Goldman: US Stimulus Set to End, to Drag on Growth

The raft of U.S. government stimulus measures, designed to backstop the tentative economic recovery and avert a double-dip recession, appears to be drawing to an end and that would place a serious drag on economic growth, according to a report from Goldman Sachs.

"Congress looks increasingly unlikely to extend anymore fiscal aid to state governments, despite ongoing shortfalls in state revenues, and they have already let several other items lapse," Goldman Sachs analyst Alec Phillips wrote.

The Senate moved forward on a renewal of extended unemployment benefits Tuesday, which will last until November 30, the report points out.

"The good news is that this will avoid further income disruption for those who had expected to receive benefits... The bad news is that this latest extension of fiscal stimulus may be the last," Phillips wrote.

Goldman no longer expects further fiscal stimulus to be introduced by the government, which if true, could run the risk of derailing the tentative economic recovery. 

"This adds almost a full percentage point to the drag on growth from Q4 2010 to Q4 2011 to what we had already estimated," Phillips said.

Goldman does expect most of the expiring tax cuts from between 2001 and 2003 to be extended.