(WASHINGTON) -- A confidential new report prepared by Goldman Sachs for its clients says spending cuts passed by the House of Representatives last week would be a drag on the economy, cutting economic growth by about two percent of GDP.
“Under the House-passed spending bill [which cut spending by $61 billion],” says the report, which was obtained by ABC News, “the drag on GDP growth from federal fiscal policy would increase by 1.5pp to 2pp in Q2 and Q3 compared with current law.”
The report, which is signed by Goldman economist Alec Phillips, goes on to predict that the House-passed bill is unlikely to become law because it won’t pass the Senate and, in any case, the president threatened to veto it.
More likely, the report says, is a deal to cut spending by $25 billion this year, followed by a cut of $50 billion next year. Even those more modest spending cuts, Goldman Sachs predicts, will cut economic growth rates by one percent of GDP.
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