- Democrats will likely pass Biden's infrastructure and family plans as one bill in the fall, Goldman Sachs said.
- Odds of a bipartisan infrastructure agreement are "dwindling further" as talks continue, the bank added.
- The package will likely cost just over $3 trillion, with half of the spending offset by tax hikes.
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President Joe Biden's infrastructure- and family-focused spending plans will become law, just not in their current form, Goldman Sachs economists said Friday.
With stimulus in the rear-view mirror and the country on the mend, the White House has shifted its focus to long-term investments in the economy. Democrats and Republicans continue to haggle on an infrastructure package, with the GOP most recently unveiling a $928 billion counteroffer to the Biden administration's $1.7 trillion proposal.
Negotiations have so far been fairly bipartisan, with Republicans meeting with Biden in recent weeks to mull over their respective plans. Yet Goldman sees the White House eventually ditching the GOP and pushing forward with Democratic support only.
"Although bipartisan discussions on an infrastructure package are continuing, the already low odds of success appear to be dwindling further," the team led by Jan Hatzius said in a note to clients.
It's "hard to see how a bipartisan agreement will come together," the economists added. Senate Republicans' latest counter includes just $257 billion in new spending, with the rest of the package financed by spending already authorized in past relief bills. Conversely, the White House's proposal includes $1.7 trillion in new spending.
That $1.5 trillion gap will likely force Democrats to pass the measure through budget reconciliation, Goldman said. The process allows Senate Democrats to pass legislation through a simple majority and skirt the need for bipartisan support.
The House will probably pass the reconciliation bill in July, and while the Senate could start working on the bill later next month, it's more likely that Senate Democrats don't approve the measure until September or October, the team said.
Using the reconciliation process will also force Democrats to combine Biden's American Families Plan with his infrastructure package, the economists added. The package will cost sightly more than $3 trillion, and half of the spending will be offset with tax increases, according to Goldman.
And, for the first time since the pandemic hit, risks for the package are skewed to the downside. The White House has indicated the proposals won't add any more than $800 billion to the deficit over the next ten years. Unless that target changes, Congress will need to either raise taxes even higher or spend less, the team said.
For the time being, Biden isn't giving up on a bipartisan agreement. The president is slated to meet with Sen. Shelley Moore Capito of West Virginia on Wednesday to continue talks on the infrastructure package. Aside from the huge difference in spending goals, Republicans and Democrats are still far apart in how they plan to pay for the measure.
Commentary from administration officials suggests negotiations could be pressed for time. Transportation Secretary Pete Buttigieg said Sunday on CNN that talks "can't go on forever," and that bipartisan discussions "need a clear direction."
"I think we are getting pretty close to a fish-or-cut-bait moment, but I will tell you that, on the fishing side of things, the negotiations have been healthy," he said, adding "time is not unlimited here."