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Inflation, end of covid aid spark nostalgia for pandemic economy – The Washington Post

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DOYLESTOWN, Pa. — Jazmin Johnson never had more than $300 in her bank account. Then came a gusher of federal stimulus funds during the pandemic, and Johnson’s savings swelled, rising to roughly $10,000 one day last spring.

But roughly a year later, that boost is almost all gone. On a recent Tuesday morning, the mother of two sat at a food pantry in the Philadelphia suburbs, waiting to pick up free diapers and lamenting that her bank balance now stands at $511. On their last trip to the grocery store, Johnson told her 3-year-old that they could no longer afford his favorite red Hawaiian Punch.

That kind of turnaround is alarming for anyone going through it — and it may be the key to understanding why Americans have turned so sharply on this economy, posing a massive political threat to the Biden administration and Democrats in Congress ahead of this year’s midterm elections. The economy snapped back so quickly from the pandemic that people like Johnson are in a paradox: They’re worse off now, financially, than they were even when covid was a much more severe health threat, the national unemployment rate was almost twice as high, and economic growth was uneven.

By many measures, Johnson has vindicated President Biden’s economic policies. The cash from Biden’s American Rescue Plan stimulus program gave her $4,200 in stimulus checks — for herself and two kids — followed by big increases in food stamp assistance and a significantly larger Child Tax Credit. That helped her go back to school last spring, where she got a degree as a medical assistant. A better job, and higher pay, soon followed, treating dementia patients at a hospital nearby. Despite the recent decline, her savings are still technically larger than at any other point in her life.

But Johnson does not feel like an economic success story. Instead, she has a sense of acute loss for that fleeting period last spring where remarkable new financial opportunities appeared possible. Like the country overall, Johnson has slowly and steadily gotten poorer over the past year. Her expenses have soared due to the fastest inflation in four decades, and the many pandemic-driven government programs that supplemented her income have been eliminated one by one.

“It was a weight lifted like I can’t describe. I could actually buy what I wanted to at the grocery store,” said Johnson, 22. “But now I keep telling my boyfriend that I’m stuck. Living is so much harder now.”

The coronavirus — and attempts to mitigate its severity — severely damaged large sectors of the American economy when it first hit in February 2020, with unemployment spiking as schools and businesses closed their doors over the following month. But despite those severe shocks, the country’s economy emerged from the pandemic not only intact but propelled by a historic boom. Flush with cash from nearly $6 trillion in unprecedented federal stimulus, consumer spending exploded. America created more jobs last year than any other year in the nation’s history. The economy grew by the fastest rate in 38 years.

The only direction to go was down. Compared to almost any other time in modern history, American households still have lots of cash. But compared to last year, they have significantly less — particularly as costs have continued to rise faster than their wages for the last year. This economic comedown now appears poised to quickly get much more intense, with signs of early declines in business growth, consumer spending and hiring as the Federal Reserve raises interest rates to curb rapidly rising inflation.

Interviews with more than three dozen people in Bucks County, Pa. — one of most narrowly divided counties in one of the most critical swing states in the 2020 presidential election — turned up a lingering nostalgia for the pandemic economy, as inflation has eroded stimulus savings over the last year. It amounts to an intractable problem for the White House, which cannot bring back the stimulus checks and other relief measures that offered an unprecedented, but temporary, degree of financial stability for millions of people that is fading painfully with every trip to the grocery store and gas station.

“There’s no doubt wealth is much higher now than it was two years ago or in the time before that,” said Jason Furman, who served as a senior economist in the Obama administration and is now a professor at Harvard University. “But people have literally become poorer, by any concept, over the last year. Over the last 12-month period, just about everything has moved in the wrong direction. It should not be a mystery why people are worried.”

‘We can’t eat it all and hike everything’

Kitty Ghen, 63, and Nancy Strenger, 62, walked out of 86 West in Doylestown on a balmy Tuesday evening, the longtime friends emerging from the swanky sushi restaurant into a busy downtown strip thrumming with diners and shoppers. The last two years have been good for them: Ghen received a federal grant from the Paycheck Protection Program at the start of the pandemic and later got a separate covid-related business grant from the county. Strenger had enjoyed the rising value of her cryptocurrency investments.

But in a change from their normal routine, Ghen and Strenger each only had one drink at happy hour and headed back to their respective homes for dinner, having decided to cook more to save. Ghen is an acupuncturist and fears the current downturn in the stock market will lead patients to cut out her practice in favor of more essential medical needs. Strenger, who is retired, watched the value of her cryptocurrencies collapse this month.

