Societe Generale have bumped up their projections for 2011 U.S. GDP to 3.3% from 2.3%, so long as the tax deal is delivered. Note the relatively large size of consumer spending in relation to U.S. GDP growth, likely a product of taxes putting money back in consumers pockets.
Photo: Societe Generale
This new fiscal stimulus’ effect will not last forever, however.
From Societe Generale:
Fiscal policy will be positive for 2011 and 2012 due to the stimulus package. Beyond 2012 there is a tremendous amount of uncertainty, as the stimulus package does nothing to address the long term deficit problem, but only serves to add to it. The Obama debt commission has presented a framework, which looks like a very good starting point for potential legislation. Given the strong partisan nature of Washington it may require bond markets to put politicians’ backs to the wall in order to get something substantive done. That said, there have been areas of promise.
Societe Generale seem to be calling for all bond vigilantes to swoop in and put pressure on the U.S. Congress to get a deal done quickly on the deficit.
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