What impact will Biden’s new deal have on growth?

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Goldman with the note:

President Biden released his budget proposal to Congress, which calls for an increase in the deficit of $800bn over 10 years (0.3% of GDP over that period) to accommodate his “American Jobs Plan” (AJP) and “American Families Plan”(AFP). While the amount is not surprising, this is the first time the White House has formally shown the net effect of their proposals over the ten-year period. Congress will use when it considers them.

Those plans would raise spending by a total of $4.4 trillion over ten years (1.5%of GDP over that period) and increase tax revenues by $3.6 trillion (1.3%). Congress will likely scale back many of these proposals; our current forecast is for a package of slightly more than $3 trillion over 10 years, with tax increases of around half that amount, but we believe the risks lie modestly to the downside of those amounts.

We expect congressional Democrats to pivot away from bipartisan infrastructure negotiations in the next couple of weeks and to begin to move forward with reconciliation legislation—requiring only Democratic support—that includes many of these proposals. House passage could come by July, but the Senate looks likely to take until September or October to act.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.