- While Democrats and the White House push forward with stimulus talks, Goldman Sachs still doesn't expect a near-term breakthrough.
- Odds of a pre-election bill "continue to look very low" as the biggest issues between both parties loom large, the team led by Jan Hatzius wrote in a Tuesday note.
- Still, negotiations will likely continue as "neither side benefits from ending them," they added.
- The election is the biggest variable for determining the size of a fiscal relief bill and when it passes, Goldman said.
Democrats and the White House now plan to reach a stimulus agreement by the end of the week, but Goldman Sachs isn't betting on a breakthrough.
House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continue to hold talks on passing another sweeping relief bill. The White House recently upped its proposal to $1.88 billion, but the sum still stands well below the $2.2 trillion package pushed by House Democrats. With Election Day looming and significant differences between both parties curbing progress, odds of a near-term bill "continue to look very low," Goldman said in a Tuesday note.
"The thorniest issues - fiscal aid to states and liability protections-are still outstanding and there is no indication that differences have narrowed since last week," the team led by Jan Hatzius said.
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Senate Democrats already blocked Republicans' bill for renewed Paycheck Protection Program funding on Tuesday, and are poised to vote against a $500 billion "skinny bill" on Wednesday. With neither party making significant strides to meet the other, progress toward reaching a compromise has been sluggish.
Still, talks will likely continue since "neither side benefits from ending them," Goldman's strategists said. Pelosi said Tuesday she remains "optimistic" about a deal, but has previously indicated that a bill may not materialize until after November 3.
Time is running out for a pre-election breakthrough, making the election's outcome "the biggest variable" for how stimulus talks will proceed, according to the bank. A status quo result would likely extend the legislative deadlock into the winter and see a bill pass in a lame-duck session of Congress, the team said.
A Democratic sweep of the White House and the Senate would push a deal into 2021, as Republicans would maintain their objection to a larger deal and Democrats would simply wait to take power. A fully Democrat-controlled government could expedite a much larger fiscal relief bill, Goldman said.
The strategists still see hope for piecemeal bills being passed before the new year. While Democrats have mostly opposed the approach, lawmakers may seek to renew expanded unemployment benefits before they expire in 2021, the team said.
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