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On the ballot in the US midterms: Economy – Al Jazeera English

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Nathan Rojas, 23, lives in Georgia, United States and drives daily from his parents’ home to his job. Rising gas prices this year have made his commute a struggle.

“Not everybody can work from home,” Rojas said. “Gas isn’t a privilege, it’s a necessity.”

At the grocery store, Rojas said his family buy half the meat they did a year ago because food prices have risen so steeply.

Rojas voted early Wednesday at the Putnam County Board of Elections in Eatonton, Georgia, which residents in his county can do between October 17 and November 4. He said he switched from the candidate his sister advised him to vote for to one he thought could help temper inflation and lower taxes for the less wealthy.

Crucial midterm elections due in the US on November 8 – when voters decide if Democrats or Republicans will control the US House of Representatives or Senate – come at a time when inflation in the country is running rampant. The Federal Reserve has hiked interest rates to the highest levels since early 2008, making the economy a pressing poll issue alongside vital concerns like women’s reproductive rights and access to voting.

A Pew Research poll conducted in mid-October determined that the economy is top of mind for 79 percent of voters. Among these respondents, Republicans outnumbered Democrats. The cost of food, gas and housing, respectively, are the three most concerning economic issues, according to poll respondents.

The effect of increasing grocery prices can be seen at food pantries, according to Alicia Harrison, the program director for MEND, an interfaith network of 22 food pantries throughout Essex County, New Jersey.

“There continues to be a tremendous amount of need,” said Harrison. “Not only have the pantries not seen a decrease, they’ve actually seen an increase over the last few months. They’re seeing new clients every week.”

She attributed this increase to people who had depleted their financial savings since the pandemic and the end of the eviction moratorium that had been in place during the pandemic, as well as the rising prices. “For a lot of these people, every incremental increase means they have to decide what they’re buying. It’s a big struggle.”

US food prices rose 11.4 percent between August 2021 and August 2022, according to data in the latest Consumer Price Index from the Bureau of Labor Statistics.

According to economic data released on October 27 by the Department of Commerce, the US economy grew in the third quarter after two quarters of shrinkage. The growth was fuelled by consumer and government spending, both federal and state, as well as local, according to the data.

INTERACTIVE_US_INFLATION-01

Vote for a ‘functioning democracy’

But for many US voters, the economy cannot take precedence over other pressing social issues. According to the same Pew Research poll, nearly 70 percent of respondents said “the future of democracy in the country” was their guiding concern and more of them were voting for a Democratic candidate over a Republican.

That includes Corporate Communications Executive Morgan Baden of Maplewood, New Jersey. “Economics absolutely don’t matter when democracy itself is on the ballot,” said Baden, who is also a young-adult author. “Like most people, inflation is a concern for me and I see the difference in pricing and the corresponding supply chain issues every day. But that’s the case across the globe, not just in the US, and it’s a shame certain politicians are trying to blame the current administration for something that’s clearly a global issue. I hope American voters can see through that.”

For many voters who are immigrants, how candidates talk about — and plan to support — immigrant communities is vital.

Basma Alawee, 36, of Jacksonville, Florida, said she will vote only for local candidates who recognise the value of immigrant workers in an area where many hiring managers say they cannot find applicants.  “We have not been seeing good policy locally toward taking out the barriers when immigrants apply for jobs,” Alawee said.

Laila Martin, 36, a resident of Harrisburg, Pennsylvania, said she is “looking for champions” of the immigrant community when she votes. Martin recently became a US citizen and this is her first time voting here.

A CBS News Battleground Tracker poll found that 63 percent of those who plan to vote for Democrats believe “a functioning democracy” is a bigger concern than “a strong economy”, compared with 29 percent of those leaning Republican. Conversely, 70 percent of likely Republican voters support a strong economy over a functional democracy, compared with 29 percent of likely Democratic voters.

Journalist and Democratic commentator Terry Blount said on Twitter that “the people who were voting about the economy were always going to vote” but that the midterms were going to see many first-time voters concerned about “their rights…being taken away”. Blount suggested Roe v Wade, gun violence and Medicare were bigger concerns for those new voters than the economy.

INTERACTIVE_US MIDTERMS_Key issues

A survey of 1,000 Black voters conducted by KFF/TheGrio found that 28 percent who said they were more likely to vote in the 2022 midterms than they had been to vote in previous elections were driven by the desire to vote Republicans out of office. Nearly three-quarters of those polled said the economy would drive their midterm votes, with 81 percent saying they felt the economy was stacked against Black people.

Glynda Carr, the co-founder and president of Higher Heights for America, a PAC that supports Black female candidates for political office, wrote on Twitter: “While we know the economy weighs heavily on the minds of Black voters this midterm, we know that the economy cannot be separated from key issues like voting rights and criminal justice reform.”

