Trump or Clinton means more spending, says Goldman

Published Mon, Aug 8 20164:13 PM EDT

Whether Donald Trump or Hillary Clinton gets elected, government spending is likely to go up in the coming years, according to Goldman Sachs. "Fiscal policy is coming back into focus in the U.S., driven by campaign proposals that signal a possible post-election fiscal boost, reduced political interest in deficit reduction, and potential economic gains from increased public investment and/or tax reform," Goldman Sachs economist Alec Phillips wrote in a note to clients Friday. "Our expectation is that fiscal policy will become slightly more expansionary over the next two years, and we are increasing our government spending numbers slightly to account for this." The Goldman note came out before the release of Trump's economic plan Monday, but many of the themes were similar to what was known beforehand. Phillips cited how the last 10 first-term presidents had federal budget deficit spending go up on average. More important than the historical tendency, both Trump and Clinton "seemed focused on expansionary fiscal policy" for their administrations. Clinton's proposals include a $50 billion annual increase in infrastructure spending totaling an eventual $250 billion. Her economic plan will likely increase government spending in the short term, says Goldman Sachs. However, it could be revenue neutral in 10 years, according to CRFB [Committee for a Responsible Federal Budget] estimates which Phillips cited. Trump's economic plan is focused on tax relief for businesses and individuals. His plan will increase the budget deficit by $11.5 trillion in 10 years, according to the CRFB. "Mr. Trump has not spelled out any specific plans on infrastructure but has suggested that he would boost spending even further than Sec. Clinton's plan," the Goldman Sachs note said. As a result of both economic plans, Goldman Sachs estimates real federal spending will rise 1.5 percent in 2018 after an essentially flat 2017. Phillips said 2017 levels won't change much as they are already set from last year's budget negotiation.

A pressman checks uncut sheets of $20 bills at the US Bureau of Engraving in Washington, DC.

Paul J. Richards | AFP | Getty Images

Whether Donald Trump or Hillary Clinton gets elected, government spending is likely to go up in the coming years, according to Goldman Sachs.

"Fiscal policy is coming back into focus in the U.S., driven by campaign proposals that signal a possible post-election fiscal boost, reduced political interest in deficit reduction, and potential economic gains from increased public investment and/or tax reform," Goldman Sachs economist Alec Phillips wrote in a note to clients Friday.

"Our expectation is that fiscal policy will become slightly more expansionary over the next two years, and we are increasing our government spending numbers slightly to account for this."