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The worsening pandemic raises the stakes for Biden's economic program – CNN

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“You have to right the market a little bit,” the former vice president told me. “The middle class is getting killed.”
Within weeks, the coronavirus hit and worsened the toll — literally and figuratively. That steepens the challenge President-elect Biden faces when he replaces President Donald Trump in January.
For at least a half century, multiple economic forces have exacerbated disparities within American society. By 2016, a Pew Research Center analysis recently found, the most affluent 5% possessed 248 times the wealth of the least affluent 40%. Wealth improves health; on average, the richest 1% of Americans live more than 10 years longer than the poorest 1%, a study in the Journal of the American Medical Association has found.
Covid has deepened both dismal grooves. Blacks and Hispanics, who lag behind Whites in wealth and income, die from the virus more than five times as often, according to the Institute for Health Metrics and Evaluation at the University of Washington.
The economic dislocations of the pandemic have largely spared more affluent Americans. Buoyant financial markets and home values have protected their wealth, and their ability to work from home has protected their jobs.
Low-paid service workers, by contrast, have been devastated. Many of those who have been lucky enough to avoid being laid off must report to job sites as “essential workers,” heightening their risk of exposure.
Others have faced layoffs due to plummeting demand, and the prospect of permanent job loss from sectors such as leisure travel or in-person retailing that won’t recover soon if ever. While higher-wage employment has risen back to pre-pandemic levels, the number of jobs paying $27,000 or less remains down 19%, according to Harvard’s Opportunity Insights Economic Tracker.
“For people who can work remotely, all this is slightly inconvenient,” observed Massachusetts Institute of Technology economist David Autor. “For many others, they’re going to have to change their livelihoods.”

‘A lot of people have been left behind’

Responding to all this won’t require Biden to rewrite the economic plans he’d already developed, because of who they were always intended to help.
“The agenda was really crafted with the core insight in mind that a lot of people have been left behind for a long time,” noted longtime Biden economic adviser Jared Bernstein.
In the name of rebalancing for fairness and equity, his campaign proposed trillions in tax increases on the affluent to finance trillions in spending on health care, infrastructure, education and other programs.
But Covid raises the stakes for getting his proposals enacted, and suggests subtle shifts of emphasis.
For example, higher minimum wages work best in tight labor markets. So elevated unemployment has diminished the urgency of Biden’s call for doubling the federal minimum to $15, according to Autor.
Yet pushing any tax increases through Congress will be difficult, especially if Republicans keep control of the Senate after Georgia’s runoff elections in January. But Biden’s proposed payroll tax hike on incomes over $400,000 has grown more important. That’s because a significant number of older Americans who’ve lost jobs are expected seek Social Security earlier than previously planned, adding new strains to the program’s finances.
Workers cast off by suddenly declining industries face a more immediate need for the job training upgrades Biden has proposed. Those responsible for young children and aging parents have grown more desperate for the kind of help Biden’s proposed caregiving subsidies would provide.
The inadequacy of virtual learning required by Covid elevates the importance of his higher proposed school funding levels. Without remedial education programs, low-income families less able to compensate with technology or tutoring will fall farther behind than they already are.
“The learning deficits are going to be so deep we don’t know if they’ll ever be able to overcome them,” said Melissa Kearney, a University of Maryland economics professor who specializes in inequality. “I want to be an optimistic person, but I am so disheartened at this moment.”

Congress remains stalled on more relief

One source of her discouragement: the inability of the lame-duck Congress and Trump White House to agree on a new Covid-relief package, which Republicans and Democrats alike call necessary. Without year-end action, millions face impoverishment from expiring unemployment benefits, eviction from their homes and business failures.
The stalemate augurs poorly for passing a major new economic stimulus once Biden and the new Congress take office in 2021. Mark Zandi, the chief economist for Moody’s, calls a large infrastructure program, to help stave off a backslide into recession, the most potent single step the new president could take to reduce economic disparities.
Democrats say Biden can make some progress without Congress, including possible executive action to relieve some student loan debts. His expected choice for Treasury Secretary, Janet Yellen, is a labor market expert deeply familiar with fiscal and monetary tools from her past work as Federal Reserve chair and a Clinton White House economist.
Incoming White House chief of staff Ron Klain brings expertise in pandemics from his work overseeing President Barack Obama’s successful response to Ebola. Taming the coronavirus would at least help the new administration prevent economic disparities from widening any further.
A year later, that issue remains Biden’s target.
“The middle-class and working-class people are being crushed,” the President-elect told NBC last week. “That’s my focus.”

