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Biden economy plan: Can he restore growth, will his programs pass? – USA TODAY

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Paul Davidson
 
| USA TODAY

Democrat Joe Biden’s victory in the presidential race will provide a boost to a U.S. economy battered by the COVID-19 pandemic as his bold spending plans and stauncher support for trade and immigration more than offset the drawbacks of new taxes and regulations, top economists say.

Biden’s blueprint will bring back the 11 million jobs and $670 billion in annualized gross domestic product wiped out – and not yet recovered – in the crisis more rapidly than if President Trump had won a second term, analysts say.

“Biden’s policies are the right ones to address the economic crises created by the pandemic,” says Mark Zandi, chief economist of Moody’s analytics. “With such high unemployment, low inflation and zero interest rates, Biden’s proposal to go big on government investment will get us back to full employment fastest. His policies are also targeted to help low- and middle-income households hit hardest by the pandemic.”

Yet the scope of the economic benefits delivered by Biden’s agenda hinges on whether Republicans keep narrow control of the Senate, as now seems likely, or Democrats gain a slim edge. The outcome is uncertain amid ongoing vote tallies in local races and final results may not be clear until early next year because of runoff races.

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A Biden presidency and GOP Senate would mean a smaller economic boost than a sweep that hands a slight majority to Democrats. Under the former scenario, the economy would grow an average 3.5% a year and generate 11.6 million jobs during Biden’s four-year term, according to Moody’s. That would be just modestly better than average growth of 3.2% and 9.8 million new jobs under the status quo – a second Trump term with the current split Congress, Zandi estimates

If Biden could work with a Democratic-controlled Senate, the economy would grow more vigorously – an average 3.8% a year, creating 14.1 million new jobs, according to the Moody’s analysis. The nation would return to full employment by late 2022, a year earlier than under a Biden presidency and Republican Senate, Zandi reckons. 

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Here’s how a Biden plan could affect the economy:

Another COVID-19 stimulus package

Biden has voiced support for a robust relief measure that includes another federal bonus to weekly unemployment benefits, more aid for struggling small businesses and financially distressed states, and another round of stimulus checks to most households.

The big question: Which party has the majority in the Senate? Last month, the Democratic House passed a $2.2 trillion package while the Republican Senate has favored a $500 billion plan.

If Republicans keep control, lawmakers likely would approve a $1.5 trillion stimulus, possibly late this year, according to Moody’s Analytics and Oxford Economics. If the Democrats wrest control, Zandi expects a $2 trillion package that could match the $600 jobless aid provided to unemployed Americans earlier this year instead of a reduced amount.

But economist Nancy Vanden Houten of Oxford Economics believes even a Democratic Senate would opt for a $1.5 trillion measure to preserve space for other spending initiatives.

Biden longer-term spending

Biden is proposing $7.3 trillion in new spending over 10 years, including upgrading the nation’s roads, bridges and highways; building a clean energy economy; investing in research and development to bolster manufacturing; ensuring the government and its contractors buy American products; providing tuition-free community college; ensuring access to affordable childcare and universal preschool; and providing aid for Americans to buy or rent homes.

The flurry of programs will create new economic output, generate millions of jobs, help workers better prepare for high-skilled positions and increase the nation’s productivity, or output per worker, Zandi says.

If Democrats narrowly win the Senate but Republicans can block major legislation with 40 votes, Senate Democrats will have to compromise with Republicans, likely trimming the $7.3 trillion blueprint to about $4 trillion, Zandi says. Oxford economist Gregory Daco foresees a more dramatic cut to about $3 trillion.

And if Republicans keep Senate control, just a sliver of the proposals likely would pass, with GOP lawmakers perhaps agreeing to some infrastructure and social service spending in exchange for middle-class tax cuts, Zandi says.

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Biden taxes

To help pay for the massive outlays, Biden plans to raise taxes by about $4 trillion over the next decade. He proposes eliminating loopholes for individuals earning more than $400,000; subjecting incomes above $400,000 to the 12.4% Social Security payroll tax; and phasing out itemized deductions at incomes of $400,000.

