US: Fiscal stimulus looming - NAB
|Tony Kelly, Senior Economist at NAB, points out that both the US House of Representatives and the Senate recently passed bills to cut US taxes by around $1.4 trillion over a ten year period.
Key Quotes
“At their peak, both the House and Senate versions incorporate tax changes that would lead to a decline in revenue of just over 1% of GDP.”
“There are differences between the two sets of legislation that need to be reconciled through a committee process. House and Senate Republicans appear to have agreed on a compromise bill and the intention, at the time of writing, is for a vote on the legislation next week. Passage appears likely but not certain as it would take only a few defections of Republican senators to prevent passage.”
“Both the Senate and House packages were projected to lead to lower revenue from individual and domestic business operations, and increased revenue from international tax changes. In terms of the fiscal impact a major difference between the two versions was the timing of the corporate tax cut which the House had starting in January 2018 and the Senate version a year later. Reports indicate that under the compromise version the corporate cuts will start from January 2018, so we have illustrated the magnitudes of the changes in the chart below using the House plan.”
“Our assumption has been that there would be a fiscal stimulus of around 1% of GDP in calendar 2018. The House version has an approximate calendar year fiscal impact of around 0.8% GDP in 2018 (rising to 1.1% in 2019) so we look like we are in the right ball park. Given this, we have not changed our assumption for the amount of fiscal stimulus but will review it when more details of the reported compromise version, including cost estimates, become available.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.