“I don’t get the food I used to get,” Ghen said. “I’m more careful than ever.”

Strenger added: “The stocks have amazingly been going downhill, and it really put a scare into me.”

With about 630,000 residents, Bucks County is a middle- to upper-income suburb of Philadelphia, and the borough of Doylestown represents its affluent economic core. Covid shut down the city’s downtown much as it affected cities across the country. But, financially, Doylestown and its 8,250 residents rebounded. More than $100 million in small business loans flowed into the city from the stimulus package signed by Trump in March 2020. Bucks County is receiving $122 million from Biden’s rescue plan, which passed last year.

The county added an additional 600 new businesses from 2020 to 2021, according to federal data. Home values in Doylestown increased by 35 percent, according to Redfin. A new bitcoin ATM opened at the Doylestown Global Gas Station on North Easton Road, as did one at a local Giant. These all mirrored national trends — Americans applied to start 5.4 million small businesses last year, a record that exceeds any other year by 20 percent, and asset prices nationwide were inflated by historically low interest rates intended to spur demand.

“Toward the beginning of covid, we were really well-received; we were doing local deliveries; people were really willing to come out,” said Caitlin Hernandez, 31, owner of Makers Off Main, which sells handcrafted works from a collective of local artists and opened during the pandemic.

But this boom appears to have crested. Small businesses nationally have soured on the economy and are increasingly concerned about their ability to pass on higher costs to their customers. The percentage of small business owners who expect better conditions fell from April to May for the fifth consecutive month, according to the National Federation of Independent Businesses — notching the worst reading in the 48-year history of the survey.

Discretionary purchases may be the first to go. Hernandez’s art workshops, for instance, had been drawing about 10 people consistently; now, they’re attended by only two or three people, or canceled altogether. “Supporting small businesses is harder when the economy is down and money is tight,” she said.

Many business owners in Bucks County say demand is keeping up for now, but worry that it is at risk if persistent inflation forces them to implement another round of price hikes. Owen Burke, 20, the part-owner of the diner Coach’s, already raised the price of his Philly cheesesteak — called the “Buck” — from $9 to $11.95 in response to the rising costs of ingredients. His supplier just increased his price tag for fries from $30 to $50 for a case of seven bags. Some customers grumbled but most kept buying, though Burke is now worried they’ll revolt if he raises prices again.

The duration of the price hikes makes them particularly anxiety-inducing, because businesses can’t anticipate their impact on future sales. Up the street from Coach’s, James Lamb, 43, pointed at a row of candy bars and let out a small sigh. Already, his Evolution Candy store in downtown Doylesville had raised the price of Charms sour balls from $2 to $2.25. One of the store’s novelty items, a roughly foot-long Rice Krispy treat, once sold for $19.95 but now goes for $25.95. And the store may have to raise the price of their traditional candy bars — like Hershey’s and Twix — from $1.50 to $1.65.

“We want to go for $1.65, but the community might not be ready for it,” Lamb said. “We’re eating some things,” he said of the higher prices being paid to suppliers, “because we can’t eat it all at once and hike everything.”

After stimulus reprieve, vulnerable Americans falling ‘thousands of dollars behind’

For about two decades, Colleen Lester, 53, had put off treating the chronic pain in her back and hip. But when her stimulus check arrived last spring, she was finally able to pay for a specialty chiropractor who relieved her symptoms. “It was peace of mind — not constantly worried about paying my bills. We always struggled financially, and I’ve always lived paycheck to paycheck,” Lester said. “I tried not to spend that money. It was, ‘Oh my gosh’; it felt so nice.”

But now Lester says she is back to scrambling to keep her bank balance above the $100 minimum. A day-care provider, Lester has cut back on buying healthy food at the grocery store and stopped purchasing organic food. She is also trying to eat less overall. She is unsure if she can continue to afford the treatment for her back. “I’m feeling the anxiety a lot now,” she said. “What if something breaks? I really don’t have anything in my bank account.”

While it was primarily intended on boosting the economy overall, the biggest impact from the federal stimulus may have been on improving the safety net. From December 2020 to April 2021, when the Biden administration sent out $1,400 stimulus checks, the share of Americans nationwide reporting that they did not have enough to eat fell by 40 percent, according to University of Michigan poverty researchers. Financial instability fell by 45 percent, the researchers found. “Adverse mental health symptoms” fell by more than 20 percent.

