Economy

Thursday April 2, 2020

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday April 2, 2020

If we want the economy to recover, we need to bail out tenants and property owners, too

Coronavirus cartoons

The federal government recently introduced a plan to encourage businesses to retain workers by subsidizing 75 per cent of their wages. By providing laid-off and self-isolating workers with an alternative to employment benefits it should help limit social, economic and financial disruption from the pandemic. Rather than let the economy tailspin, the hope is to engineer a successful recovery once the virus is contained. If business activity and consumer confidence vanish, getting the economy back off the ground will be hard.

We need to expand this plan to the real estate sector. For many newly laid-off people, neither expanded Employment Insurance nor the new Emergency Response Benefit will be enough to cover rent or mortgage payments. But homeowners in Vancouver and tenants in Toronto typically have much higher monthly obligations than those in Moncton and Trois-Rivières. Issuing the same federal cheque to everyone would not be fair. Commercial tenants are just as diverse: their ability to pay rent today depends on how hard the virus has hit their business and that varies from case to case and region to region.

On the positive side, banks rebuilt their capital over the past decade and most commercial landlords, because of strong recent growth, have resources to deal with temporary difficulties. But the scope of the current crisis is unprecedented: large numbers of homeowners could soon stop paying their mortgages, while many real estate owners could default on their commercial mortgages as both tenants stop paying rents. This would force banks to take large write-offs, quickly depleting their capital and potentially throwing the country into a financial crisis.

Such an outcome can be avoided by providing rapid and targeted mortgage and rent relief where it is most urgently needed. Because governments are already over-extended, banks and real estate owners should manage the programs I’m proposing, with government limited to providing funds, liquidity and loan guarantees. Minimizing the government’s role and putting the onus of implementation on banks and landlords would encourage efficiency and speed. (Continued: Financial Post) If we want the economy to recover, we need to bail out tenants and property owners, too

The federal government recently introduced a plan to encourage businesses to retain workers by subsidizing 75 per cent of their wages. By providing laid-off and self-isolating workers with an alternative to employment benefits it should help limit social, economic and financial disruption from the pandemic. Rather than let the economy tailspin, the hope is to engineer a successful recovery once the virus is contained. If business activity and consumer confidence vanish, getting the economy back off the ground will be hard.

We need to expand this plan to the real estate sector. For many newly laid-off people, neither expanded Employment Insurance nor the new Emergency Response Benefit will be enough to cover rent or mortgage payments. But homeowners in Vancouver and tenants in Toronto typically have much higher monthly obligations than those in Moncton and Trois-Rivières. Issuing the same federal cheque to everyone would not be fair. Commercial tenants are just as diverse: their ability to pay rent today depends on how hard the virus has hit their business and that varies from case to case and region to region.

On the positive side, banks rebuilt their capital over the past decade and most commercial landlords, because of strong recent growth, have resources to deal with temporary difficulties. But the scope of the current crisis is unprecedented: large numbers of homeowners could soon stop paying their mortgages, while many real estate owners could default on their commercial mortgages as both tenants stop paying rents. This would force banks to take large write-offs, quickly depleting their capital and potentially throwing the country into a financial crisis.

Such an outcome can be avoided by providing rapid and targeted mortgage and rent relief where it is most urgently needed. Because governments are already over-extended, banks and real estate owners should manage the programs I’m proposing, with government limited to providing funds, liquidity and loan guarantees. Minimizing the government’s role and putting the onus of implementation on banks and landlords would encourage efficiency and speed. (Continued: Financial Post) 

 

Wednesday March 11, 2020

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday March 11, 2020

Economic Prescription for Coronavirus: ‘You’ve Got to Go Fast’

The government can’t prevent the coronavirus from damaging the U.S. Economy.

February 28, 2020

The usual tools that economic policymakers rely on, like tax cuts and stimulus spending, won’t restore canceled conferences, unclog supply chains or persuade wary consumers to go out to bars and restaurants. Even if such policies would help, they conflict with the advice of health officials who are urging “social distancing” to slow the spread of the virus.

But that doesn’t mean policymakers are powerless. Economists say well-designed programs could limit the damage and help ensure a quick rebound.

