Economists lower 2022 growth forecasts on the back of Biden administration 'spending plan blocked'

27 December 2021, Mumbai:

Some economists expect the U.S. economy to grow more slowly next year after a key Democratic lawmaker dealt a seemingly fatal blow to President Joe Biden's $1.75 trillion spending plan, further clouding an outlook that was facing heightened risk from the rapid spread of the Omicron variant of COVID-19.

Goldman Sachs lowered its GDP growth forecast for 2022 as did Mark Zandi, chief economist for Moody's Analytics, after U.S. Senator Joe Manchin said on Sunday he could not support Biden's ambitious "Build Back Better" proposal, which would expand the social safety net and tackle climate change.

"If BBB doesn't become law, the economic recovery will be vulnerable to stalling out if we suffer another serious 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 lower by half a percentage point in 2022 if the proposed legislation doesn't become law.

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

One shift that economists say could slow growth is the reduction of an enhanced tax credit that sent families monthly payments of up to $300 per child but which is set to expire on Dec. 31. Lawmakers could pass a modified version of Biden's spending bill next year or decide to extend the credit retroactively, although negotiations could take weeks, Goldman Sachs researchers wrote in a note to clients.

U.S. economic output was expected to slow in the early part of next year from the brisk pace seen at the end of 2021 even before Omicron emerged as a threat to global growth and Biden's spending plan was derailed.

Economists projected earlier this month that growth would slow next year as the lift provided by earlier spending programs faded and the Federal Reserve reduced its monetary policy accommodation in the face of high inflation.

REUTERS (The news article has not been edited by DFU Publications staff)

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