He also wants to increase the corporate tax rate from 21% to 28%, and tax capital gains and dividends at ordinary rates for incomes above $1 million.

Under a slim Democratic majority in the Senate, Zandi figures Republicans would oppose the individual tax hikes and only the corporate tax increase would pass. Daco thinks Republicans would rebuff the expanded payroll tax and agree to bumping up the corporate tax rate to just 24% instead of 28%.

New taxes likely would ding business profits and discourage some investment, damping economic growth, Zandi says. Oxford, however, says the effects on business activity should be “negligible.” And there should be just limited impact on high-income households, who can more easily tap savings and investments to maintain their spending, Zandi says.

Both Zandi and Daco also figure Biden would delay any tax hikes to later in his term, after the economy is well on the path to recovery.

And if Republicans keep their Senate majority? Don’t expect any tax increases, the economists say.

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Biden immigration

Biden doesn’t need Congress’s approval to reverse a cascade of Trump executive actions, and economists say that’s precisely what he will do. Those include a ban on travel from several Muslim-majority countries and a sharp reduction in the annual cap on the number of refugees permitted in the U.S., Oxford Economics says. Biden also supports sweeping immigration reform, which likely would boost the number of migrants entering, and staying in, the country.

Zandi also expects a looser policy on H-1B visas for high-skilled foreign workers.

All told, average annual immigration to the U.S. likely would slowly climb back to about 1 million after falling to about 750,000, the economists say. That would boost the population and labor supply, increasing consumer spending, productivity and economic growth, they say.

Biden on trade

Biden has taken a tough stance on trade with China and wouldn’t immediately lift the $360 billion in tariffs Trump slapped on Chinese imports, Daco and Zandi say. But unlike Trump, Biden has said he wants to rally U.S. allies to confront China. And while Trump almost certainly would have escalated the trade war, Biden likely would remove some of the tariffs, perhaps the most recent wave, Daco says. Zandi believes all the levies will be gone by 2023.

That would eliminate a tax on American shoppers who buy Chinese imports, bolstering consumer spending. And it likely would prompt China to remove the retaliatory tariffs it has levied on American shipments to that country, juicing U.S. industrial production and exports.

Biden “will bring stability,” Daco says.

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Biden regulations

Biden has said he’ll roll back much of Trump’s cuts to regulations, especially environmental rules for the power and auto industries, as he ramps up a plan to address climate change and promote clean energy.

Daco says new regulations likely would discourage some business investment and hiring.

“The oil and gas sector could see a rough ride with the imposition of new, onerous regulation,” says economist Troy Ludtka of research firm Natixis.

 Zandi, however, says there’s no evidence that regulations have such negative effects on business activity.

Minimum wage

Biden supports a Democratic proposal in Congress to raise the federal minimum wage from $7.25 an hour to $15. But with just a slim Senate majority, Democrats would not be able to overcome a filibuster.

That likely would mean no minimum wage hike or a small bump that won’t have a meaningful impact, Zandi says. And a Republican Senate would be highly unlikely to approve a bump in base pay, Zandi says.

The economic effects of a minimum wage increase are mixed. About 30 million, mostly lower-income households would benefit from higher pay, increasing their spending power, Oxford Economics says.

At the same time, that economic gain could be offset as some businesses hire fewer workers and pass their higher labor costs to consumers, hurting consumption, Oxford says. Some businesses also could replace workers with technology, the research firm says.

Several states already are gradually raising their pay floors to $15, and dozens of cities and counties, along with corporations such as Amazon, are already there. A base pay increase to $15 would have little negative impact if it occurs gradually and follows market trends, Zandi says.

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Canadians to get say on how to grow Blue ocean economy – SaltWire Network

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Canadians will be asked their opinions as the federal government begins crafting its strategy to develop a blue economy.