President Trump said Monday that he would meet with congressional leaders to discuss a “very substantial” payroll tax cut and other measures. Many economists are skeptical of that approach, arguing that a payroll tax cut would be too small and too poorly targeted to be of much help.

June 28, 2018

Instead, they recommended a variety of other steps, some narrowly aimed at addressing the outbreak and some intended to bolster the broader economy. One lesson from the last recession is that the government has to move quickly.

“You’ve got to go big, and you’ve got to go fast,” said Claudia Sahm, a former Federal Reserve staff member who is now director of macroeconomic policy at the Washington Center for Equitable Growth, a left-leaning research organization. “If you don’t go fast, you’re not going to short-circuit it.”

Here are some forms that such intervention could take: 1) Fight the disease. 2) Cushion the blow. 3) Stimulate the broader economy. 4) What about payroll taxes? (Continued: NYTimes) 

 

Thursday September 19, 2019

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday September 19, 2019

Political smorgasbord doesn’t come free

Transactional politics are nothing new. That’s where a politician and/or a party offers goodies on the front end of the transaction, and the voter supports the politician/party on the back end.

September 12, 2019

It’s not unlike shopping and being drawn to sales or special deals that look especially appealing. That outfit looks good, but wait, the one next to it looks as good but it’s cheaper, or perhaps nicer in some small way. So the natural tendency is to take the one that seems better, even if the difference is marginal.

But what if the front of the special buy is fine, but you see flaws or differences once it’s unwrapped? What if you find out it needs special treatment when being cleaned, or it requires some sort of investment you weren’t expecting?

The analogy with the kind of transactional politics we’re experiencing during this election campaign isn’t perfect, but it serves the purpose. The political store has been bustling with promises, especially over the last several days, as the competing parties roll out their platforms — bit by bit — and try to be the outfit with that special something.

October 10, 2015

There’s nothing wrong with all this, to a point. It serves the purpose of offering measurable alternatives. If you don’t like the Conservative plan to expand RESPs, you can choose the Liberals because you like their plan about helping first-time home buyers. Or vice-versa. But it can be problematic when this sort of offer-of-the-day political play dominates the campaign to the exclusion of all else, and that is what’s happening right now.

It’s a veritable smorgasbord. Pick the party that has enough you like, and just vote for them? Of course, it’s not that easy. We know that not all promises are kept. Remember Justin Trudeau on electoral reform. We know that not all promises are fully explained. Andrew Scheer’s tax cuts are phased in so the maximum benefit comes only after three years. And the cost of that promise alone is $6 billion, which has to be paid for by someone — who might that be?

A big problem with many of the promises made to date is that the parties haven’t explained fully — in some cases not at all — how they will pay for their promises. That’s a critical part of understanding how parties will govern if elected. And it’s not always just about balanced budgets or deficits. It’s also about what things — like government services and support — get sacrificed in order for promises to be kept.

All smorgasbords end the same way. There’s a bill to pay. We can all stand to be reminded of that. (Hamilton Spectator) 

 

Thursday July 25, 2019

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday July 25, 2019

History the best teacher on dealing with China

While everyone’s attention has recently been focused on events of 50 years ago —i.e., the Apollo 11 mission —the world has continued to turn. Canada’s problems with China have not gone away.

October 2, 1999

So it might be wise to focus less on the moon than on more recent historic events. In May 1999, during the heat of the war in the former Yugoslavia, NATO accidentally bombed the Chinese Embassy there. Tensions between China and the U.S. escalated, negotiations to get China into the World Trade Organization failed, and it took some time for diplomacy to right itself. China joined the WTO in 2001.

The finance minister of Singapore at the time, Heng Swee Keat, took Bill Clinton’s secretary of state, Madeleine Albright, aside and offered a few words of wisdom. It was not in the best interest of the United States to adopt an adversarial stance with China. Heng had more significant pearls to offer Beijing: Tap western markets, western technology and western capital and develop your own economy.

March 24, 2008

Twenty years is not a long time, particularly not when dealing with China, which has always played a long game. But Beijing took Heng’s advice and we are watching that long game unfold. Over several decades now, China has made inroads in the West —in technology specifically — and dumped a lot of capital in the developing African countries.

