By Jonnelle Marte

(Reuters) – Some economists believe the U.S. economy will slow down next year, after a crucial Democratic lawmaker struck a blow to President Joe Biden’s $1.75 billion spending plan. The decision further clouded an outlook already at risk due to the Omicron variation of COVID-19.

Goldman Sachs (NYSE 🙂 has lowered its GDP forecast, as well as Mark Zandi (CEO of Moody’s Analytics (NYSE :), after U.S. Senator Joe Manchin declared on Sunday that he would not be supporting Biden’s “Build back Better” plan, which would increase the social safety net while tackling climate change.

“If BBB doesn’t become law, the economic recovery will be vulnerable to stalling out if we suffer another serious wave of the pandemic; an increasingly likely scenario with Omicron spreading rapidly,” Zandi wrote on Twitter (NYSE:) on Monday, adding that he expects real GDP growth to be lower by half a percentage point in 2022 if the proposed legislation doesn’t become law.

Democrats have been able to absorb the legislative defeat as Biden faces criticism from health professionals due to an increase of COVID-19 infection.

One change economists fear could slow down growth is the elimination of an enhanced credit for tax. This credits paid monthly family payments up to $300 per child, but is scheduled to expire Dec. 31. Biden’s spending bill could be modified next year by lawmakers or extended retroactively. But negotiations may take several weeks, Goldman Sachs analysts wrote to clients.

The U.S. economy was likely to slow from its brisk pace at the close of the 2021, even though Omicron was a potential threat to global growth. Biden’s spending plan also was halted.

Inflation was predicted by economists earlier this month. The Federal Reserve reduced its monetary policies to counter high inflation, and earlier in the month they projected that next year’s growth would be slower.

A Reuters poll published Dec. 8 by economists showed that the annualized rate growth in gross domestic products was likely to decline to 4% for the first quarter 2022, from 6% over the three-months.[ECILT/US]The growth rate for 2022 total was 3.9%, which is still well below pre-pandemic trends of 5.6%.

In response to the strong economic growth and inflation, the Fed declared last week it will double its rate of bond-buying wind down and could increase interest rates by three times next year. Zandi stated that the U.S. central banking could find it difficult to announce three rate rises next year if U.S. economy growth is slower than expected.

Goldman said that the Fed’s expectation of a March rate increase is now at risk due to the fact that the “most Fed officials expected the BBB Act (or something similar) to be passed.”