Americans can expect the economy to enter a substantial slow down over the next two years, according to a report released by Goldman Sachs this week, potentially setting up trouble for President Donald Trump and Republicans heading into the 2020 election year.
> Goldman Sachs on Monday issued a report projecting gross domestic product (GDP) growth will slow to 1.8 percent and 1.6 percent in the third and fourth quarters of 2019, respectively, sooner than anticipated and creating a major headwind for GOP candidates the following year.
> The bank’s chief economist, Jan Hatzius, wrote in a note to clients that “tighter financial conditions and a fading fiscal stimulus” from the 2017 tax reform and spending packages will be “key drivers of the deceleration.”
> The Goldman Sachs forecast is in line with a Congressional Budget Office (CBO) projection from August that called for GDP growth to slow to 2.4 percent next year and then 1.6 percent in 2020.
Leading up to the 2018 midterms, Trump campaigned heavily on the more impressive numbers from the second and third quarters this year, 4.2 percent and 3.5 percent, respectively.
> He mocked former President Obama in September for saying during the 2016 presidential race that Trump would need a “magic wand” to get to 4 percent GDP growth.
> “I guess I have a magic wand, 4.2%, and we will do MUCH better than this! We have just begun,” Trump tweeted in August after GDP growth was revised up to 4.2 percent.
But Trump’s prediction that Americans would see GDP “very shortly in the fives” appears highly unlikely to come true — and that does not bode well for Republicans.
> “Anytime you have a slowing economy or entering a recession, that’s terrible news for the party in power, that’s just historically true,” said John Weaver, a Republican strategist who worked on Ohio Gov. John Kasich's (R) 2016 presidential campaign.
> Monday’s gloomy projection, combined with a report that confidence among homebuilders had dropped to its lowest level since August of 2016, coincided with a 396-point drop in the Dow Jones Industrial Average.
> The stock market is close to flat on the year.
And should the economic forecast come to pass, Republicans’ much-touted 2017 tax cuts could become even less popular:
> “The tax cuts will not even come close to paying for themselves. That’s already clearly obvious,” said Mark Zandi, the chief economist for Moody’s Analytics.