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by Maurie Backman | Updated July 25, 2021 - First published on Jan. 11, 2021
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One investment banking giant believes a Democrat-controlled Senate will be good for the economy. Let's hope it's right.
Now that Democrats have swept the Senate races in Georgia, we're looking at a Democrat-controlled Senate for the first time in years. And investment banking giant Goldman Sachs thinks that's good news for the economy.
In fact, Goldman is convinced that a Democrat-controlled Senate will pave the way for an additional stimulus package early in 2021. The most recent stimulus bill, totaling $900 billion, includes provisions for boosted unemployment, rental assistance, and direct stimulus checks worth $600 apiece.
Goldman Sachs is now projecting that the U.S. unemployment rate will drop to 4.8% by the end of 2021, and reach 3.9% by the end of 2023. As of December 2020, the jobless rate was 6.7%, whereas a 3.9% unemployment rate is closer to pre-coronavirus levels (in Feb 2020, the jobless rate was just 3.5%).
Clearly, a general economic recovery is good for Americans across the board. But right now, a lot of people may be more concerned with individual relief.
Millions of people have lost their jobs or seen their hours or income take a hit in the course of the pandemic. And while the jobless rate has improved since a record high in April 2020, many people are still struggling.
Though the latest round of stimulus checks may provide some relief, it's a drop in the bucket for those who have depleted their savings accounts and are racking up credit card debt to pay for essentials. Thankfully, Joe Biden has plans to unveil a new coronavirus relief package very soon -- one that includes a round of $2,000 stimulus payments for the public.
When the recent round of $600 checks went out, even President Trump blasted lawmakers for being stingy given the economic crisis. And while some tried to push a vote to boost those checks to $2,000 apiece, Senate leadership prevented it. Most Americans say they intend to use their $600 stimulus checks to cover basic expenses like food and medication, which clearly shows that additional relief is needed soon.
If Biden gets those $2,000 checks passed -- certainly more likely with a Democrat-controlled Senate -- Americans may finally get enough relief to stay afloat until coronavirus vaccines are widely rolled out and the pandemic slows down.
This isn't the first time Goldman Sachs has gone out on a limb and put its faith in Democratic leadership. Back in October, it stated that a Biden presidency would lead to a faster economic recovery. But presidents can't work in a bubble -- they need the support of Congress to pass changes and take meaningful steps. With Democrats now controlling the House and Senate, there may be a real opportunity to dish out relief and help dig the economy out of its hole. For the sake of the U.S. public, let's hope Goldman is on the money with its predictions.
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