmaker dealt a seemingly fatal blow to the president’s spending plan Joe Biden, of US $ 1.75 trillion, complicating even more perspectives that faced the risk of the omicron variant.

Goldman Sachs lowered its 2022 growth forecast, as did Mark Zandi, chief economist at Moody’s Analytics, after Sen. Joe Manchin said Sunday that he could not support the “Build Back Better” (BBB) ​​proposal to expand the social safety net and tackling climate change.

“If BBB is not signed into law, the economic recovery will be vulnerable to stalling if we suffer another severe wave of the pandemic; an increasingly likely scenario with omicron spreading rapidly, “Zandi wrote on Twitter on Monday, adding that he expects real GDP growth to be less than half a percentage point in 2022 without the law.

Democrats are absorbing the legislative setback as the Biden administration faces criticism from healthcare experts for a surge in COVID-19 infections.

One change that economists say could slow growth is the reduction of an improved tax credit that sent families monthly payments of up to $ 300 per child, but which expires on December 31.

Lawmakers could pass a modified version of Biden’s spending bill next year or decide to extend the credit retroactively, but negotiations could take weeks, Goldman Sachs researchers wrote in a note to clients.

US economic output was expected to slow early next year from the rapid pace seen in late 2021, even before omicron emerged as a threat to global growth and Biden’s spending plan was rolled back. derail.

The annualized growth rate of the Gross Domestic Product was expected to fall to 4% in the first quarter of 2022, from the 6% forecast in the last three months of this year, according to a Reuters poll of economists published on December 8.

Additionally, growth for the full year of 2022 was seen to slow to 3.9% – still well above pre-pandemic trends – from 5.6% this year.

Goldman also said that the apparent disappearance of Biden’s spending plan adds risk to his expectation that the Fed will make its first rate hike in March, given that “most Fed officials probably expected the BBB or something similar became law ”.