Fisheries and Oceans Minister Bernadette Jordan says the online consultation process will begin in the new year to open up the discussion to provinces, territories, Indigenous peoples and others. More details on the process will come soon, she said.

That was just one of the details revealed Thursday, Dec. 3,  in a virtual panel discussion hosted by the Ocean Frontier Institute (OFI), following up on the announcement of the previous day of Canada’s commitment with 13 other nations to sustainably manage 100 per cent of its oceans.

The OFI-hosted virtual panel discussion — Charting a Course for a Sustainable Blue Economy — focused on Canada’s opportunities for sustainable growth of the “blue” economy.

Panelists included OFI’s CEO and science director Dr. Anya Waite, OFI’s strategic engagement officer Catherine Blewett and Karin Kemper, global director for environment, natural resources and blue economy global practice with the World Bank, as well as Jordan.

244,000 miles worth of management


WHAT’S A BLUE ECONOMY?

The blue economy is described as an economy driven by sustainable, ocean resources and accounts for about $31.65 billion annually in GDP. It is the source of almost 300,000 Canadian jobs with direct, indirect and induced benefits in sectors as diverse as fisheries and aquaculture, marine transportation, ocean energy and technology, recreation and tourism.

WHAT IS PROBLUE?

This is a multi-donor trust fund that “supports the sustainable and integrated development of marine and coastal resources in healthy oceans.” PROBLUE has four pillars: fisheries and aquaculture, marine pollution, oceanic sectors, and seascape management. To date, PROBLUE has received pledges of approximately US$110 million from Canada, Norway, Sweden, Denmark, Iceland, France and Germany.


There are many challenges ahead for those who aim to grow the blue economy. One is just the sheer expanse of the seas on planet earth.

Waite noted if the world’s ocean were measured as a country, it would be the seventh largest in the world.

And among the world’s nations, Canada governs a massive marine environment — three oceans and a coastline of about 244,000 kilometres.

Those marine areas are crucial, not just to national economies, but to the global environment.

The Labrador Sea, for instance, on Canada’s East Coast, is referred to as “the Earth’s lungs.”

The seawater in that space absorbs carbon and heat; it’s a natural filter that helps regulate global climate.

“The Labrador Sea is a bigger carbon sink than the Amazon rain forest,” said Waite. “The ocean is our climate.”

Protecting the ocean environment will be a significant task.

The ocean economy

Fishing boats at Petit Etang, Cape Breton. According to the World Bank, one in 10 people in the world depend on the fishing industry for their livelihood. - SaltWire File Photo
Fishing boats at Petit Etang, Cape Breton. According to the World Bank, one in 10 people in the world depend on the fishing industry for their livelihood. – SaltWire File Photo

Finding balance between environmental protection and economic needs will be another.

Globally, said World Bank director Kemper, one in 10 livelihoods are dependent on fisheries, with women making up about half of the fish harvesting/processing workforce.

She said as Canada and the other nations move towards sustainable management, there may be some short-term tradeoffs, but “in the long term we have to focus on sustainability.”

And as countries begin the process of recovering from COVID, she said, some short-term solutions could aid the long-term goal of the sustainable oceans commitment.

“Governments might want to do large infrastructure projects to create employment – putting money into people’s pockets in the short term,” she said, “and that could lead to things like cement seawalls to prevent coastal erosion, planting mangroves to rebuild swamps or doing recovery work on reefs.”

There’s no dispute that there’s still much to learn about the ocean.

According to Jordan, the current Canadian government has done much work since 2015 to improve research and rebuild fish stocks.

For example, she said, funding was recently increased to expand knowledge of caplin, the fish that feeds other fish, in the Newfoundland and Labrador region.

“We are using the new funding to examine this data to determine how it can be used to establish reference points to advise resource managers,” she told SaltWire.

Since 2018 she noted, the federal government has completed rebuilding plans for six of 19 selected fish stocks.