These benefits have not entirely dissipated. Americans at the bottom of the income distribution appear, by many indicators, to be better off financially than they were before the pandemic. Nationally, Americans’ bank accounts still remain roughly 70 percent higher than where they were before the pandemic started, according to data from JPMorgan Chase. Seventy-eight percent of Americans reported doing at least okay financially at the end of 2021, according to a Federal Reserve survey — the highest rate since 2013, when the survey began. Delinquencies on auto loans, mortgages and credit card debts remain low by historical standards.

But the trend is clear: The JP Morgan data shows a 35 percent drop in the bank accounts of poor families relative from last spring to this past February — a number that is not adjusted for 8 percent inflation as well over the last year — although balances increased slightly due to tax refunds sent in March.

The share of Americans who reported sometimes or often going hungry plummeted to 8 percent in April 2021. It had risen back to 10 percent by February of this year, according to a research paper by University of Michigan poverty researchers Patrick Cooney, H. Luke Shaefer and Samiul Jubaed. Similarly, the percentage of Americans who said it was very difficult to pay for household expenses increased from roughly 9.8 percent in April 2021 to 14 percent this February, the paper found. Feeding America, one of the biggest national food bank organizations, said 80 percent of its organization saw demand increase or stay the same from April 2021 to March of this year.

These head winds are evident in Bucks County, too. Calls for help to Between Friends Outreach, a nonprofit that helps house and feed struggling families, are up from roughly 60 a month to 100 a month, according to Tara Stoop, the group’s managing director. Doylestown FISH, another emergency assistance nonprofit, said requests for help plunged from 767 in 2019 to around 500 during the pandemic. This year, they’re on track to surpass the 2019 levels of requests for help. Utility shut-offs were suspended during the pandemic before resuming last year.

“The requests for help with utility bills we used to get were for $500 or $600,” said Marijane Harris, the group’s president. “Now people are thousands of dollars behind. Our numbers have changed drastically.”

The economic whiplash has been more drastic for parents than perhaps any other group. Johnson has lost not just Biden’s monthly Child Tax Credit of $300 per month for young kids, which expired at the end of last year, but also most of her food stamp payments, which were slashed from $600 per month (bumped up by a temporary federal assistance program during the pandemic) to $32. Baby formula that cost $13 is now $22 — when she can find it — and gas to get to work and pick up the kids costs hundreds more.

With her kids’ toys scattered on the carpet, Johnson looked out the window of her apartment — where the rent just increased from $325 to $500 per month — and remembered her feeling when the stimulus payments arrived last year. She is pregnant, and is not sure where she will live when she gives birth again next year.

The better future she dreamed about a year ago seems like it’s slipping out of reach.

“As soon as [the checks] hit, I told everyone that I wanted to put it down for a house. I said this was the perfect time, the perfect opportunity, for somewhere to start,” Johnson said. Within hours, she called her grandmother and asked for advice on how to save for a mortgage. “I thought, ‘Maybe in a year or two, we’ll have the money.’”

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Northern Shootout's return provides a big boost to Orillia's economy – CTV News Barrie

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The return of an annual slo-pitch softball event marks the unofficial start of summer in Orillia.

The Northern Shootout is back for its 13 edition after a pandemic-driven hiatus.

The tournament consists of 78 men’s, women’s and co-ed teams from Ontario and Quebec and promises a big boost to the economy in the city.

“Especially after two years of pandemic restrictions,” said Mike Ladouceur, City of Orillia. “This helps our tourism recover, puts heads in beds, hotels are filled, restaurants filled, this is really the big event that begins our summer of events.”

Organizer Mike Borrelli said the tournament has grown to become one of the biggest in Canada.

“We’re pretty much at capacity for participants. We can’t accommodate anymore,” he added. “We’re using the other diamonds, we got all the diamonds in Orillia, and we’re using the Rama diamond, so if we had more diamonds, we could accommodate more teams.”

The owners of Adovo Pizza in Orillia say the increase in tourism has done wonders for their business this year.

This being the first big event of the season, they’re excited to welcome so many people into the city.

“Everyone has just been waiting to get out,” said Adam Zimmerman, co-owner. “Especially for sporting events and vendors, have a cold beer. There’s nothing wrong with it.”

The tournament culminates with an annual home run derby, which organizers said typically draws 1,200 fans to watch.

