After Democratic Senator Joe Manchin of West Virginia’s bombshell rejection of Joe Biden’s Build Back Better Act, Goldman Sachs’ economic outlook for the US immediately dimmed.  The famed Wall Street firm told its clients over the weekend that the President’s signature legislation will not pass a divided Congress, sinking the nearly $2 trillion bill.

Goldman Sachs’ economists, led by Jan Hatzius, say that “A failure to pass BBB has negative growth implications,” and that they expect GDP to grow at a pace of 2% in the first quarter, down from their previous 3% projection.
Goldman Sachs Building via Flickr/David

The bank also trimmed its GDP forecasts for the second quarter to 3% (from 3.5% previously) and the third quarter to 2.75% (compared with 3% previously). It specifically pointed to the expiration of the child tax credit and the lack of the other new spending that had been anticipated.

Goldman Sachs (GS) reiterated that upcoming inflation reports are not likely to help swing the tide back in favor of Build Back Better. The consumer price index (CPI) rose in November by 6.8% from the year earlier, the biggest 12-month jump in 39 years

And continues:

“With headline CPI reaching as high as 7% in the next few months in our forecast before it begins to fall, the inflation concerns that Sen. Manchin and others have already expressed are likely to persist, making passage more difficult. The omicron variant is also likely to shift political attention back to virus-related issues and away from long-term reforms.”
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Manchin went on Fox News Sunday with guest host Bret Baier on Sunday morning to announce his opposition to the bill, saying  “I had my reservations from the beginning and I’ve been working diligently. I’ve done everything humanly possible.”
Manchin in part blamed the decision to vote against Biden’s agenda on inflation and the Covid-19 Omicron variant.
“I cannot vote to continue with this piece of legislation, I just can’t. I’ve tried everything humanly possible. I can’t get there.”

“You’re done,” Baier asked. “This is a no?”

“This is a no,” Manchin answered. “I have tried everything I know to do and the president has worked diligently. He’s been wonderful to work with.”

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Christopher Powell