More than fishing

Fisheries and Oceans Minister Bernadette Jordan - SaltWire File Photo
Fisheries and Oceans Minister Bernadette Jordan – SaltWire File Photo

The blue economy is not only the fishing industry.

“Our ocean industries account for nearly $32 billion annually in GDP and 300,000 jobs across fishing, aquaculture, energy, ocean technology, shipping, tourism and other industries.”

And the goal of ocean sustainability is a global one, with a challenge for progressive nations to help underdeveloped countries in sustainable ocean management.

That’s why Canada is also committing to help other nations craft their own sustainable oceans plans through the World Bank’s PROBLUE fund.

Thursday Jordan announced Canada will invest another $4 million to that fund, for a total commitment of $69 million, making this country the top donor to the fund so far.

You can watch the full panel discussion here:

[embedded content]


 Transforming the ocean economy; the principles

The following principles are outlined in the report “Transformation for a Sustainable Ocean Economy”, a vision document created by Canada and the 13 other nations that have committed to enacting sustainable management of 100 percent their oceans by 2025.

Alignment: Ocean protection and production must align with the UN Framework Convention on Climate Change and the Paris Agreement, the Convention on Biological Diversity, and the Polluter Pays Principle as set out in the Rio Declaration. Actions must be aligned across ocean-based and land-based activities and ecosystems.

Inclusiveness: Human rights, gender equality, community and Indigenous Peoples’ participation, through their free, prior and informed consent, must be respected and protected.

Knowledge: Ocean management must be informed by the best available science and knowledge, including indigenous and local knowledge, and aided by innovation and technology.

Legality: The UN Convention on the Law of the Sea is the legal basis for all ocean activities, and existing international ocean commitments must be implemented as a foundation for achieving a sustainable ocean economy.

Precaution: Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.

Protection: A healthy ocean underpins a sustainable ocean economy. A net gain approach must be applied to ocean uses in order to help sustain or restore the health of the ocean.

Resilience: The resilience of the ocean and ocean economy must be enhanced.

Solidarity: The need for access to finance, technology and capacity building for developing countries, especially Small Island Developing States and Least Developed Countries, must be recognised, taking into account their particular circumstances and vulnerabilities.

Sustainability: The production and harvesting of ocean resources must be sustainable and support resilient ecosystems and future productivity.

Click here for more about the Ocean Frontier Institute visit.

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Brazil's economy grew 7.7% in Q3, but slower than expected – 570 News

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RIO DE JANEIRO — Brazil’s economy grew 7.7% in the third quarter of the year from the previous three months, the national statistics institute reported on Thursday — the strongest quarterly result in a quarter century but less than expected following heavy stimulus spending.

It is the fastest quarterly growth since the series began in 1996 and confirmed the Brazilian economy’s exit from technical recession, characterized by two consecutive quarters of contraction. But activity hasn’t yet returned to the level seen prior to the coronavirus pandemic.

Brazil’s Economy Ministry had projected growth of 8.3% for the period, according to a bulletin relased on Nov. 17.

The expansion during July through September coincided with the payment of emergency assistance funds to more than 60 million people to mitigate the impact of the pandemic, and also with the reopening of activities in most states, where quarantine measures were relaxed.

“The data is disappointing due to the enormous fiscal stimulus that the government used for the economy to recover,” Emerson Marçal, head of the Center for Applied Macroeconomics of the Getulio Vargas Foundation in São Paulo, told The Associated Press by phone.

The emergency payment, about $10 monthly in the third quarter, helped boost retail sales and contributed to the recovery of industrial production, Marçal said. The end of the aid, tentatively scheduled for December, and the possibility of new restrictions on activity due to the surge of coronavirus cases may further compromise the speed of recovery, he added.

Brazil has confirmed more than 6.4 million coronavirus infections, with 174,000 deaths. In recent weeks, infections have risen in big cities like Sao Paulo and Rio de Janeiro. President Jair Bolsonaro has consistently argued that the economic impact of lockdowns and other measures during the pandemic would be more damaging to Brazil than COVID-19 itself.

