(Bloomberg Opinion) — Democrats are facing a challenge they haven’t confronted since the 1988 presidential election. They are trying to persuade enough Americans to kick a Republican out of the White House even though the economy is doing well. They failed that year – and as their latest presidential debate showed, so far they haven’t figured out how to meet the challenge this time either.
Early in that debate, moderator Judy Woodruff of PBS noted that “the overall U.S. economy right now looks strong” and asked the candidates what they would say to voters “who may not like everything President Trump does but they really like this economy.” Each of the candidates who responded denied her premise. They said it wasn’t really a strong economy after all.
One of their tacks was to bring up specific shortcomings of the economy. Senator Bernie Sanders of Vermont said we have the highest child-poverty rate “of almost any major country on earth” and that wage growth over the past year, at 1.1% after inflation, has been “not great.” Former Vice President Joe Biden said that “most Americans” would “have to sell something or borrow the money” to pay an unexpected $400 bill. Entrepreneur Andrew Yang said that depression, financial insecurity and student loan debt are at record highs.
Many of these specific complaints are false or overstated. America’s child poverty rate looks bad in international comparisons only if you are looking at relative poverty: the fraction of children in households making less than half the median income. That’s actually a measure of inequality. Look instead at levels of material deprivation among children, and the U.S. is in line with other countries. Child poverty rates have also been declining.
Wage growth during the past year was better than it has been for most of the past two decades; and it is as good a conjunction of wage growth and high employment levels as we have seen in this period.
Biden’s statistic about a surprise $400 bill is wrong. He almost certainly misunderstood a Federal Reserve finding that 61 percent of Americans would pay a $400 bill out of cash. The other 39 percent, it is true, would sell something or borrow the money, for example by running a credit-card balance. That doesn’t mean a majority of the population would “have to” resort to such measures.
Americans’ self-reported financial security is also holding up well. The percentage of Americans who tell Gallup they are worried about maintaining their standard of living has generally been falling. For three years running, majorities have said that their financial situations are improving.
While Democrats are straining to find gloomy statistics, almost every economic indicator is moving in the right direction. Employment growth and wages are up. Poverty is down.
The other main tack the Democratic candidates took was to deny that Americans consider today’s economy good. Biden and Yang were joined by Massachusetts Senator Elizabeth Warren and South Bend, Indiana, Mayor Pete Buttigieg in claiming that although gross domestic product and the stock market have been rising, ordinary Americans aren’t feeling good economic times. “This economy is not working for most of us,” the mayor said.
Many of these specific complaints are false or overstated. America’s child poverty rate looks bad in international comparisons only if you are looking at relative poverty: the fraction of children in households making less than half the median income
But most Americans don’t feel the way these Democrats say they do. As noted already, most Americans say their financial situations are getting better. The percentage of Americans who say it’s “a good time to find a quality job,” as another Gallup question puts it, has been at or higher than 50% for all of Trump’s time in office. It was below 50% for almost all of the George W. Bush and Barack Obama years. During the past two years, a majority of Americans has also rated economic conditions as excellent or good. They didn’t do that during the past two presidencies.
It is certainly possible for Democrats to argue that we could be doing better, or to deny that Trump’s policies are responsible for the health of the economy. A lot of positive economic trends have continued, but not accelerated, during his time in office. But to say that “the middle class is getting killed,” as Biden did at the debate, is to fly in the face not just of the economic data but of what most Americans think about their own lives.
Perhaps the bottom will fall out of the economy before the election in a way that few people now anticipate. If it stays on the same path, though, President Trump will campaign next fall on a simple economic message: He has been good for the economy and the Democratic nominee would be bad. On current form, the Democratic candidate will counter him by trying to convince Americans that the economy isn’t as good as it looks and they’re not doing as well as they think they are. And then they’ll switch the subject to how Trump is dangerously disconnected from reality.
New coronavirus variants pose major risk to the global economy, IMF warns – CTV News
The pandemic could slam the brakes on a global economic turnaround this year despite mass vaccination programs and unprecedented levels of stimulus, according to the International Monetary Fund.
The IMF expects the global economy to grow by 5.5% this year, it said on Tuesday, or 0.3 percentage points faster than its previous forecast in October. The upgrade reflects “expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies,” the group said. (The IMF estimates that the world economy shrank by 3.5% in 2020, its biggest peacetime contraction since the Great Depression.)
But it also warned that surging infections in late 2020, renewed lockdowns and logistical problems with vaccine distribution could hamstring growth. If new variants of the coronavirus also prove difficult to contain, global output this year would be 0.75% less than the IMF expects.
Looking further ahead, the IMF expects global growth to slow to 4.2% in 2022.
“Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” Gita Gopinath, chief economist of the IMF, said in a blog post.
Some countries will recover more quickly than others. China, which was the only major economy to grow in 2020, is forecast to achieve growth of 8.1% this year. The United States should emerge from its deep slump to expand by 5.1%, a pace that’s 2 percentage points faster than the IMF predicted in October.
The 19 countries that use the euro are expected to see growth of 4.2% in 2021. The United Kingdom, which endured a 10% contraction last year as it left the European Union and is now battling a new coronavirus variant, would rebound with relatively modest growth of 4.5%.
“The wide divergence reflects to an important extent differences across countries in behavioral and public health responses to infections, flexibility and adaptability of economic activity to low mobility, preexisting trends, and structural rigidities entering the crisis,” the IMF said.