Student loans, not avocado toast

Another poll, by left-leaning think-tank Data for Progress, found that President Joe Biden’s student debt relief plan was motivating people to vote, with 46 percent of voters saying they were more likely to cast a ballot because of the plan. Fifty-two percent of Democrats and 49 percent of Republicans said they were more likely to vote in the midterms because of the student debt relief plan.

Meanwhile, two-thirds of college students polled by online-learning platform Course Hero said inflation was driving their vote. Sixty-six percent of those planning to vote for Democrats said student loan forgiveness, as well as the cost of college and student loans, would influence their vote, while inflation and the rising cost of rent, gas and groceries was a driving force for 73 percent of Republican students.

Jackie Smith, 25, of Sacramento, California, said contrary to what older generations believe, it is not Starbucks and avocado toast keeping her bank balance low. Smith took out $60,000 in student loans to attend graduate school after receiving a full-ride scholarship to her undergraduate university. “I definitely will be voting for candidates who understand that this is an issue,” she said. Her graduate degree made it possible for her to get a better job but she said the debt will make it “very difficult to buy a house, get married, [or] make some long-term financial decisions like having kids”.

Nejra Sumic, 35, of Phoenix, Arizona, said she is voting for local and state candidates who support Proposition 308, which would allow undocumented immigrants to pay the same in-state tuition to Arizona universities as students who are citizens.

“These midterms can make or break the next generation of college students,” said Smith.

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Economy

Here is Trump economy: Slower growth, higher prices and a bigger national debt

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If Donald Trump is re-elected president of the United States in November, Americans can expect higher inflation, slower economic growth and a larger national debt, according to economists.

Trump’s economic agenda for a second term in office includes raising tariffs on imports, cutting taxes and deporting millions of undocumented migrants.

“Inflation will be the main impact” of a second Trump presidency, Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera.

“That’s ultimately the biggest risk. If Trump is president, tariffs are going up for sure. The question is how high do they go and how widespread are they,” Yaros said.

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports.

During Trump’s first term in office from 2017 to 2021, his administration introduced tariff increases that at their peak affected about 10 percent of imports, mostly goods from China, Moody’s Analytics said in a report released in June.

Those levies nonetheless inflicted “measurable economic damage”, particularly to the agriculture, manufacturing and transportation sectors, according to the report.

“A tariff increase covering nearly all goods imports, as Trump recently proposed, goes far beyond any previous action,” Moody’s Analytics said in its report.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. They could also affect businesses’ decisions about how and where to invest.

“There are three main tenets of Trump’s campaign, and they all point in the same inflationary direction,” Matt Colyar, assistant director at Moody’s Analytics, told Al Jazeera.

“We didn’t even think of including retaliatory tariffs in our modelling because who knows how widespread and what form the tit-for-tat model could involve,” Colyar added.

‘Recession becomes a serious threat’

When the US opened its borders after the COVID-19 pandemic, the inflow of immigrants helped to ease labour shortages in a range of industries such as construction, manufacturing, leisure and hospitality.

The recovery of the labour market in turn helped to bring down inflation from its mid-2022 peak of 9.1 percent.

Trump has not only proposed the mass deportation of 15 million to 20 million undocumented migrants but also restricting the inflow of visa-holding migrant workers too.

That, along with a wave of retiring Baby Boomers – an estimated 10,000 of whom are exiting the workforce every day – would put pressure on wages as it did during the pandemic, a trend that only recently started to ease.

“We can assume he will throw enough sand into the gears of the immigration process so you have meaningfully less immigration, which is inflationary,” Yaros said.

Since labour costs and inflation are two important measures that the US Federal Reserve weighs when setting its benchmark interest rate, the central bank could announce further rate hikes, or at least wait longer to cut rates.

That would make recession a “serious threat once again”, according to Moody’s.

Adding to those inflationary concerns are Trump’s proposals to extend his 2017 tax cuts and further lower the corporate tax rate from 21 percent to 20 percent.

While Trump’s proposed tariff hikes would offset some lost revenue, they would not make up the shortfall entirely.

According to Moody’s, the US government would generate $1.7 trillion in revenue from Trump’s tariffs while his tax cuts would cost $3.4 trillion.

Yaros said government spending is also likely to rise as Republicans seek bigger defence budgets and Democrats push for greater social expenditures, further stoking inflation.

If President Joe Biden is re-elected, economists expect no philosophical change in his approach to import taxes. They think he will continue to use targeted tariff increases, much like the recently announced 100 percent tariffs on Chinese electric vehicles and solar panels, to help US companies compete with government-supported Chinese firms.

