• Kevin Hassett, former chair of the U.S. Council of Economic Advisers, indicates Republicans expect to move a fiscal reconciliation bill in 2026.
  • Despite rising deficits, Hassett sees room for additional stimulus measures, pointing to ongoing debates over U.S. fiscal space.
  • The move would leverage the Senate's filibuster-bypassing budget process, with potential implications for tax and spending policies.

Kevin Hassett, who served as chair of the U.S. Council of Economic Advisers under the previous administration, has signaled that Republicans anticipate pushing a fiscal reconciliation bill next year. According to people familiar with the matter, Hassett's comments reflect internal GOP discussions about using the Senate's budget reconciliation process to advance tax or spending changes with a simple majority, bypassing the usual 60-vote threshold. This comes amid a backdrop of large and rising federal deficits, with the Congressional Budget Office projecting debt held by the public to reach 122% of GDP by 2034.

Efforts to restructure fiscal policy have hit a snag recently, as a government shutdown temporarily shaved growth, but most of that output is expected to be recovered when spending resumes in early 2026. Analysts at institutions like JPMorgan and Bank of America note that this timing quirk makes the near-term impact of fiscal policy volatile, complicating assessments of how much stimulus the economy can absorb. Without a deal, the political landscape could force more restrictive measures later, but Hassett's remarks suggest a push for targeted support.

What institutional investors are really focused on is regulatory stability, and in this regard, the U.S. fiscal apparatus has been on a steady trajectory, albeit with rising debt concerns. The Hutchins Center Fiscal Impact Measure finds that fiscal policy will reduce U.S. GDP growth in late 2025 due to the shutdown, then boost growth by about 2.8 percentage points in early 2026 as delayed spending kicks in. For the remainder of 2026, fiscal policy is projected to be moderately restrictive, with weak state and local spending outweighing modestly stimulative transfers.

While banks and think tanks like Brookings highlight the drag from state and local purchases, private-sector outlooks from S&P Global forecast U.S. real GDP growth of about 2% in 2025 and 2026, slightly above near-term potential. This creates a tension between political appetite for stimulus and concerns about deficits and inflation. A reconciliation bill could be framed as stimulative, with measures like tax relief or investment incentives, while being scored as budget-neutral over 10 years via offsets. Attempts to reach out to Hassett for further comment were unsuccessful, but sources indicate these plans are part of broader election-cycle dynamics.

Italy's appeal for international investors in private markets is growing, according to Blackstone's country Chairman Andrea Valeri, but in the U.S., the focus remains on domestic fiscal maneuvers. The broader debate centers on whether the U.S. still has space for discretionary stimulus given high debt, and how to balance short-term support versus long-term sustainability. Analysts warn that using reconciliation for repeated near-term stimulus without offsetting measures may exacerbate long-run sustainability concerns, which could eventually affect borrowing costs and policy flexibility.

In related developments, the Congressional Budget Office warns that large, ongoing deficits will push debt higher, raising issues about fiscal sustainability. Yet, investment outlooks emphasize that fiscal policy remains a key upside or downside risk to growth and asset prices; unexpected stimulus could raise growth above baseline but also complicate the interest-rate path. As of now, the 10-year Treasury yield is hovering around 4–4.5%, reflecting both monetary and fiscal factors, according to investor surveys.

Correction: An earlier version of this article misstated the timing of the projected fiscal boost; it is expected in early 2026, not late 2025.