The pandemic is causing “exceptional uncertainty,” according to the IMF.
“Although new restrictions following the surge in infections (particularly in Europe) suggest growth could be weaker than projected in early 2021, other factors pull the distribution of risks in the opposite direction,” the IMF said.
If the vaccine distribution and efficacy go smoothly, for example, output could exceed expectations by as much as 1% globally, with companies hiring and expanding capacity in anticipation of rising demand.
New coronavirus variants pose major risk to the global economy – CNN
Where the lopsided economic impact of COVID-19 in Canada goes from here – CBC.ca
All economic downturns are unfair. Some people inevitably get hit harder than others. But almost a year into the COVID-19 catastrophe, the data makes it abundantly clear: the impact of this crisis is uniquely unequal.
More than a million Canadians remain under- or unemployed while millions more simply adjusted to working from home.
The second wave of COVID-19 cases and increased restrictions in many parts of the country have clobbered the most vulnerable workers who were already struggling. But many Canadians who were lucky enough to keep their jobs have been able to cut expenses on travel, commuting and child care. In doing so, they’ve saved more than $170 billion, collectively.
Stock markets have soared to all-time highs even while the global economy collapsed. Since bottoming out last April, both the Dow and the S&P are up more than 60 per cent.
Djenaba Dayle lost her job as a server at events in Toronto when the pandemic hit last March.
“You watch the news and you see people who are privileged and fortunate enough to be in a position to save money right now,” she said. “And I know that, for myself, it’s just debt.”
When COVID-19 began spreading last year, Dayle knew tough times were coming. She applied for the Canada emergency response benefit (CERB) and eventually the new extended employment insurance programs. But it’s still not enough, she said.
“It’s either pay my full rent and not eat or eat and get behind in my rent.”
On the other side of the country, Cole Westersund has experienced both sides of the pandemic’s economic divide. Last March, he was terrified that his work as a real estate agent in Vancouver would grind to a halt along with the rest of the economy.
“It was incredibly difficult to face the fact that you might not be able to put food on the table,” he said.
Then, about a month into the pandemic, some restrictions began to lift. And suddenly his phone started ringing, he said. Clients were looking for properties out of town.
“Coming out of the lockdown, they figured, ‘Hey, we have this money saved up,'” said Westersund. “If people were fortunate to keep their jobs, [they figured] let’s change our lifestyle. You know, if you’re a skier, if you’re a hiker, a biker or a fisherman.”
He said people were looking for more space and privacy or even just a break from being cooped up because of public health restrictions.
And business has been booming ever since, he said. He’s been struggling to keep up with demand. The sale of recreational real estate, such as cottages, has soared 11.5 per cent in the first nine months of 2020.
But Westersund said it’s important to remember every purchase is also a sale. And many of the clients selling their properties were listing because times were so tough.
“Stepping into a client’s house, knowing full well that the reason that they’re selling is because they need the money, it’s a difficult conversation to have,” he said.
It is the definition of a K-shaped recovery. People on the lower branch have seen their fortunes fall and have not yet recovered while those on the upper branch have prospered.
Experts worry the increased division between those two branches may outlast the pandemic.
“Some of these effects could end up being permanent, and the bottom part of the K could persist for quite a while,” said former Bank of Canada governor Stephen Poloz, speaking at an online event on Jan. 13 hosted by Western University’s Ivey Business School.
The concern is that the worsening inequality of the economic downturn will lead to what economists call scarring: long-term job losses that result in lower growth and drag the whole economy down.
Poloz said the key right now is to support Canadians who are still reeling financially. He pointed out that interest rates remain at historic lows.
“The main thing is for us to focus on boosting growth,” he said. “I’m hopeful that, in this context that we find ourselves, we can have more federal and provincial collaboration that allows us to do some things that will boost growth forever.”
WATCH | Canadian entrepreneurs on navigating the pandemic:
Djenaba Dayle, the server from Toronto, takes umbrage with the term scarring.
“They’re deep, festering, open wounds,” she said. “It’s not a scar. Things have not healed over.”
In order to heal, she said, Canadians need to rethink how social programs work. Dayle said the COVID-19 crisis is a glaring reminder that the support system wasn’t adequate before the pandemic hit.
“[We need] changes to EI, changes to how we approach people who are renters, changes to how we support folks who are down on their luck,” she said.
Dayle said the minimum wage needs to rise, and that rent control is crucial — and not just during a crisis. Several economists have proposed introducing automatic triggers that would restart more intensive support programs such as CERB when major trouble hits.
On the upside, most experts agree the recovery is nearly here. Daily COVID-19 case numbers are finally starting to decrease. Vaccines are beginning to roll out, albeit slowly. Economic forecasts from the major Canadian banks suggest blockbuster growth in April, May and June. Even once you factor in a negative quarter of growth to start the year, economists are predicting GDP will come in around 4.5-5 per cent for 2021 and at a similar level in 2022.
“It’s a massive acceleration of growth that we’re expecting over the next couple of years or so,” said Derek Holt, vice-president and head of capital markets economics with the Bank of Nova Scotia.
It’s been decades since Canada has seen that level of growth. Growth like that means investment and building — and that means jobs will be created. It means everyone benefits.
But will Canadians remember how much people needed government assistance during the worst of the pandemic? Will they remember how insufficient it was for many?
Dayle isn’t sure
“Let’s say I have very little faith,” she said. “But [I have] a great deal of hope.”
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