With Trump’s tax cuts set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, the tax cuts to higher earners like those making more than $400,000 a year would expire.

Although Biden has said he would hike corporate taxes from 21 percent to 28 percent, given the divided Congress, it is unlikely he would be able to push that through.

The contrasting economic visions of the two presidential candidates have created unwelcome uncertainty for businesses, Colyar said.

“Firms and investors are having a hard time staying on top of [their plans] given the two different ways the US elections could go,” Colyar said.

“In my entire tenure, geopolitical risk has never been such an important consideration as it is today,” he added.

 

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Economy

China Stainless Steel Mogul Fights to Avoid a Second Collapse

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Chinese metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars. Two decades on, he’s once again fighting for survival.

A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed. Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co., along with plants held by his wife and son. Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.

 

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Economy

Why Trump’s re-election could hit Europe’s economy by at least €150 billion

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A Trump victory could trigger a 1% GDP hit to the eurozone economy, with Germany, Italy, and Finland most affected. Renewed NATO demands and potential cessation of US aid to Ukraine could further strain Europe.

The potential re-election of Donald Trump as US President poses a significant threat to the eurozone economy, with economists warning of a possible €150 billion hit, equivalent to about 1% of the region’s gross domestic product. This impact stems from anticipated negative trade repercussions and increased defence expenditures.

The recent attack in Butler, Pennsylvania, where former President Trump sustained an ear injury, has boosted his re-election odds. Prediction markets now place Trump’s chances of winning at 71%, a significant rise from earlier figures, while his opponent, Joe Biden, has experienced a sharp decline, with his chances dropping to 18% from a peak of 45% just two months ago.

Rising trade uncertainty and economic impact from tariffs

Economists James Moberly and Sven Jari Stehn from Goldman Sachs have raised alarms over the looming uncertainty in global trade policies, drawing parallels to the volatility experienced in 2018 and 2019. They argue that Trump’s aggressive trade stance could reignite these uncertainties.

“Trump has pledged to impose an across-the-board 10% tariff on all US imports including from Europe,” Goldman Sachs outlined in a recent note.

The economists predict that the surge in trade policy uncertainty, which previously reduced Euro area industrial production by 2% in 2018-19, could now result in a 1% decline in Euro area gross domestic product.

Germany to bear the brunt, followed by Italy

Germany, Europe’s industrial powerhouse, is expected to bear the brunt of this impact.

“We estimate that the negative effects of trade policy uncertainty are larger in Germany than elsewhere in the Euro area, reflecting its greater openness and reliance on industrial activity,” Goldman Sachs explained.

The report highlighted that Germany’s industrial sector is more vulnerable to trade disruptions compared to other major Eurozone economies such as France.

After Germany, Italy and Finland are projected to be the second and third most affected countries respectively, due to the relatively higher weight of manufacturing activity in their economies.

According to a Eurostat study published in February 2024, Germany (€157.7 billion), Italy (€67.3 billion), and Ireland (€51.6 billion) were the three largest European Union exporters to the United States in 2023.

Germany also maintained the largest trade surplus (€85.8 billion), followed by Italy (€42.1 billion).

Defence, security pressures and financial condition shifts

A Trump victory would also be likely to bring renewed defence and security pressures to Europe. Trump has consistently pushed for NATO members to meet their 2% GDP defence spending commitments. Currently, EU members spend about 1.75% of GDP on defence, necessitating an increase of 0.25% to meet the target.

Moreover, Trump has indicated that he might cease US military aid to Ukraine, compelling European nations to step in. The US currently allocates approximately €40bn annually (or 0.25% of EU GDP) for Ukrainian support. Consequently, meeting NATO’s 2% GDP defence spending requirement and offsetting the potential reduction in US military aid could cost the EU an additional 0.5% of GDP per year.

Additional economic shocks from Trump’s potential re-election include heightened US foreign demand due to tax cuts and the risk of tighter financial conditions driven by a stronger dollar.

However, Goldman Sachs believes that the benefits from a looser US fiscal policy would be marginal for the European economy, with by a mere 0.1% boost in economic activity.

“A Trump victory in the November election would likely come with significant financial market shifts,” Goldman Sachs wrote.

Reflecting on the aftermath of the 2016 election, long-term yields surged, equity prices soared, and the dollar appreciated significantly. Despite these movements, the Euro area Financial Conditions Index (FCI) only experienced a slight tightening, as a weaker euro counterbalanced higher interest rates and wider sovereign spreads.

In conclusion, Trump’s potential re-election could have far-reaching economic implications for Europe, exacerbating trade uncertainties and imposing new financial and defence burdens on the continent.

 

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