Goldman Sachs analysts raised their growth forecasts for the U.S. this year after President-elect Joe Biden unveiled a sprawling coronavirus relief package that would inject $1.9 trillion into the nation's sputtering economy.
In an analyst note to clients this weekend, economists led by Jan Hatzius projected the economy would grow 6.6% in 2021, faster than the 6.4% previously estimated. The economists said they expect the nation's unemployment rate — which is at 6.7% — to fall to 4.5% by the end of the year, down from the prior estimate of 4.8%.
"We do not expect all of the elements of the $1.9 trillion proposal to pass, but we have raised our expectations for state fiscal aid, education and public health spending, unemployment insurance benefits, and several smaller items," the analysts wrote.
Biden's plan includes $20 billion to accelerate vaccine distribution, a $15-an-hour minimum wage, an extension of supplemental unemployment benefits through the end of September, a one-time $1,400 stimulus check and a one-year expansion of the Earned Income Tax Credit and Child Tax Credit.
“During this pandemic, millions of Americans, through no fault of their own, have lost the dignity and respect that comes with a job and a paycheck,” Biden said last week during a prime-time address. “There is real pain overwhelming the real economy.”
Close to 400,000 people in the U.S. have died of COVID-19 and more than 24.1 million have been infected, the most in the world. Lockdown measures adopted across the country to curb the spread of the virus have cost millions of Americans their jobs.
The Goldman economists said they expect the additional $1,400 direct cash payment will cause a "large spike" in disposable income in the first three months. Bank analysts previously upped their estimate for the amount of stimulus Biden will secure to $1.1 trillion, an increase from the previous estimate of $750 billion.
Democrats will control the Senate by the thinnest of margins after twin victories by Jon Ossoff and Raphael Warnock in the Georgia runoff elections last week clinched the party a 50-50 split in the upper chamber, with Vice President-elect Kamala Harris able to cast a tie-breaking vote. Democrats hold a slim 222-to-211 advantage in the House.
Even with a monopoly on power, however, Biden could have a difficult time getting the aid package passed: Unless the Senate uses a tool known as "reconciliation" that requires only a majority vote -- which Biden has signaled he doesn't support -- then the legislation will need 10 GOP votes in order to pass.