Economy

How Is the U.S. Economy Doing? Ways to Give the Economy a Boost. – Barron's

Published

5 years ago

March 8, 2020

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Though its full impact is yet unknown, the coronavirus has the potential to upend the U.S. economy and send it into recession. Even if a recession is avoided, it’s clear that certain industries—and their workers—will be hit hard. Airlines, cruise lines, and hotels have been at the center of the story, and it wouldn’t be a surprise to see restaurants and retail also take a hit. Then there are the so-called gig workers, who could be among the hardest hit if the gigs dry up.

There’s only so much the Federal Reserve can do about the situation. Its job in all this is to make sure that companies that need access to funds can get it, whether that means lowering interest rates, as it did last week, or through other steps. It needs to keep the financial system working.

But as many have pointed out, there’s nothing the Fed can do about the spread of coronavirus, supply-chain disruption, or workers losing their jobs. If the hit from coronavirus reaches crisis level—and it’s still not clear it will—then it will be up to the Federal government to figure out. Ideas already being discussed include a payroll tax holiday, infrastructure spending, and tax rebates. Here’s what has been tried to over the years.

Cut Corporate Taxes

The idea behind cutting corporate taxes is that companies will have more money to spend on paying workers, so they can hire more or at least fire fewer. Already, Italy has announced a tax credit for any company that has seen revenue decline by more than a quarter. In the U.S., White House sources have been quoted as saying that the government was considering tax relief for airlines, cruise operators, and other travel companies impacted by the coronavirus. Corporate tax cuts, however, have been criticized as being less effective than other forms because they don’t do much to stimulate demand.

Tax Rebates and Stimulus Checks

What better way to help the economy than putting more money in people’s pockets? This was tried in 2008, before the recession that started in 2007 became the Great Recession, when Congress tried to boost the economy by passing the Economic Stimulus Act of 2008 in February of that year. The law is best remembered for the stimulus checks that Americans received, which was supposed to lead to a quick boost in spending. It did, but not enough to stave off the financial crisis. An even faster way to get money more money to Americans is by cutting the payroll tax. That tax takes a piece out of every worker’s paycheck. Of course, it would benefit only those who have a job.

Infrastructure Spending

Everyone likes to think of infrastructure spending when the economy goes bad, but it’s often considered a stimulus of last resort. For instance, one year—and one Lehman Brothers bust—after Congress enacted the Economic Stimulus Act of 2008, it passed the American Recovery and Reinvestment Act of 2009. The law included tax rebates but also extended unemployment benefits, provided tax incentives for companies, and, yes, funded infrastructure projects. The most massive infrastructure stimulus, however, came with the New Deal during the Great Depression. Not only were Social Security and other entitlements created, it funded massive infrastructure projects as a way to put Americans to work. Let’s hope it doesn’t come to that.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

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Economy

Statistics Canada reports August retail sales up 0.4% at $66.6 billion

Published

23 hours ago

October 25, 2024

Anne Joseph

OTTAWA – Statistics Canada says retail sales rose 0.4 per cent to $66.6 billion in August, helped by higher new car sales.

The agency says sales were up in four of nine subsectors as sales at motor vehicle and parts dealers rose 3.5 per cent, boosted by a 4.3 per cent increase at new car dealers and a 2.1 per cent gain at used car dealers.

Core retail sales — which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers — fell 0.4 per cent in August.

Sales at food and beverage retailers dropped 1.5 per cent, while furniture, home furnishings, electronics and appliances retailers fell 1.4 per cent.

In volume terms, retail sales increased 0.7 per cent in August.

Looking ahead, Statistics Canada says its advance estimate of retail sales for September points to a gain of 0.4 per cent for the month, though it cautioned the figure would be revised.

This report by The Canadian Press was first published Oct. 25, 2024.

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

5 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

1 week ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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