Economy

As Congress fights, analysts warn economy needs help now – CKPGToday.ca

Published

4 years ago

July 27, 2020

Yet even with the viral outbreak intensifying and nearly half of Americans whose families have endured a layoff saying they fear those jobs are lost forever, Congress isn’t anywhere close to agreeing on the outlines of a package even as a $600-a-week federal payment to the unemployed has expired.

The debate coincides with worrisome signs about the job market and the economy. The number of laid-off workers who have applied for unemployment benefits has topped 1 million every week for 18 straight weeks. Before the pandemic, that figure never exceeded 700,000. Real-time data shows that Americans’ visits to shops and restaurants have levelled off after having grown in May and June. Air travel fell last week compared with the week before.

As Congress struggles to reach a compromise on a new financial rescue plan, the main sticking point is the supplemental federal unemployment aid, which provides $600 a week on top of whatever benefit each state provides.

The White House wants to replace the enhanced benefit with a payment that would vary by state but would combine with a state unemployment benefit to replace 70% of recipients’ previous income, likely with some cap for high-income earners. On average, state benefits are equivalent to 45% of workers’ former incomes.

Senate Republicans favour reducing the $600 to a flat payment of $200, possibly as a bridge to a 70% replacement system. The flat payment had been adopted in March because most states’ unemployment systems use antiquated software that cannot adjust individual payments using a percentage formula.

The Democratic-led House has already approved legislation that would extend the $600 through January. Research has shown that, counting the $600 a week in federal aid, roughly two-thirds of those out of work are receiving more money from their jobless benefits than they earned at their previous jobs. That conclusion has fueled Republican concerns that the extra aid has discouraged some of the unemployed from returning to work, potentially slowing the recovery.

Many small businesses have said the $600 weekly federal benefit has made it harder for them to fill jobs. But some unemployed people are reluctant to return to work because they fear becoming infected. And others have tried and failed to find any work.

One new finding suggests that the federal jobless benefit hasn’t broadly kept people from going back to work. In a paper released Monday, a group of economists and doctoral students at Yale University found that unemployed people with larger percentage gains in their benefits were no less likely to return to work than those with smaller increases.

When the unemployment rate is as high as it is now, economists generally worry less about disincentives, because so few jobs are available. It’s when unemployment is low and people who are out of work know that jobs are widely available that the disincentive to work would more likely apply.

William Spriggs, chief economist at the AFL-CIO, argued that the 7.5 million jobs that the economy added in May and June suggest that most of the unemployed will take a job offer when unemployment is high, because they know another opportunity may be hard to find.

“This is the last lifeboat leaving, and if you don’t get on it, you’re toast,” Spriggs said. Most workers also prefer the security of a job over a temporary, if generous, benefit, he said.

Jeremiah Spelts is among those who would like to find new work. Spelts, 41, earned more money from his diesel mechanic job, which he lost in June, than on unemployment. He worked in the oil fields in Wyoming until his employer of two years ran through their Paycheck Protection loan from the government and oil prices fell.

Still, the extra $600 has made it possible for him to cover all his bills.

If that goes away, “I would literally start losing things,” he said. “The first to go would be my apartment and utilities.”

On other issues, Senate Republicans have indicated that they oppose further aid to state and local governments, though they support more money for schools. The House Democrats’ bill provides $1 trillion for state and local governments. Both parties support additional funding for small businesses, but Senate Republicans are considering limiting new grants to businesses whose revenue has shrunk at least 50%.

Michael Strain, an economist at the right-leaning American Enterprise Institute, says he supports reducing the extra benefit to roughly $200 a week. But says that the money saved from that cut should be pumped back into the economy. He favours more aid for state and local governments to prevent them from making any further layoffs, and more funds for small businesses.

“The goal is to support the economy and support consumer spending, without disrupting work incentives,” Strain said.

But Scott Shane, an economics professor at Case Western Reserve University, said he thinks aid should focus more on the unemployed than on small businesses, because many companies may not survive, particularly those involved in in-person services such as restaurants, bars and hotels.

The benefit of keeping a restaurant open, for example, is limited, even if it pays all its employees, Shane said. It won’t order food or new equipment from its suppliers, which, in turn, have to cut jobs. And there’s no way to know at this point when restaurants and other in-person businesses will reopen.

In fact, the potentially open-ended nature of government aid keeps Shane up at night. Congress approved a $2 trillion package in March. The aid Congress is considering now will likely top $1 trillion.

“Are we going to do this twice more every six months going forward?” he asked. ”You can’t just borrow forever.”

___

AP Writer Thalia Beaty in New York contributed to this report.

Christopher Rugaber, The Associated Press

by Canadian Press

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

2 days ago

September 10, 2024

Anne Joseph

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

2 days ago

September 10, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

Published

2 days ago

September 10, 2024

Anne Joseph

HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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