China’s “Belt and Road Initiative,” launched in 2013, is yet another example of the country’s strategic goals: A trade infrastructure costing anywhere between $1 trillion and $8 trillion and involving 70 countries that will tie China to Europe and other Asian nations through a “belt” tying together China, Eurasia and Russia, and a maritime “road,” across several oceans and seas to the Suez Canal and up into Europe.

June 17, 2017

The plan is to end Chinese dependence on the United States. After decades of accumulating capital and technological knowledge, China is in a position to fundamentally alter the way global trade works.

Canada will, inevitably, be affected, especially if, as predicted, China expects the road part of its initiative to include an Arctic pass. This new Silk Road will not be the stuff of Marco Polo, which benefited the West immensely, but will be a huge boon to China and the allies it creates through the initiative.

All the more reason, then, that Canada must resolve its strained relationship with China sooner than later.

December 12, 2018

The present conflict stems from the arrest of Meng Wanzhou, a senior executive of Huawei, China’s big tech firm. She is wanted in the United States on fraud charges and, under a U.S.-Canadian extradition treaty, she is under house arrest here. China subsequently imprisoned two Canadian citizens and threatens to execute a third already in prison. How we got to this point matters less than how we get out of it.

International pressure, and a wider agreement involving the United States, could free the Canadians, get Meng out of Canada, and resolve this issue. That pressure can also see Canada, as a participant in dialogue with the 10 members of the ASEAN, using diplomacy within the organization to work with China on an amicable solution.

December 5, 2017

Canada must follow the advice of Singapore in 1999 and not adopt an adversarial stance with China, but at the same time it cannot be so naive as to think that an economic solution — like the U.S. imposition of tariffs — will work either.

China saw that move coming a long time ago and has been defending itself against it. Prosperity did not lead to a more politically liberal China. Ask the pro-democracy protesters right now in Hong Kong.

“A journey of a thousand miles begins with a single step,” Lao-Tze wrote 2,500 years ago. Canada must be careful not to trip. (Hamilton Spectator Editorial) 

 

Thursday June 28, 2018

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday June 28, 2018

Trump’s tariffs will be more painful for Canada than the U.S., economist says

The Trump administration’s tariff threats have the potential to drive companies currently operating in Canada out of the country, the president of a Canadian automotive association said Tuesday.

June 14, 2018

The United States has already imposed tariffs on the steel and aluminum industries and has threatened to impose a 25 per cent levy on Canadian-made autos.

The tariffs could make Canadian-made products uncompetitive and add $6,000, $10,000 or more to the cost of a vehicle, said David Adams, president of Global Automakers of Canada, at an event sponsored by the Economics Club of Canada.

He said a nonautomotive company he knows has decided it can’t expand in the United States from Ottawa, because of the uncertainty, so it’s opening a U.S. office and the same could happen to automotive companies.

“The uncertainty effectively does the job of … driving more investment into the United States as the safe harbour,” Adams said.

June 13, 2018

The Trump administration hasn’t necessarily realized that the its tariffs will also hurt the United States, said MaryScott (Scotty) Greenwood, chief executive of the Canadian American Business Council — pointing to a recent announcement by Harley-Davidson.

A tariff war between the U.S. and many of its trade partners has already prompted the iconic American motorcycle company to move production of motorcycles bound for Europe overseas, blaming European Union tariffs it said would add an estimated $2,200 cost to the average bike. That prompted President Donald Trump — whose own tariffs prompted the EU moves — to accuse Harley of using tariffs as an excuse for moves already planned.

March 9, 2018

“It’s a very dangerous game we’re playing here, economically,” Greenwood said.

Prime Minister Justin Trudeau has announced Canada will impose $16.6 billion in retaliatory tariffs on U.S. products coming into Canada, which go into effect on Sunday.

But CIBC chief economist Avery Shenfeld said Tuesday the United States is far better equipped than Canada to withstand the use of tariffs as a “sledge hammer” in trade negotiations.

Some Americans will face higher costs on imported goods from Canada but U.S. producers will be at a smaller risk because their home market is so much bigger than ours, Shenfeld said during a panel discussion about NAFTA in Toronto. (Source: Toronto Star) 

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