If the tax credit payments are not reauthorized, the economy could rebound more slowly than previously thought, according to Goldman.
Goldman says ending the payments will contribute to disappointing GDP growth.
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The base case for the Democrats' proposal to spend almost two trillion dollars on clean energy, education and middle-class tax credits has been changed by Manchin's announcement, according to a Sunday evening note to clients by Jan Hatzius.
The most important question about the near-term economic outlook is the fate of the expanded child tax credit, which is set to expire on December 31 for the families of some 65 million children.
It would likely take several weeks to negotiate a new compromise, extending past the year-end deadline and losing urgency as additional negotiations for other measures simultaneously take place.
Hatzius said last week that the Treasury Dept. looks unlikely to make the January and February payments on time even if Congress extends the credit in the new year.
In a radio interview on Monday, Manchin said that the tax credit payments should be part of tax refunds, as opposed to separate monthly payments, and that only working Americans should receive the credit.
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Manchin told MetroNews on Monday that he wants social reforms to include responsibility and accountability and that only the children of employed Americans should be eligible for the expanded child tax credit.
The quote is crucial.
The year-end deadline to extend the CTC was the most important forcing event, and it is not clear what, if anything, will serve as a new deadline for action.
The key background.
Biden's American Rescue Plan increased the child tax credit from $2,000 per child last year to $3,600 for each child under the age of 6 in 2021. The IRS started giving out half of the credit in monthly payments in July to families who need it more than usual because of the swine flu. The full credit was available to individuals earning up to $75,000 a year, heads of household up to $112,500 a year, and joint filers up to $150,000 a year. The credit would be extended through the end of 2022, giving eligible families $250 in monthly payments for each child under the age of 17 and an extra $50 per month for kids under the age of 6.
There was aContra.
A study by the University of Chicago found that the proposal would have negative economic consequences. Kevin and Bruce estimated that the expansion of the child tax credit would reduce employment by 1.5 million workers.
Manchin says he won't support build back better.
The White House is considering double child tax credits in February.
