US election outcomes matter – Goldman Sachs

By FXStreet Alec Phillips, Senior US Economist at Goldman Sachs, suggests that the US fiscal stance depends in part on the election outcome.

Key Quotes

“Republicans are likely to focus on two issues that could provide a net boost: tax reform and defense spending. Tax reform would be more likely to provide a modest tailwind to growth in the first year or two after enactment, since reform would likely receive greater political support if the new benefits (e.g., lower tax rates or the ability to repatriate foreign earnings at a low cost) phase in quickly, while the provisions used to pay for them take longer. Increasing defense spending also has adherents in both parties, though disagreements remain
regarding whether to cut spending elsewhere or to simply raise spending in aggregate. These debates have recently been resolved by increasing the budget deficit in the short term and spreading offsetting budgetary savings over many years.

Democrats, by contrast, are apt to prioritize increased domestic spending in a few specific areas. Secretary Clinton proposes a large increase in federal infrastructure spending (on top of the small bump that was recently enacted). While a small boost in spending is possible, we expect that a material increase would be unlikely …read more

Source:: FX Street