Brazilian banks estimate a 4.5% drop in Brazilian GDP for 2020, a smaller decline than is expected in the region’s other major economies. The International Monetary Fund projects a contraction of 8.1% for the Latin American and Caribbean region, with Brazil least affected by the crisis.

Marcelo Silva De Sousa, The Associated Press

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Feds' fall economic statement shortchanges climate – Corporate Knights Magazine

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Canadians are going to have to wait until the next Liberal budget to get a full sense of the government’s commitment to a green recovery, though Ottawa has unveiled some key parts of the plan this fall.

Finance Minister Chrystia Freeland made a down payment on clean-energy stimulus in her fall economic statement on November 30, but the $6.64-billion package of new measures over 10 years was far smaller than some clean-energy advocates had called for.

Corporate Knights calculates that the funding announced for a climate-focused recovery plan represents only 20% of the federal investment needed to meet the government’s own commitment to reduce greenhouse gas emissions.

In the government’s first major financial update since the COVID-19 pandemic shut down the economy last March, Freeland maintained a focus on support programs for individuals and businesses.

She promised a future budget with a more robust stimulus plan worth up to $100 billion over three years. It’s uncertain how much of that will be allocated to climate-change mitigation, given competition from other post-pandemic priorities such as a national daycare program to boost women’s participation in the workforce.

The federal green recovery plan, to date, falls well short of the commitments made by more ambitious national governments, including that promised by U.S. President-elect Joe Biden, who has pledged a US$2-trillion green recovery plan, subject to Congressional approval.

Numerous groups have urged the Liberal government to match the efforts of countries in Europe and East Asia that have announced major green stimulus plans, even as some of those nations remain in the grip of the pandemic.

As part of a green recovery plan endorsed by 50 business leaders, Corporate Knights proposed a 10-year, $108-billion program that would be front loaded to ensure that Canada can re-start the economy on a greener footing that it argues will be essential to tapping into global growth markets.

In a series of virtual roundtables hosted by Corporate Knights and the Embassy of Germany in Canada this fall, speakers pointed to opportunities in areas such as deep retrofits for buildings, the emerging hydrogen economy, and potential markets for non-combustible products from the oil sands that would trap carbon rather than emitting it into the atmosphere.

Corporate Knights publisher Toby Heaps described the Liberal plan as “meek,” saying, “I think the government’s response to the pandemic shows us what an emergency response looks like, and one cannot help but notice how different that looks from their response to the climate emergency.”

In a report this fall, another group, the Task Force for a Resilient Recovery, urged the federal government to adopt a five-year, $55.4-billion plan that would allocate $27.4 billion to deep retrofits of buildings.

As of the fall update, the Liberal government has allocated $12.6 billion over 10 years to climate-related action, including $6 billion already allocated to the Canada Infrastructure Bank. That figure will climb when Freeland unleashes her stimulus budget, likely next spring. The budget, she said in her speech, “will advance our progress on climate action and promote a clean economy.”

In the mini-budget released November 30, the minister allocated $6.64 billion in three key areas, though some of that money will be spent over 10 years: $2.6 billion over seven years for home retrofits; $150 million to install electric-vehicle charging stations; and $3.9 billion to plant two billion trees, preserve wetlands and boost sustainable agriculture.

The building-retrofit plan consists of $5,000 grants, which the government hopes will be used to improve the energy efficiency – and lower carbon emissions – of 700,000 homes. Freeland said the government will also fashion a plan for low-interest loans to support more expensive, deeper retrofits.

The grants alone will be insufficient to provide enough incentive for homeowners and landlords to make the deep retrofits needed to dramatically reduce greenhouse gas emissions from buildings, which account for 17% of the country’s total, said Ralph Torrie, co-author of a Corporate Knights white paper called Building Back Better with a Green Renovation Wave.

“At a time when the urgent need is to stimulate the business and logistical innovations for implementing mass, deep retrofits, we get instead $5,000 grants for households to go it alone,” Torrie said. “This will create lost opportunities by triggering halfway measures and upgrades that fall short of what is required for an effective emergency response to climate change.”

