Economy
Making masks mandatory may save the economy too, Goldman Sachs economist says – CTV News
TORONTO —
As more and more jurisdictions order face masks to be mandatory in public places, protests are springing up against the temporary restriction these orders place on individual freedom.
Although generally small and ineffective in changing public policy, the protests have attracted attention for their opposition to what are widely seen as useful measures designed to save lives.
Now, a new group of professionals is entering the fray, arguing that mandatory mask orders aren’t just about protecting public health, but also about rescuing the economy.
Jan Hatzius, the chief economist at Goldman Sachs, released a report last week calling for a national mask mandate in the United States. If the country does not take that step, he argued, it will have to resort to more severe lockdown measures that could shrink the American economy by five per cent.
Investors are already worried about what will happen to the U.S. economy because of fast-rising COVID-19 caseloads in many southern states, Hatzius said.
“What Goldman Sachs is trying to say to people is ‘There is a cost to not getting coronavirus under control,'” Marvin Ryder, an associate professor at the DeGroote School of Business at McMaster University in Hamilton, told CTV News Channel on Tuesday.
“If you don’t get this under control, there are severe consequences. There’s only one choice left, and that would be a severe lockdown.”
Those lockdowns deal a severe economic blow, as businesses close and consumers stop spending money. The Canadian economy plunged by 7.5 per cent in March and an unprecedented 11.6 per cent in April as large parts of the country were shut down to ride out the initial wave of the pandemic. In the U.S., where the measures taken were less strict and more patchwork, the economy still contracted by 17 per cent between January and April, according to Goldman Sachs.
Many countries have made mask-wearing compulsory in at least some public gathering places during the pandemic, including the United Kingdom, France, Germany, Mexico and India. There is no such national mandate in Canada or the U.S., although some individual jurisdictions within each country have enacted similar policies. Wearing a mask in indoor public settings is now mandatory in Toronto and will be later this month in Montreal.
A recent poll conducted by Nanos Research for CTV News found that 54 per cent of Canadians support mandatory masks in all public spaces across the country, with an additional 25 per cent somewhat supportive. Some doctors and public health experts have been pushing for mandatory masks as well, arguing it would be an especially worthwhile initiative in the provinces where COVID-19 remains a greater public concern.
THE ECONOMIC IMPERATIVE
Ryder described the Goldman Sachs report as an attempt to convince those who do not agree with the public health message that there are other advantages to “[giving] up a little civil liberty” and accepting public mask requirements.
“A little compromise here means we can keep the economy going,” he said.
Goldman Sachs’ research found that states that mandated masks saw approximately 25 per cent of their population shift to always or frequently wearing them in public within the first month or so, in addition to those who were already wearing them often.
“[This] suggests that a national mask mandate could increase US face mask usage by statistically significant and economically large amounts, especially in states such as Florida and Texas that currently don’t have a comprehensive mandate and are seeing some of the worst outbreaks,” Hatzius wrote.
The research also found that new COVID-19 case rates fall significantly starting about a week after a state’s mask mandate comes into force, and continue to fall for at least the following month, with death rates decreasing as well.
States without mandatory mask orders accounted for half of the U.S. population but two-thirds of all new COVID-19 cases as of July 1, Hatzius said.
“If a face mask mandate meaningfully lowers coronavirus infections, it could be valuable not only from a public health perspective but also from an economic perspective because it could substitute for renewed lockdowns that would otherwise hit GDP,” he said.
Regardless of whether face masks are mandatory or not, Americans are more likely to wear them in public than Canadians, according to recent polling by British firm YouGov.
Economy
Biden's Hot Economy Stokes Currency Fears for the Rest of World – Bloomberg
As Joe Biden this week hailed America’s booming economy as the strongest in the world during a reelection campaign tour of battleground-state Pennsylvania, global finance chiefs convening in Washington had a different message: cool it.
The push-back from central bank governors and finance ministers gathering for the International Monetary Fund-World Bank spring meetings highlight how the sting from a surging US economy — manifested through high interest rates and a strong dollar — is ricocheting around the world by forcing other currencies lower and complicating plans to bring down borrowing costs.
Economy
Opinion: Higher capital gains taxes won't work as claimed, but will harm the economy – The Globe and Mail
Alex Whalen and Jake Fuss are analysts at the Fraser Institute.
Amid a federal budget riddled with red ink and tax hikes, the Trudeau government has increased capital gains taxes. The move will be disastrous for Canada’s growth prospects and its already-lagging investment climate, and to make matters worse, research suggests it won’t work as planned.
Currently, individuals and businesses who sell a capital asset in Canada incur capital gains taxes at a 50-per-cent inclusion rate, which means that 50 per cent of the gain in the asset’s value is subject to taxation at the individual or business’s marginal tax rate. The Trudeau government is raising this inclusion rate to 66.6 per cent for all businesses, trusts and individuals with capital gains over $250,000.
The problems with hiking capital gains taxes are numerous.
First, capital gains are taxed on a “realization” basis, which means the investor does not incur capital gains taxes until the asset is sold. According to empirical evidence, this creates a “lock-in” effect where investors have an incentive to keep their capital invested in a particular asset when they might otherwise sell.
For example, investors may delay selling capital assets because they anticipate a change in government and a reversal back to the previous inclusion rate. This means the Trudeau government is likely overestimating the potential revenue gains from its capital gains tax hike, given that individual investors will adjust the timing of their asset sales in response to the tax hike.
Second, the lock-in effect creates a drag on economic growth as it incentivizes investors to hold off selling their assets when they otherwise might, preventing capital from being deployed to its most productive use and therefore reducing growth.
Budget’s capital gains tax changes divide the small business community
And Canada’s growth prospects and investment climate have both been in decline. Canada currently faces the lowest growth prospects among all OECD countries in terms of GDP per person. Further, between 2014 and 2021, business investment (adjusted for inflation) in Canada declined by $43.7-billion. Hiking taxes on capital will make both pressing issues worse.
Contrary to the government’s framing – that this move only affects the wealthy – lagging business investment and slow growth affect all Canadians through lower incomes and living standards. Capital taxes are among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. And while taxes on capital gains do raise revenue, the economic costs exceed the amount of tax collected.
Previous governments in Canada understood these facts. In the 2000 federal budget, then-finance minister Paul Martin said a “key factor contributing to the difficulty of raising capital by new startups is the fact that individuals who sell existing investments and reinvest in others must pay tax on any realized capital gains,” an explicit acknowledgment of the lock-in effect and costs of capital gains taxes. Further, that Liberal government reduced the capital gains inclusion rate, acknowledging the importance of a strong investment climate.
At a time when Canada badly needs to improve the incentives to invest, the Trudeau government’s 2024 budget has introduced a damaging tax hike. In delivering the budget, Finance Minister Chrystia Freeland said “Canada, a growing country, needs to make investments in our country and in Canadians right now.” Individuals and businesses across the country likely agree on the importance of investment. Hiking capital gains taxes will achieve the exact opposite effect.
Economy
Nigeria's Economy, Once Africa's Biggest, Slips to Fourth Place – Bloomberg
Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.
The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.
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