Goldman Sachs Predicts Democrats Will Win House, Focus on Fiscal and AI Regulation

Goldman Sachs released a report on the U.S. economy, predicting that the probability of the Democrats winning a majority in the House of Representatives has exceeded 90%, while the Senate remains uncertain. If the Democrats secure the House, the expiration of spending authorization on December 11 and the debt ceiling in 2027 will become major legislative battlegrounds. Goldman Sachs expects that the Democrats may leverage the risks of government shutdowns or debt ceiling events to seek policy concessions. Although significant changes in fiscal policy are unlikely in the next two years, spending may slightly increase, with an expected rise of about 0.25% of GDP by 2027. Regarding tariffs, Goldman Sachs believes that while the Democrats intend to partially reduce tariffs, it is highly likely that the results of the Section 301 investigation will be announced after the midterm elections, leading to new tariffs that will outweigh the Democrats' partial reductions, potentially resulting in a net increase of just under 2 percentage points in the effective tariff rate in the U.S. Concerning AI and data centers, post-election, interest in data center issues is expected to cool, with a low likelihood of a nationwide construction halt. Congress's focus will shift to AI regulation, potentially reaching a moderate compromise that includes basic federal oversight and corporate self-testing. If the Democrats win either chamber, investigations into large tech companies are expected, and stricter AI restriction bills may also be introduced at the state level.

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