Contrary to President Donald Trump's claim that a win by Joe Biden in November would spell economic catastrophe, a Goldman Sachs analyst told the bank's clients Monday that a so-called "blue wave" of Democratic victories next month would likely provide a substantial boost to the U.S. economy by making possible "substantially more fiscal support" in the form of Covid-19 relief, infrastructure spending, and climate legislation.
While predictably characterizing Biden's proposed tax hikes on corporations and the rich as "negative," Goldman Sachs chief economist Jan Hatzius wrote that the supposed downsides of the tax increases would be outweighed by "the boost to growth from fiscal stimulus."
Hatzius predicted a Democratic coronavirus stimulus package next year—should the party win control of the Senate and the presidency—would likely total around $2.5 trillion, significantly bigger than the $1.8 trillion package the White House is currently pushing to the dismay of many Senate Republicans.
"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 [of 2021], followed by infrastructure and climate legislation. In this scenario, we would expect legislation expanding health and other benefits, financed by tax increases, to pass in Q3."
As right-wing hacks predict economic disaster if Biden wins, worth pointing out that private-sector analysts are remarkably bullish. From Goldman Sachs (no link) pic.twitter.com/O54Bbu0zSy
— Paul Krugman (@paulkrugman) October 19, 2020
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The analysis from Goldman Sachs—which benefited handsomely from Trump's tax cuts and has continued to post massive profits even amid the coronavirus pandemic—comes after the president claimed during a campaign rally over the weekend that "the Democrats would terminate our recovery" if they win the White House and the Senate in November, repeating a warning he issued on Twitter earlier this month.
"IF YOU WANT A MASSIVE TAX INCREASE, THE BIGGEST IN THE HISTORY OF OUR COUNTRY (AND ONE THAT WILL SHUT OUR ECONOMY AND JOBS DOWN), VOTE DEMOCRAT!!!" the president wrote.
But Moody's Analytics, an economic research firm, has estimated that a Biden presidency would likely create 7.4 million more jobs than another four years of Trump.
"The economic outlook is strongest under the scenario in which Biden and the Democrats sweep Congress and fully adopt their economic agenda," Moody's Analytics economists Mark Zandi and Bernard Yaros wrote last month. "Trump has proposed much less expansive support to the economy from tax and spending policies."