Economy

Why the Biden Economy Could Be the Same Long Slog as the Obama Economy – The New York Times

Published

4 years ago

November 8, 2020

Credit…Stephen Crowley/The New York Times

The way things are shaping up, the Biden economy appears likely to show uncanny similarities to the 2011-to-2016 Obama economy.

Joe Biden will be inaugurated in January amid an economy that is likely to be slowly recovering from collapse. The Senate will probably be in the hands of Republicans — an opposition party perhaps willing to do enough to try to prevent steep damage to the economy and markets, but unwilling to embrace the kind of multi-trillion dollar spending agenda that could generate a Biden boom. This combination would mean that the Federal Reserve would be left playing the dominant role in trying to propel an economic recovery, with the downsides that would entail.

Much about that forecast is uncertain. There is still a chance, if both runoff elections in Georgia go their way, that Democrats could win 50 seats in the Senate, with Kamala Harris as vice president to tip the balance. Or, this version of a Republican Senate may prove more receptive than the Obama-era one to working with Mr. Biden on his economic agenda. (The Senate majority leader, Mitch McConnell, indicated a desire on Wednesday to pass new a stimulus bill before the end of the year, though on Friday he said that good jobs numbers meant that stimulus should be relatively small.) And it is possible that when the coronavirus crisis abates, the economy will snap back to health on its own, particularly if the Biden administration handles public health policy effectively.

But the reaction to the election in financial markets in recent days suggests that something like the Obama recovery is more likely: in short, a long slog back to health.

Treasury bond yields fell sharply Wednesday, suggesting investors expect less fiscal stimulus, slower growth and easier monetary policy from the Fed than had been envisioned pre-election. And the stock market soared Wednesday and Thursday, as investors priced in both easier money from the Fed and a Biden administration that will be constrained in its ability to raise taxes and expand regulation on businesses.

By contrast, in the run-up to the election, markets had become more positioned for a world in which a Biden administration came to office with a Democratic Senate, and could more fully embrace the kind of transformative agenda many on the left would prefer.

“The whole blue wave idea that would have come with not only very generous stimulus in the near term but structural reforms and big infrastructure investment, that seems to be off the table,” said Julia Coronado, president of MacroPolicy Perspectives.

On the campaign trail, Mr. Biden spoke of transformative efforts to fund clean energy and other infrastructure investment, which analysts expected would imply the spending of trillions of dollars and the creation of millions of jobs.

The experience of the final six years of the Obama presidency looms large. In that span, Republicans controlled at least one chamber of Congress and blocked any large-scale fiscal policy — and insisted on spending cuts in response to high deficits. Legislative deal-making took place at the margins, if at all. It was the Federal Reserve that played the dominant role in trying to propel an economic recovery, through quantitative easing and other unconventional policies.

Last time, the recovery generated by that combination was a long march back toward prosperity.

In the last recession, Congress passed a large fiscal stimulus bill in early 2009 that helped start an expansion in mid-2009. When Republicans took control of the House in early 2011, they insisted upon a turn toward deficit reduction, and the expansion continued slowly in the years that followed, with help from the Fed’s actions.

From the time that expansion began in mid-2009, it took more than six years for the unemployment rate to fall to 5 percent, its level when the Great Recession began. The Fed’s programs were effective at driving up financial markets, but with less clear-cut benefits for ordinary Americans.

The Fed chair, Jerome Powell, has been vocal about the limits of the Fed’s tools, stressing that the central bank can lend money but cannot spend it. He has called on Congress to use its power of the purse to inject money into the economy directly.

“The upshot of all of this is that the configuration of government means the Fed is going to be expected and required to be even more stimulative than they might have been otherwise,” said Nathan Sheets, chief economist at PGIM Fixed Income and a former Fed and Treasury Department official. “The fiscal impulse is likely to be diminished relative to a blue wave scenario and even relative to a scenario where Trump won and Democrats won the Senate.”

A Biden win should ensure continuity at the Fed, Mr. Sheets said, either because he reappoints Mr. Powell to a second four-year term when his current one expires in early 2022, or because he appoints someone with broadly similar views on monetary policy and credibility on Wall Street, like the Fed governor Lael Brainard or the former chair Janet Yellen.

There are ways the Biden economy might escape the slow-growth economic outlook, if the Senate goes along with enough coronavirus rescue funds to prevent widespread business failures and sharp pullbacks by state and local governments. Strategists at Jefferies, for example, project that a “skinny” stimulus of $500 billion to $1 trillion could be in play.

Then, a successful public health policy enables economic activity to quickly return to pre-pandemic levels.

“If we got a trillion dollars of stimulus, you could have a decent constellation of policies if an administration comes in and manages the virus well,” Ms. Coronado said. “We need to manage the virus efficiently, and if we got a good federal response by the end of the first quarter combined with some stimulus, you could see decent momentum.”

The global financial crisis a dozen years ago was caused by fundamental imbalances in the economy that took time to repair, whereas the coronavirus recession was caused by a surprise shock — which raises at least the possibility of a much quicker return to normal.

So the biggest question may turn out to be this one: Has the pandemic fundamentally broken anything about the economy? If not, a speedy recovery may be possible even without a politically aligned Congress. If not, it might feel like the early 2010s all over again.

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Business

A timeline of events in the bread price-fixing scandal

Published

7 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

7 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

21 hours ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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