U.S. voters see economy through political lens in polarized era - CTV News

Economy

U.S. voters see economy through political lens in polarized era – CTV News

Published

4 years ago

September 16, 2020

Harry Miller

APPLETON, WIS. —
Nothing can shake Scott Rice’s faith that President Donald Trump will save the U.S. economy — not seeing businesses close or friends furloughed, not even his own hellish bout with the novel coronavirus.

He was once a virus skeptic. But then the disease seeped into the paper mill where he works, and he was stricken, suddenly losing his appetite. He lay in bed, feverish, drenched in sweat. His body seemed at war with itself.

After 16 days at home, Rice told his co-workers that the disease was scary and real. But Trump held onto his vote for one reason: The stock market was climbing.

“The 401(k)s, just the economy,” Rice said. “He got jobs going. Just accumulated a lot of jobs, being a businessman.”

Rice’s belief represents the foundation of Trump’s hopes — that Americans believe the economy is strong enough to deliver him a second term.

But in Appleton, a city of 75,000 people along the Fox River, the health of the economy isn’t judged on jobs numbers, personal bank accounts or union contracts. Instead, it’s viewed through partisan lenses — filtered through the facts voters want to see and hear, and those they don’t.

By almost any measure, Trump’s promises of an economic revival in places like Appleton have gone unfulfilled. The area has lost about 8,000 jobs since he got elected.

While supporters like Rice are immovable, others have had enough. President Barack Obama won here in 2012, but voters flipped to Trump four years later, and Trump cannot afford much erosion in a state that he won by only 22,000 votes out of more than 2.8 million.

Biden holds a slight lead over Trump in the latest Marquette Law School poll of Wisconsin voters. Trump’s disapproval rating has risen to 54% from 49% at the start the year. But 52% of Wisconsin voters applaud Trump on the economy, while 56% dislike his handling of the pandemic.

Even Rice concedes that the economy is not just an argument for Trump — it’s also an argument against him. His 20-year-old daughter, Cassidy, tells him so. She is studying public health at George Washington University and will cast her first presidential vote for Biden.

“The fact that there was a pandemic and the fact that it had those consequences on the economy should be an eye opener, like, hey, maybe we’re not doing this correctly,” she said.

——

Trump won the presidency by wringing tens of thousands of votes out of small towns and medium-size cities across Wisconsin, Michigan and Pennsylvania.

He did it in places like Appleton’s Outagamie County. A city of stone and brick, Appleton hugs the Fox River, its currents powering the smoke-stacked paper mills that built fortunes. Now condos, cafes, offices and a jogging trail line the riverbank.

The trail ends downtown at Houdini Plaza, a monument to the city’s most famous offspring, illusionist Harry Houdini. His words are inscribed on the monument where his childhood home once stood: “What the eyes see and the ears hear, the mind believes.”

There may be no better explanation of American politics in this confounding moment.

Trump voters listen to his cheerleading for the economy and believe the businessman president has worked his magic. Biden’s backers see an illusion — an economy that was recovering under Obama, but now, with the pandemic, is trying to crawl back to health, with no real plan from Trump.

People cannot even agree on the terms of the economic debate.

“What we’ve done with politics is gotten into a tribal war that looks only at elections when we should be looking at policies and results,” said John Burke, CEO and chairman of Wisconsin-based Trek Bicycles, one of the state’s most prominent business leaders.

——

After 2016, local Democrats wasted no time mourning. Lee Snodgrass became chair of the local party and began a blitz of door-knocking to build up volunteers and voters, a task that led her into areas that were firmly for Trump.

As a candidate now for the state legislature, Snodgrass finds Republicans still defending Trump after she recited facts about the economy and the pandemic: several millions jobs lost, a rising body count.

These Republican voters found Trump’s demeanour crude. But the unemployment rate was a strong 3.5% before the pandemic. Trump had updated and replaced the North American Free Trade Agreement. They give Trump credit, although he inherited a healthy 4.7% unemployment rate and the trade deficit with Mexico on goods had jumped to $101 billion last year — higher than in any year under Obama.

——

At the Midwest Paper Group, where Scott Rice works, there is a story of recovery, but one where credit lay with the union and the Outagamie County executive, not with Trump.

More than 600 workers were handed pink slips in anticipation of the mill being shuttered, in an area where nearly one in five jobs are still in factories.

“Most were resigned to fate,” said Tom Nelson, the county executive. “The paper industry was deemed old and outdated, uncompetitive because of imports, unfair trade deals, electronic substitution.”

The workers, their union representation and Nelson lobbied the bankruptcy court and struck a deal. Instead, the mill added new machines to make materials for cardboard, capitalizing on the growing number of people shopping online at Amazon. For 12 hours a day, Rice mans the control room in a red face mask that says “USA.”

——

Trek’s three U.S. warehouses were emptied of bikes by August because of a rush of pandemic buying, yet Burke, its CEO, was agonizing about the fate of the broader economy.

