Goldman: Fiscal Boost: Mainly a 2018 Story

A few excerpts from a research piece by Goldman Sachs economist Alec Phillips: Fiscal Boost: Mainly a 2018 Story

We expect fiscal policy to become more expansionary next year, but the timing is uncertain. Our preliminary expectation is that the growth effects from looser fiscal policy would be concentrated in Q4 2017 and the first half of 2018. The timing depends mainly on how long it takes tax legislation to become law, and whether Congress legislates a prolonged phase-in or implements the full tax cut in the first year. ...

Infrastructure and federal spending are also potential factors. On the former, the lags are often quite long ... On the latter, a boost to defense spending looks likely sometime between Q2 and Q4 2017, but this may be partly offset with cuts to non-defense spending in the same timeframe.

The effect of Obamacare “repeal and replace” is less clear, but seems likely to provide a modest net stimulus in the near term—potentially as soon as Q2 2017—as a result of the likely repeal of the taxes used to pay for some of the program. Other changes are likely but seem unlikely to be implemented until 2019.