Sixteen participants will compete to walk away with a championship belt.

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Toronto Mayor John Tory lays out vision for city's economy in speech – CP24 Toronto's Breaking News

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Toronto Mayor John Tory says he’s optimistic about the future of the city’s economy, but is acknowledging that continued recovery from the COVID-19 pandemic will take place in a “challenging” economic period.

In a speech to the Toronto Region Board of Trade Thursday, Tory said he sees the city’s economic recovery and future growth resting on five pillars; rebuilding and instilling confidence, attracting new business and expanding existing ones, supporting businesses with an emphasis on small business, supporting growth, and being ready for the future and possible “transformational change.”

Tory said there is “always a tomorrow” following a crisis, but making it brighter requires planning.

“That’s why I have been talking a lot about the city’s recovery from the pandemic, a recovery that will take place during challenging economic times,” the mayor said. “I am completely committed to making sure Toronto comes back stronger than ever and that will be my main focus in the weeks and months ahead.”

To that end, Tory said he will be assembling a volunteer panel of accomplished leaders to help provide “real-time advice” as the city continues to reopen following more than two years of COVID-19 restrictions.

“I believe the rapid pace of change and need to adapt will continue and I will rely on this group to help provide real-time advice and insight so we can remain nimble,” Tory said.

While the mayor did not go into detail about the city’s economic challenges, Toronto is facing a number of hurdles. The city is still facing a major budgetary shortfall as a result of shrunken revenues. While the TTC used to be jam-packed on a daily basis, ridership numbers have still not returned to normal and ridership patterns have become more unpredictable as many businesses have allowed their employees to work from home for at least part of the week. It is also not yet clear how rising interest rates and inflation will affect the local economy in the coming months.

“Successfully addressing the issues we face as a city will take everything we’ve got,” Tory said in his speech, acknowledging that the pandemic hurt people and businesses.

“I am committed to making sure those who have lost so much over the last two years get the support they need and can be confident in playing a full and satisfying role in a strong recovery,” he added.

He said the future of work remains a key question tied to the city’s recovery and said the panel will be examining that as one of its key issues.

“This is a very profound question with potentially very profound consequences depending on the answer so we must get the very best answer we can from our advisors and from you,” Tory told the board in his speech.

He said that for example, just having people work from home on Mondays and Fridays can hugely impact the TTC and its revenues.

“What that means is a huge revenue shortfall for the transit system, because the cost of running the system for Tuesday, Wednesday, Thursday, and for the people who do go to work Monday and Friday stays about the same, (even if) you can make some changes around the edges,” Tory said. “And that creates a huge problem for us. So that’s just one small example of the kinds of questions that we have to answer.”

Tory also touted the city’s success and highlighted recent investments by the film and pharmaceutical industries from companies such as Netflix and Sanofi Pasteur. He said he would like to see those successes replicated in other industries as well.

“The world has taken notice of the growth and success story that is Toronto,” Tory said. “It was a constant conversation in the halls of the Collision conference. But at the same time, Toronto and all cities are facing challenging times ahead.”

More details about what work the advisory panel will do and who will sit on it are expected to be announced in the coming weeks.

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EXPLAINER: Why Sri Lanka's economy collapsed and what's next – ABC News

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COLOMBO, Sri Lanka — Sri Lanka’s prime minister says the island nation’s debt-laden economy has “collapsed” as it runs out of money to pay for food and fuel. Short of cash to pay for imports of such necessities and already defaulting on its debt, it is seeking help from neighboring India and China and from the International Monetary Fund.

Prime Minister Ranil Wickremesinghe, who took office in May, was emphasizing the monumental task he faces in turning around an economy he said is heading for “rock bottom.”

Sri Lankans are skipping meals as they endure shortages, lining up for hours to try to buy scarce fuel. It’s a harsh reality for a country whose economy had been growing quickly, with a growing and comfortable middle class, until the latest crisis deepened.

———

HOW SERIOUS IS THIS CRISIS?

The government owes $51 billion and is unable to make interest payments on its loans, let alone put a dent in the amount borrowed. Tourism, an important engine of economic growth, has sputtered because of the pandemic and concerns about safety after a spate of terror attacks. And its currency has collapsed by 80 percent, making imports more expensive and worsening inflation that is already out of control, with food costs rising 57%, according to official data.

The result is a country hurtling towards bankruptcy, with hardly any money to import gasoline, milk, cooking gas and toilet paper.

