We do not expect a similar shake up to our forecast in the wake of this year's midterm elections. If Republicans retake one or both chambers of Congress, sweeping fiscal policy changes seem unlikely over the next two years, absent a crisis like the one that occurred in 2020. Under this election outcome scenario, we doubt we would make any major changes to our forecasts for GDP growth, inflation or the federal funds rate as a result of the election. Instead, status quo and political gridlock strike us as the most likely outcome...
One possible election outcome scenario that could shake up the outlook would be if Democrats expanded their majorities in the House and Senate. If this were to occur, we doubt there would be any immediate significant fiscal policy changes similar to what occurred in 2021 with the American Rescue Plan. That said, big chunks of President Biden's original American Jobs Plan and American Families Plan were left on the cutting room floor due to disagreements within the very small Democratic majority in Congress. More seats in the House and Senate could help revive some of these policies in a reconciliation bill, although this would take time, if it occurred at all. We also believe this election outcome would increase the probability of fiscal stimulus in the event the U.S. economy enters a recession in 2023 - Wells Fargo
Comments