Burke, 58, pedals 110 miles on his standard Saturday ride, long enough for the nation’s problems to turn over in his mind. He decided to write a book in 2016 and updated it this year, “Presidential Playbook 2020: 16 Nonpartisan Solutions to Save America.”

As Burke sees it, Trump has governed with a dangerous set of blind. There are the hurricanes and wildfires unleashed by climate change. Not enough money invested in children. And Trump initially downplayed the virus’ threat.

In Appleton, nearly 40% of the leisure and hospitality jobs have been lost. Restaurants have been closed, hotels vacant. Downtown, Mondo! wine bar is getting by with retail sales and outdoor seating, until the weather changes.

The bar’s owner, David Oliver, 59, said American businesses desperately need another round of aid and Oliver blames the president.

“They’re supposed to be pro-business,” Oliver said. “But so much of the Republican Party has reverted to this magical thinking that Trump has that the economy is fine and the virus is going away.”

What the pandemic has shattered is consumer confidence, said Marvin Murphy, the 80-year-old owner of Fox Cities magazine. He estimates he has spoken with every business within 70 miles of Appleton.

“The COVID has put so much pessimism into the economy — that’s the big killer,” he said.

Murphy sipped a fresh cup of coffee in his backyard overlooking the Wolf River and lamented that so many people only process the world based on what they see and hear on TV.

“Reality is is not the most important thing,” Murphy said. “The perceived reality is what’s important.”

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Economy

Opinion: Higher capital gains taxes won't work as claimed, but will harm the economy – The Globe and Mail

Published

36 mins ago

April 19, 2024

Harry Miller

Canada’s Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland hold the 2024-25 budget, on Parliament Hill in Ottawa, on April 16.Patrick Doyle/Reuters

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.

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Economy

Nigeria's Economy, Once Africa's Biggest, Slips to Fourth Place – Bloomberg

Published

3 hours ago

April 19, 2024

Harry Miller

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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Economy

IMF Sees OPEC+ Oil Output Lift From July in Saudi Economic Boost – BNN Bloomberg

Published

4 hours ago

April 19, 2024

Harry Miller

(Bloomberg) — The International Monetary Fund expects OPEC and its partners to start increasing oil output gradually from July, a transition that’s set to catapult Saudi Arabia back into the ranks of the world’s fastest-growing economies next year.

“We are assuming the full reversal of cuts is happening at the beginning of 2025,” Amine Mati, the lender’s mission chief to the kingdom, said in an interview in Washington, where the IMF and the World Bank are holding their spring meetings.

The view explains why the IMF is turning more upbeat on Saudi Arabia, whose economy contracted last year as it led the OPEC+ alliance alongside Russia in production cuts that squeezed supplies and pushed up crude prices. In 2022, record crude output propelled Saudi Arabia to the fastest expansion in the Group of 20.

Under the latest outlook unveiled this week, the IMF improved next year’s growth estimate for the world’s biggest crude exporter from 5.5% to 6% — second only to India among major economies in an upswing that would be among the kingdom’s fastest spurts over the past decade.

The fund projects Saudi oil output will reach 10 million barrels per day in early 2025, from what’s now a near three-year low of 9 million barrels. Saudi Arabia says its production capacity is around 12 million barrels a day and it’s rarely pumped as low as today’s levels in the past decade.

Mati said the IMF slightly lowered its forecast for Saudi economic growth this year to 2.6% from 2.7% based on actual figures for 2023 and the extension of production curbs to June. Bloomberg Economics predicts an expansion of 1.1% in 2024 and assumes the output cuts will stay until the end of this year.

Worsening hostilities in the Middle East provide the backdrop to a possible policy shift after oil prices topped $90 a barrel for the first time in months. The Organization of Petroleum Exporting Countries and its allies will gather on June 1 and some analysts expect the group may start to unwind the curbs.

After sacrificing sales volumes to support the oil market, Saudi Arabia may instead opt to pump more as it faces years of fiscal deficits and with crude prices still below what it needs to balance the budget.

Saudi Arabia is spending hundreds of billions of dollars to diversify an economy that still relies on oil and its close derivatives — petrochemicals and plastics — for more than 90% of its exports.

Restrictive US monetary policy won’t necessarily be a drag on Saudi Arabia, which usually moves in lockstep with the Federal Reserve to protect its currency peg to the dollar.

Mati sees a “negligible” impact from potentially slower interest-rate cuts by the Fed, given the structure of the Saudi banks’ balance sheets and the plentiful liquidity in the kingdom thanks to elevated oil prices.

The IMF also expects the “non-oil sector growth momentum to remain strong” for at least the next couple of years, Mati said, driven by the kingdom’s plans to develop industries from manufacturing to logistics.

The kingdom “has undertaken many transformative reforms and is doing a lot of the right actions in terms of the regulatory environment,” Mati said. “But I think it takes time for some of those reforms to materialize.”

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