America’s presidential election is entering its closing stretch with the economy still stuck in a pandemic slump, and the candidates locked in a tight battle over the best way to pull it out.
The economy looked like a winner for President Donald Trump through most of his first term, with strong growth and unemployment declining. During the first months of the coronavirus recession, he maintained a polling lead on the issue. But lately there are signs that Democratic challenger Joe Biden is catching up.
Some of the policy gaps between the candidates are age-old: The Republican says he’ll cut taxes and red tape, while the Democrat promises to spend more. Others reflect contrasting approaches to new challenges like climate change and competition with China. And on a handful of issues, they broadly agree.There’s also been a big difference in presentation, with a slew of detailed policy proposals emerging from the Biden campaign, while Trump prefers to list promises in terse bullet-points.Whoever wins has a better-than-usual chance of actually implementing their proposals, because the pandemic has blown away old budget restraints, according to Mark Zandi, chief economist at Moody’s Analytics. “There’s a real good chance that a lot of them may become law.”
Here’s how the two candidates’ economic ideas stack up in some key areas.
Pandemic Recovery
The pandemic upended the nation’s longest economic expansion on record. In March and April alone, employers shed more than 22 million people from payrolls. The U.S. has recovered millions of jobs, but remains about 11.5 million short of pre-pandemic levels.
Trump has promised to create 10 million new jobs in 10 months, though both details and the precise time frame are fuzzy.
Meeting Trump’s goal may prove challenging. Permanent business closures have likely eliminated at least 5.5 million jobs, said Aneta Markowska, chief U.S. financial economist at Jefferies.
“Rebuilding those jobs is going to require new business formations or significant expansion by existing businesses, and that is just a process that takes time,” Markowska said.
Biden has promised to grow U.S. employment beyond pre-pandemic levels with a series of new government programs he calls “Build Back Better.” They include US$400 billion for manufacturing and $300 billion for research and development, which Biden says could create 5 million jobs on top of those lost to the coronavirus outbreak.
He has not attached a timeframe to his plan, though he would face pressure to achieve it by the end of his first term.
Tax and Spend
Fiscal policy may be the sharpest distinction between the candidates’ economic platforms. Trump has said he wants to build on tax cuts passed in his first term, while Biden has pledged to at least partly reverse them.The president says he’ll make the 2017 reductions to income and corporate taxes permanent (they’re currently due to expire in 2025), and his team has hinted at a “Tax Cuts 2.0” without giving much detail. Economic adviser Larry Kudlow has suggested there could be a reduction for the “middle class,” achieved by lowering the 22 per cent marginal rate of income tax to 15 per cent.
Trump deferred payroll taxes by executive order during the pandemic and says he’ll get Congress to turn that into a permanent write-off if re-elected.
Biden says he’ll undo half of Trump’s corporate tax cut by lifting the rate to 28 per cent from 21 per cent. He’s also told the wealthiest Americans that they should expect to pay more. Tax rates on income above US$400,000 would edge up to 39.6 per cent from 37 per cent.
The former vice president would also eliminate tax breaks for capital gains and dividends, and he plans to charge payroll taxes on incomes above US$400,000 (they currently only apply below US$137,700).On the outlays side of the budget, Trump — who funneled more cash to the Pentagon during his first term — has hinted he might look to slash spending in a second term, but has also promised to increase federal funding for law enforcement and infrastructure.
Biden’s promises include $2 trillion for a clean-energy overhaul and about US$1.5 trillion split between support for care for children and the elderly and for manufacturing.
‘Made in America’
The coronavirus recession hit service industries especially hard -– and highlighted the U.S. economy’s growing dependence on them, after the disappearance of manufacturing jobs since the 1990s. Both candidates have plans to bring the factories back – and both feature “Made in America” tax credits to encourage domestic investment.Trump’s team has floated the idea of halving the corporate rate to 10.5 per cent for firms that relocate to the U.S. The president is also proposing measures specifically tailored to companies repatriating jobs from China, as well as a 100 per cent expensing deduction in crucial industries like pharmaceuticals and robotics.
Biden would offer a 10 per cent tax credit for companies that reopen or renovate idled factories, or retool them to make priority goods like electric cars. The measure would also apply in industries where the U.S. competes with government-subsidized Chinese manufacturers, and would help cover relocation costs for companies that bring operations home.
Offshore Stick
In addition to carrots, both candidates plan to use sticks to reverse the outsourcing of production by U.S. companies to lower-wage countries like China, Vietnam and Mexico.
Trump has said he would prohibit federal contracts for companies that outsource to China, and impose tariffs on those that “desert America.”
Biden plans to impose a surcharge on profits made by U.S. firms that manufacture products overseas and sell them at home: they would pay a corporate tax rate of 30.8 per cent. He’d also phase out deductions and expensing write-offs for businesses that move overseas, and impose a 21% minimum tax on all foreign earnings.
Energy Jobs
Both Trump and Biden have identified the energy industry as a key sector for job creation. But their approaches couldn’t be more different.
Trump has said he will “continue to unleash American energy” by cutting more regulations – a follow-up to first-term policies that included approval of the Keystone XL pipeline and expansion of natural-gas export approval. He’s tried to paint Biden as an extreme environmentalist who would destroy energy-sector and automaking jobs.
Biden says his plan for US$2 trillion in clean-energy projects would create at least 10 million jobs –- including some in the auto industry, driven by a shift to electric cars. He’d also set up a “civilian climate corps” modeled on work-relief programs during the Great Depression.
The Democratic contender acknowledges that some existing energy jobs, such as those at coal mines and power plants that rely on the fossil fuel, would disappear -– and he’s pledged training and other support for the displaced workers.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