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Down But Not Out: Pandemic Likely Dealt Blow To Economy But There's Room For Hope – NPR

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A sign noting a retail space is available for lease appears in San Francisco in December. A resurgence in the pandemic likely dealt a major blow to the U.S. economy in the fourth quarter.

Jeff Chiu/AP

Jeff Chiu/AP

The resurgence in the pandemic likely dealt a major blow to the U.S. economy in the last three months of the year, though it is not expected to have delivered a knockout punch.

Most economists expect fourth-quarter gross domestic product data on Thursday will show a significant slowdown from July to September, when the economy staged a sharp recovery from the early days of the pandemic.

Key sectors such as leisure and hospitality have been hit hard by the pandemic’s resurgence, and had it not been for the $900 billion rescue package that Congress passed in the final weeks of December, the economy might have started 2021 with a double-dip recession.

But other companies, including in manufacturing and online retail, are doing better and seeing business return to pre-pandemic levels.

Ben Herzon, a senior economist with IHS Markit, expects Thursday’s report from the Commerce Department will show GDP grew less than 1% in October, November and December.

That’s a significant slowdown from the previous three months when the economy grew by 7.4% as businesses reopened from pandemic lockdowns in March and April.

(The Commerce Department typically reports quarterly GDP changes at annualized rates, but that exaggerates swings both up and down. Measured by that rate, third-quarter GDP grew 33.4% after a drastic 31.4% contraction in the second quarter.)

“We got a really strong third quarter, and then things started to fizzle out a little bit,” Herzon said.

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Hurt most in the last three months of the year were restaurants and in-person entertainment businesses such as movie theaters as a winter wave of coronavirus infections and deaths made consumers nervous about going out. The leisure and hospitality segment of the economy lost nearly 500,000 jobs in December.

Other segments of the economy have fared better. Manufacturing and homebuilding continue to bounce back from their pandemic slump, and consumption of goods is higher now than it was before the coronavirus struck.

“There are some strengths,” Herzon said. “It’s just that services, which is a very large part of the economy, is really struggling to get back to where it was.”

While the U.S. has made up much of the ground it lost early last year, the economy likely ended 2020 about 3% smaller than when it began.

With COVID-19 still killing around 4,000 Americans every day, economic activity is likely to remain subdued for the next several months. But if new vaccines are successful in stopping the pandemic, the economy is poised for a strong recovery in the second half of this year.

The International Monetary Fund expects the U.S. economy to grow 5.1% in 2021 and match its pre-pandemic level sometime in the second half of the year.

Any forecast, however, comes with a number of question marks: How smoothly will the vaccine rollout go? What is the impact of new coronavirus variants? And how much more money will consumers spend once the pandemic is under control?

Americans who have kept working during the pandemic have socked away about $1.3 trillion in extra savings during the last year, according to Pantheon Macroeconomics. That could provide a significant boost to the economy, if and when they decide to spend it.

“You probably won’t get more haircuts than you otherwise would have,” Herzon said. “But maybe people are really tired of staying home, and they will go out to eat more than they would have otherwise.”

Additional fuel could come from the federal government if Congress approves another round of $1,400 relief checks, or other parts of President Biden’s proposed $1.9 trillion package to rescue the economy.

A surge in demand for airline tickets and restaurant reservations that suddenly outstrips supply could trigger a jump in prices.

But Federal Reserve Chairman Jerome Powell said any such increase is likely to be temporary and would not spark concerns at the central bank of runaway inflation.

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Carney, OTPP CEO set timelines for climate friendly economy at Davos – BNN

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Two Canadian investment leaders endorsed a transition to clean energy at a virtual Davos World Economic Forum on Wednesday, as more investors worldwide push for concrete sustainability commitments.

