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Goldman Sachs isn't doing McConnell's talking points any favors

Mitch McConnell desperately wants people to believe the American Rescue Plan won't be responsible for economic growth. Private forecasts disagree.
Image: Goldman Sachs
A lighted sign marks the Goldman Sachs trading post on the floor of the New York Stock Exchange.Richard Drew / AP

This year is only about one-fifth over, but there are economic analysts whose job it is to make projections about what the rest of 2021 has in store. And right now, as Axios noted, many of these forecasters are feeling quite optimistic.

Economists at Goldman Sachs raised their GDP growth expectations for the U.S. economy to 8% for 2021 in a note to clients on Sunday night.... If Goldman's forecast is correct, it would mark the largest economic expansion for the U.S. in generations.

In its forecast for clients, Goldman Sachs explained that it has raised its forecast for domestic economic growth "to reflect the latest fiscal policy news."

In other words, Democrats in Congress and the White House are making dramatic new investments, which will generate additional economic growth, which meant the banking giant decided to reassess its early forecast to reflect its greater optimism.

Time will tell, obviously, whether Americans actually see 8% GDP growth this year, but if the projection proves accurate, it will be historic: the United States hasn't seen annual growth that strong in 70 years.

If this seems at all familiar, it's not your imagination. Morgan Stanley last week also revised its GDP projection in similar ways, thanks in part to the Democrats' new COVID relief package. Around the same time, the Organization for Economic Co-operation and Development (OECD) updated its economic forecast for 2021 in a more optimistic direction, in part because of the "fiscal stimulus" coming from Congress and the Biden administration.

It's important to emphasize some of the relevant caveats. It's too soon to say with confidence, for example, whether these projections will be accurate. What's more, some of these forecasts vary in specificity: some expect to see growth reaching 8%, others believe growth won't be quite that robust.

But there's a thread tying each of them together: all of these forecasts became more optimistic as a direct response to the Democrats' American Rescue Plan.

At a certain level, this may seem like common sense. Congress and the White House are poised to pump an enormous amount of capital into the domestic economy, so it stands to reason that we'll see dramatically improved growth.

But as a political matter, none of this does Republicans any favors. Senate Majority Leader Mitch McConnell (R-Ky.) invested quite a bit of time and energy last week insisting that the Dems' COVID relief package will have nothing at all to do with the coming economic "boom." The GOP leader insisted that it will simply be a coincidence: the economy was poised to soar whether the Democratic legislation passed or not.

It's precisely why these independent forecasts don't do McConnell any favors. As recently as late 2020, the average growth expectation among Wall Street analysts for 2021 was about 4%. Now, some of these same firms are forecasting growth roughly twice as strong -- not because of luck, but because of a Democratic package that received exactly zero Republican votes.