Economy

Budget deal to boost economy, says S&P

by Erik Wasson - 12/11/13 4:37 PM ET

The new budget deal reached by Rep. Paul Ryan (R-Wis) and Sen. Patty Murray (D-Wash.) should boost the economy next year, economists at Standard & Poor’s said Wednesday.

S&P estimated that the deal could add 0.2 percent to the gross domestic product, bringing GDP up to 2.8 percent for the year.

{mosads}“This would match 2012 as the strongest year since the recovery started. We will wait for a little more visibility on the prospects for the deal to become policy before changing our baseline forecast,” S&P said.

The House is set to vote on the budget deal as soon as Thursday.

The gains come because the deal increases federal spending in the short term by $63 billion, which should provide a demand stimulus to the economy. S&P also sees gains from decreased business uncertainty surrounding any possible repeat of the 16-day government shutdown in October.

The deal does not completely erase fiscal uncertainty, however, since the debt ceiling still must be raised next spring.

“The private sector will probably be more confident when planning investment and spending for next year, which would directly boost growth,” S&P said.

It predicted the deal makes it more likely the Federal Reserve would move to end bond purchases aimed at stimulating growth at its next meeting, set for Tuesday.

Tags Patty Murray Paul Ryan