But before we get to President Trump and presumptive Democratic nominee Joe Biden, here’s some of what’s happening right now:
- At the end of this month, the enhanced unemployment insurance that provides unemployed workers with an extra $600 per week will expire, sending tens of millions of families from a position of stability into financial stress or outright crisis.
- According to a recent study, at least 5.4 million Americans have lost their health insurance during the pandemic and economic collapse.
- While the Paycheck Protection Program has helped many small businesses survive the crisis, it hasn’t been nearly enough. Tens of thousands of small businesses have already shut their doors permanently; by the time this recession is over, that number could be in the hundreds of thousands. The PPP is set to expire in August.
- We’re on the cusp of a housing cataclysm: As many as 23 million families, or one in five households that rent their home, could face eviction by this fall.
- State and local budgets continue their free fall, causing massive layoffs and cutbacks in services, while the Republican leadership in Congress refuses to provide the aid they need.
In the fantasy world Trump inhabits, the economy can simply be switched back on; convince everyone that things are fine and they’ll all return to work and boundless prosperity will ensue. But it’s now clear that the economy will likely take years to recover from the damage it has already sustained and continues to sustain.
Worst of all, the president has rejected this fundamental truth: We can’t recover economically until we contain the pandemic. Instead, he has decided to simply give up on controlling the pandemic and let it run rampant, and insist that if he does some cheerleading for the economy, we will magically recover.
So when you ask the White House for its economic plan, it becomes obvious it has no plan at all. The administration is signaling that while it despises the generosity of the $600 supplemental UI, it might be open to some smaller payments of as-yet-undetermined size. The White House has, however, floated the idea of a “capital gains tax holiday,” a giveaway to rich investors. That’s its answer.
There is one other idea coming out of the Trump administration. Ivanka Trump debuted an ad campaign on Tuesday called “Find Something New,” in which people whose livelihoods have disappeared are urged to expand their horizons and explore new career opportunities. The company you worked at for 10 years went bankrupt? The restaurant your family owned for generations went out of business? Why not start a fashion line, or become a motivational speaker? Or have your dad give you a job in his White House?
So that’s what Trump is offering. What about Biden?
On Tuesday, the presumptive Democratic nominee released a new infrastructure plan whose goal is “creating the jobs we need to build a modern, sustainable infrastructure now and deliver an equitable clean energy future.”
In many ways, it resembles other infrastructure plans Democrats have put forth: roads, bridges, transit, water systems, clean energy, broadband, upgrading buildings for energy efficiency, and so on. He proposes to spend $2 trillion over four years to achieve these goals, and in the process promote union jobs and environmental justice.
The most striking contrast between the approaches Biden and Trump take isn’t only that Biden wants to do a lot and Trump wants to do very little. It’s also that the steps Biden proposes are quite purposefully meant to create permanent effects: not just a temporary infusion of cash or a tax break, but the building of tangible systems and resources that could continue to yield benefits even after the next Republican president takes office.
He has other plans, too; his campaign calls them “Build Back Better.” While he may not want to reorient fundamental power relations in the same way that Sens. Bernie Sanders and Elizabeth Warren proposed in their presidential campaigns, it’s no longer possible to say that Biden isn’t being ambitious.
If Biden does win, he’ll take office with the economy not only still in crisis, but also facing profound long-term difficulties. Even if you don’t support the specifics of what he proposes, or think he’s missing other steps that ought to be taken, at least he seems to understand the gravity of the problem.
And Trump? As The Post’s Carol Leonnig reports, “the president seemingly has no interest in or patience for what he considers the boring work of governing, several of his former senior advisers say.” It’s becoming all too clear.
UK's Johnson expects steady recovery for economy this year – Financial Post
LONDON — British Prime Minister Boris Johnson said Britain’s economy would show a steady recovery this year albeit with “bumps on the road” after the country posted a strong increase in the number of employees on company payrolls in June.
“You’re seeing the job numbers increasing and I think the rest of this year there will still be bumps on the road but I think you’ll see a story of steady economic recovery,” Johnson told LBC radio on Wednesday.
(Reporting by Guy Faulconbridge and Kate Holton, writing by Elizabeth Piper Editing by William Schomberg)
Fed Considers Tapering Bond Purchases as Economy Grows – The New York Times
Federal Reserve officials are gathering in Washington this week with monetary policy still set to emergency mode, even as the economy rebounds and inflation accelerates.
Economists expect the central bank’s postmeeting statement at 2 p.m. Wednesday to leave policy unchanged, but investors will keenly watch a subsequent news conference with the Fed chair, Jerome H. Powell, for any hints at when — and how — officials might begin to pull back their economic support.
That’s because Fed policymakers are debating their plans for future “tapering,” the widely used term for slowing down monthly purchases of government-backed debt. The bond purchases are meant to keep money chugging through the economy by encouraging lending and spending, and slowing them would be the first step in moving policy toward a more normal setting.
Big and often conflicting considerations loom over the taper debate. Inflation has picked up more sharply than many Fed officials expected. Those price pressures are expected to fade, but the risk that they will linger is a source of discomfort, ramping up the urgency to create some sort of exit plan. At the same time, the job market is far from healed, and the surging Delta coronavirus variant means that the pandemic remains a real risk. Policy missteps could prove costly.
Here are a few key things to know about the bond-buying, and key details that Wall Street will be watching:
The Fed is buying $120 billion in government backed bonds each month — $80 billion in Treasury debt and $40 billion in mortgage-backed securities.
Economists mostly expect the central bank to announce plans to slow those purchases this year, perhaps as soon as August, before actually dialing them back late this year or early next. That slowdown is what Wall Street refers to as a “taper.”