Former Bank of Canada governor Mark Carney said that politicians can help markets finance the transition to zero-emission economies by setting credible forward commitments.

Canada’s carbon pricing plan is an example of a forward commitment, Carney said, since it would hike the federal tax to $170 a tonne by 2030 from $30 currently.

“I think we’re reaching the tipping point. The question is execution. How is that political will channelled?” said Carney, who was speaking in his capacity as United Nations Special Envoy for Climate Action and Finance.

He pointed to recent COVID-19 vaccine purchase agreements as an example of the power of putting political will behind contracts.

Carney, who is also vice-chairman at Brookfield Asset Management, said that financial and economic markets will adjust to future goals, such as upcoming bans of internal combustion engines in Europe. Carney pointed to his research with U.S. Treasury Secretary and former Federal Reserve chairwoman Janet Yellen, which suggested that markets will “smooth” out the carbon price hikes.

“That’s what markets do best. And by the time you get to the point where the price is high, the economy has adjusted,” said Carney.

In a separate session, Ontario Teachers’ Pension Plan chief executive Jo Taylor said the pension plan tries to push its portfolio companies toward sustainability, rather than immediately divesting in carbon-intensive companies. The pension plan said last week it would commit to reaching net-zero greenhouse gas emissions by 2050.

“Through that engagement, rather than divestment, I think we can particularly push these companies to do a better job and actually provide some additional help and services in and around the world where they may not be immediately available,” said Taylor.

Carney and Taylor’s comments at Davos came as 61 global business leaders said at the forum they would begin using a standardized set of environmental, social and governance metrics and disclosures.

Global investment firm BlackRock Inc. also said this week it would start giving “heightened scrutiny” to investments that posed a climate-change risk, calling for more company disclosures not only on climate change but also social goals such as equity, diversity and inclusion. In his letter to CEOs, BlackRock chief executive Laurence Fink said that between January and November 2020 there was a 96 per cent year-over-year increase in sustainable asset investments in mutual funds and exchange traded funds.

Carney said that as more governments sign on to net-zero pledges, it is “cascading down” to large pension funds, insurance companies and sovereign wealth funds.

“We don’t often invest on our own, so what we need to do is also persuade other investors,” said Taylor. “Some of the investors we work with have a much more short-term view of what they’re trying to achieve.”

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Gold's rally to slow, not stop, as global economy recovers: poll – The Globe and Mail

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Analysts and traders have downgraded their forecasts for gold but still expect prices to recover from current levels and many see it achieving record highs this year, a Reuters poll showed on Wednesday.

Traditionally seen as a safe place to store wealth, gold surged to a record level of $2,072.50 an ounce last summer as the coronavirus swept the globe.

But prices have since dipped to around $1,850 as the rollout of vaccines encourages investors to channel more money into assets such as equities that benefit from economic growth.

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Gold will average $1,900 an ounce during the January-March quarter, $1,925 an ounce for the full year and $1,908 in 2022, according to the median forecasts returned by a survey of 40 analysts and traders.

That is lower than the prediction from a similar poll three months ago that gold would average $1,965 in 2021.

“We expect gold to perform well in 2021, although at a slightly more subdued rate compared to 2020,” said Ross Norman, an independent analyst.

“We expect gold to score a fresh all-time high in 2021.”

“Financial markets remain vulnerable and we think investors will continue to see gold as the near perfect antidote,” he said.

Gold has benefited from action by central banks to slash interest rates and pump cash into the economy, which raises the threat of inflation and reduces returns on bonds, a competing asset class.

But while global economic recovery may weaken the dollar, helping gold by making it cheaper for buyers outside the United States, it also is likely to raise bond yields, making gold less attractive, said Julius Baer analyst Carsten Menke.

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Silver behaved in a similar way to gold last year, surging to $29.84 an ounce in the summer, its highest since 2013, before falling to around $25.

The poll returned median forecasts for prices to average $25.86 this year, a little lower than the prediction of $26.00 returned by the poll three months ago, and $25.30 in 2022.

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