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GOP tax plan can help boost economy already growing above trend: Goldman chief economist

  • The passage of the Republican tax reform bill would be an "additional positive boost" to the U.S. economy, which is already growing above trend, Goldman Sachs' Jan Hatzius said
  • The Senate Budget Committee advanced its bill on Tuesday, sending it to the full chamber for a vote later this week.
  • He sees continued above-trend growth for next year and four Fed rate hikes.

The passage of the Republican tax reform bill would be an "additional positive boost" to the U.S. economy, which is already growing above trend, Jan Hatzius, chief economist at Goldman Sachs, told CNBC on Tuesday.

The Senate Budget Committee advanced its bill Tuesday, sending it to the full chamber for a vote later this week.

The economy is "getting a good amount of support from financial conditions and I think fiscal policy will contribute as well," Hatzius said in an interview with "Closing Bell."

The latest news on tax reform sent stocks soaring to record highs on Tuesday, with the Dow closing 255 points higher.

Hatzius thinks the stock market is accurately reflecting economic activity, calling 2017 "a good year in the economy."

"We've seen continued acceleration and growth. We've seen, I think, a pickup in most sectors," he said.

Then there is the feedback from financial conditions, such as stocks, a slightly weaker dollar, fairly low interest rates and tight credit spreads, Hatzius noted.

"That is a reason why we are likely to still see above-trend growth next year and I think that helps the case for seeing perhaps more hikes than what the market's pricing in."

Goldman Sachs thinks the Federal Reserve could raise rates four times next year, twice as many as the market is projecting.

That's because the firm expects some degree of labor market overshooting, Hatzius said.

"It looks to me that we're basically at full employment now. I don't think we have an overheated labor market … but I think we are moving towards at least some degree of labor market overheating," he said.

— CNBC's Jeff Cox contributed to this report.

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