There’s a hot debate among policymakers about how that taper should play out. Some officials think the Fed should slow mortgage debt buying first because the housing market is booming. Others have said mortgage security buying has little special effect on the housing market. They have hinted or said they would favor tapering both types of purchases at the same speed.
The Fed is moving cautiously, and for a reason: Back in 2013, markets convulsed when investors realized that a similar bond-buying program after the financial crisis would slow soon. Mr. Powell and crew do not want to stage a rerun.
Bond-buying is just one of the Fed’s policy tools, and is used to lower longer-term interest rates and to get money chugging around the economy. The Fed also sets a policy interest rate, the federal funds rate, to keep borrowing costs low. It has been near zero since March 2020.
Central bankers have been clear that tapering off bond purchases is the first step toward moving policy away from an emergency setting. Increases in the funds rate remain off in the distant future.
IMF warns of growing poverty, unrest and geopolitical tensions – Al Jazeera English
The global economic recovery continues, but with a widening gap between advanced economies and many emerging market and developing economies thanks to vaccine inequity and a lack of fiscal support, the International Monetary Fund (IMF) warned on Tuesday
While the latest update to the IMF’s World Economic Outlook sees the global economy still growing 6 percent this year – unchanged from its April estimate – Chief Economist Gita Gopinath noted that the composition of the recovery continues to change.
“The recovery is not assured until the pandemic is beaten back globally,” Gopinath told reporters during a virtual press conference as she presented the latest outlook titled Fault Lines Widen in the Global Economy.
The IMF sees global growth decelerating to 4.9 percent next year. Advanced economies are expected to achieve 4.4 percent growth in 2022 – down from 5.6 percent in 2021 – while growth in emerging and developing economies is seen slowing to 5.2 percent in 2022 from an expected rebound 6.3 percent in 2021.
Rich, emerging and developing nations all took an economic beating last year when the coronavirus pandemic forced governments to close borders, shut businesses and idle manufacturing hubs worldwide.
As countries rolled back COVID restrictions this year, growth forecasts jumped as people emerged from lockdowns and unleashed pent-up demand for products and services. That demand surge though is expected to moderate next year.
Developed economies armed and shielded with a healthy supply of COVID-19 vaccines and fiscal firepower have managed to open up businesses and resume operations. But the emergence of new COVID variants and infection spikes laces uncertainty into the recovery path.
Growth in the US, the world’s largest economy, is seen slowing to 4.9 percent in 2022 after a bounce back of 7.0 percent expected this year. Europe is also expected to slow to 4.3 percent in 2022 from 4.6 in 2021.
Growth in the Middle East and Central Asia is expected to decelerate to 3.7 percent next year from 4.0 in 2021, while emerging and developing Asian economies are expected to dip more than a point from 7.5 in 2021 to 6.4 in 2022.
Latin America and the Caribbean are forecast to experience the sharpest fall from 5.8 percent in 2021 to 3.2 in 2022 after plummeting 7.0 in 2020.
Sub-Saharan Africa is the only region that is expected to see growth climb – from 3.4 in 2021 to 4.1 percent in 2022.
Vaccines & trillions in fiscal support
Vaccine inequality is seen as a chief driver of the widening gulf between recoveries in developed and less developed economies.
Close to 40 percent of people in advanced economies have been fully vaccinated compared with only 11 percent in emerging market economies and a tiny fraction in low-income developing countries.
Fresh waves of COVID-19 cases this year, notably in India are a major source of the deepening inequality between rich and poor nations.
“The emergence of highly infectious virus variants could derail the recovery and wipe out four and a half trillion dollars cumulatively from global GDP by 2025,” Gopinath warned.
To make matters worse, poor countries and even emerging markets lack access to the funds necessary to jolt economies back to health. Advanced economies, on the other hand, passed $4.6 trillion in fiscal support for 2021 and beyond. In developing economies, most measures expired last year.
And some emerging markets like Brazil, Hungary, Mexico, Russia and Turkey have also started raising interest rates to contain soaring inflation triggered by supply chain bottlenecks as economies reopen. Higher interest rates cool economic growth.
“A worsening pandemic and tightening financial conditions would inflict a double blow to emerging markets and developing economies and severely set back their recoveries,” Gopinath warned.
Inflation & action
A significant portion of the “abnormally high inflation” readings is transitory, resulting from the pandemic’s hit to vital parts of the economy such as travel and hospitality, and from a comparison with last year’s abnormally low readings, Gopinath said.
The IMF forecasts inflation to remain elevated next year. In emerging markets and developing economies food price pressures and currency depreciation will continue to create yet another worrying disparity in economic recovery.
Major central banks must clearly communicate their outlook for monetary policy and ensure that inflation fears do not trigger rapid tightening of financial conditions, the IMF stressed.
The Fund’s proposal to end the pandemic, endorsed by the World Health Organization, the World Bank, and the World Trade Organization, sets a goal of vaccinating at least 40 percent of all people in every country by the end of 2021 and 60 percent by the middle of 2022.
The IMF urges at least 1 billion vaccine doses to be shared in 2021 by countries with more than enough of them and calls on manufacturers to prioritise deliveries to low and lower-middle-income countries.
The fund said its allocation of some $650bn worth of its reserve currency, known as Special Drawing Rights, should be completed quickly to help countries in need fund their spending needs. Greater action is also needed to ensure the G-20 successfully delivers on debt restructuring for countries where debt has ballooned and become unsustainable, said the IMF.
Gopinath further urged countries to focus more on reducing carbon emissions and slowing the rise in global temperatures to avoid yet another human and financial catastrophe. As it stands now, only 18 percent of recovery spending has been on low carbon activities.
“Concerted policy actions…can make the difference between a future where all economies experience durable recoveries or one where divergences intensify, the poor get poorer and social unrest and geopolitical tensions grow,” she said.
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