Political corruption is also a problem; not only did it play a role in the country squandering its wealth, but it also complicates any financial rescue for Sri Lanka.

Anit Mukherjee, a policy fellow and economist at the Center for Global Development in Washington, said any assistance from the IMF or World Bank should come with strict conditions to make sure the aid isn’t mismanaged.

Still, Mukherjee noted that Sri Lanka sits in one of the world’s busiest shipping lanes, and so letting a country of such strategic significance collapse is not an option.

———

HOW IS IT AFFECTING REAL PEOPLE?

Tropical Sri Lanka normally is not lacking for food but people are going hungry. The U.N. World Food Program says nearly nine of 10 families are skipping meals or otherwise skimping to stretch out their food, while 3 million are receiving emergency humanitarian aid.

Doctors have resorted to social media to try to get critical supplies of equipment and medicine. Growing numbers of Sri Lankans are seeking passports to go overseas in search of work. Government workers have been given an extra day off for three months to allow them time to grow their own food. In short, people are suffering and desperate for things to improve.

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WHY IS THE ECONOMY IN SUCH DIRE STRAITS?

Economists say the crisis stems from domestic factors such as years of mismanagement and corruption.

Much of the public’s ire has focused on President Gotabaya Rajapaksa and his brother, former Prime Minister Mahinda Rajapaksa. The latter resigned after weeks of anti-government protests that eventually turned violent.

Conditions have been deteriorating for the past several years. In 2019, Easter suicide bombings at churches and hotels killed more than 260 people. That devastated tourism, a key source of foreign exchange.

The government needed to boost its revenues as foreign debt for big infrastructure projects soared, but instead Rajapaksa pushed through the largest tax cuts in Sri Lankan history. (The tax cuts were recently were reversed.) Creditors downgraded Sri Lanka’s ratings, blocking it from borrowing more money as its foreign reserves sank. Then tourism flatlined again during the pandemic.

In April 2021, Rajapaksa suddenly banned imports of chemical fertilizers. The push for organic farming caught farmers by surprise and decimated staple rice crops, driving prices higher. To save on foreign exchange, imports of other items deemed to be luxuries also were banned. Meanwhile, the Ukraine war has pushed prices of food and oil higher. Inflation was near 40% and food prices were up nearly 60% in May.

———

WHY DID THE PRIME MINISTER SAY THE ECONOMY HAS COLLAPSED?

Such a stark declaration might undermine any confidence in the state of the economy and it didn’t reflect any specific new development. Wickremesinghe appeared to be underscoring the challenge his government faces in turning things around as it seeks help from the IMF and confronts criticism over the lack of improvement since he took office weeks ago. He’s also fending off criticism from within the country. His comment might be intended to try to buy more time and support as he tries to get the economy back on track.

The Finance Ministry says Sri Lanka has only $25 million in usable foreign reserves. That has left it without the wherewithal to pay for imports, let alone repay billions in debt.

Meanwhile the Sri Lankan rupee has weakened in value to about 360 to $1. That makes costs of imports even more prohibitive. Sri Lanka has suspended repayment of about $7 billion in foreign loans due this year out of $25 billion to be repaid by 2026.

———

WHAT IS THE GOVERNMENT DOING ABOUT IT?

Wickremesinghe has ample experience. This latest is his sixth term as prime minister.

So far, Sri Lanka has been muddling through, mainly supported by $4 billion in credit lines from neighboring India. An Indian delegation was in the capital Colombo on Thursday for talks on more assistance, but Wickremesinghe warned against expecting India to keep Sri Lanka afloat for long.

“Sri Lanka pins last hopes on IMF,” said Thursday’s headline in the Colombo Times newspaper. The government is in negotiations with the IMF on a bailout plan and Wickremesinghe said Wednesday he expects to have a preliminary agreement with the IMF by late July.

The government also is seeking more help from China. Other governments like the U.S., Japan and Australia have provided a few hundred million dollars in extra support.

Earlier this month, the United Nations began a worldwide public appeal for assistance. So far, projected funding barely scratches the surface of the $6 billion the country needs to stay afloat over the next six months.

To counter Sri Lanka’s fuel shortage, Wickremesinghe told The Associated Press in a recent interview that he would consider buying more steeply discounted oil from Russia to help tide the country through its crisis.

———

Kurtenbach, the AP’s Asia business editor, contributed from Bangkok.

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