President Trump’s $1.4 trillion tax cut could have painful consequences for the economy down the road — including a possible recession and a ballooning deficit, according to Goldman Sachs.

“The US fiscal outlook is not good,” Goldman’s chief economist Jan Hatzius said in a Sunday note.

The Wall Street powerhouse — whose former president Gary Cohn helped engineer the tax package as the White House economic adviser — dismissed economic projections by the Congressional Budget Office as too “optimistic,” and said that the deficit could spike by about 2.5 times, to $2.05 trillion, by 2028.

In one scenario, the bond market could punish the US for its growing debt levels by making it more expensive to borrow — thereby swelling deficits further, according to the Goldman note.

That could end up constraining any economic stimulus packages during the next recession, which isn’t likely for the next “couple years,” the bank said.

Goldman doesn’t believe that Congress is likely to do anything about the runaway deficits “in the near-term,” thanks to the election cycle and the impending retirement of US Rep. Paul Ryan (R-Wis.), an outspoken hawk on the issue.

Source