The fall economic statement is only part of the government’s plan, with other measures either recently announced or due to be released by the end of December.

Environment Minister Jonathan Wilkinson will soon be releasing an updated climate plan, while Natural Resources Minister Seamus O’Regan will release federal strategies on hydrogen and small modular reactors.

On the hydrogen market, the federal government lags several competitors who have already announced major strategies to be suppliers of “green” hydrogen, an emissions-free source that is derived from renewable power. Australia is fast-tracking a $36-billion hydrogen plan, while Germany and France are moving full steam ahead with plans to develop industrial uses for the clean-burning fuel.

Corporate Knights has proposed that Ottawa spend $1 billion on research and development efforts over the next five years and another $8 billion over the decade to deploy hydrogen technology across the Canadian economy.

Corporate Knights also recommended that the feds provide $1.4 billion in funding over five years to help the industry commercialize lightweight carbon-fibre production as part of a “bitumen beyond combustion” strategy, but the November 30 statement lacked any sign of a plan for shifting Canadian oil and gas economics.

How does Fall Economic Statement stack up against Corporate Knights’ Building Back Better Green Recovery Plan?

  Federal Contribution 2021-2030    
CK BBB FES BBB % shortfall
Building Back Better Homes 14656 2600 82
Building Back Better Workplaces 6000 2000 67
Greening the Grid 6700 2500 63
Building Back Better EV Uptake 11949 1650 86
Building Back Better Active Mobility 2000
Building Forest Natural Capital 16000 3791 76
Building Agriculture Natural Capital 6000 98 98
Natural Resources and EV Innovation 40500
Building Back Better Industry 4800
Sum for all programs (2021-30) 108605 12639 TBD

Sources: Fall Economic Statement 2020 

Building Back Better with a Bold Green Recovery Synthesis Report

Earlier this fall, the Build Back Better Together roundtable heard compelling evidence that economic recovery strategies that aim to return to business as usual will reignite the growth in greenhouse gas emissions, as happened after the 2008/09 recession.

If governments want to ensure that they can fund the green recovery to avert the worst impacts of the climate crisis, they’ll have to collaborate with private-sector financial institutions, another roundtable session heard.

While there is growing focus on the importance of harnessing capital markets to address climate change, government action remains critical, said Sean Kidney, CEO of the London-based Climate Bonds Initiative, an international non-governmental organization working to mobilize debt markets for climate solutions.

“It is not possible for private markets to do this. That is a total fallacy,” Kidney said. “This is not something that is going to be solved by the private market. This is something that is going to be solved by close collaboration between public and private markets.”

In her fall statement, Freeland announced support for a Sustainable Finance Action Council, which will begin work in the new year with the goal of “developing a well-functioning sustainable finance market in Canada.” Pension funds and other investors have been urging corporations in Canada to provide greater clarity around climate-change-related risks and opportunities, and experts are urging governments to show leadership.

However, Canada still lags some of its peers in terms of financial commitment to a green recovery that will fund the transition to a net-zero economy.

The government estimated that its $100-billion stimulus package would be equivalent to 3 to 4% per cent of gross domestic product, but it is unclear how that figure was calculated. Spread over three years, the spending would represent more like 2% of GDP, and only a portion of that will go to green projects.

Many of Canada’s trading peers, including Germany, France and the EU, have already earmarked 30% or more of post-pandemic stimulus for climate action.

In partnering with Corporate Knights on the Building Back Better Together virtual roundtable series this fall, German Ambassador Sabine Sparwasser said her government is committed to a strategy that focuses stimulus spending on building back better.

“We’re not going to get out of the current crisis just by giving people social benefits,” Sparwasser said during one session. “We need to invest in new technology in order to address the other crisis that is out there and is even bigger: climate change.”

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.
With the support of the Embassy of the Federal Republic of Germany in Canada.

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