Covid-19 and the Day After
Covid-19 and the Day After
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Author : Rachel Poole
Date : March 25, 2021
Here is our take on the articles summarized below:
The growth outlook for the US economy this year is looking promising. Trillions of dollars of government stimulus have already been pumped into the economy and more is expected as the Biden administration works on its “Build Back Better” long-term spending program. While the stimulus will help boost the economy in the near-term, it won’t last forever. It is important to analyze and reflect on market fundamentals and long-term market trends that have emerged from the pandemic.
Biden Team Weighs Next Economic Plan of Up to $3 Trillion
Saleha Mohsin and Jennifer Epstein, Bloomberg
Following the $1.9 trillion coronavirus relief bill signed earlier this month, the Biden administration is now considering a long-term spending program to the tune of $3 trillion. The proposal, which is expected to cross the President’s desk later this week, will focus on infrastructure and “green spending,” with $400 billion earmarked for the latter. The funding for this package is expected to come from tax increases, especially for corporations and the wealthy. Given the likely challenges from the legislature, the program is expected to be split into multiple parts. While Republicans have made clear that they oppose tax hikes and are unlikely to support major public-sector spending on renewable projects, there is a groundswell of support for an infrastructure bill, especially one that produces jobs and increases the US’ competitiveness with China. President Biden is expected to present his so-called “Build Back Better” plan to Congress in April.
Covid-19 Rewrote the Rules of Shopping. What Is Next?
Suzanne Kapner, The Wall Street Journal
As the conversation continues to shift from mid-pandemic to post-pandemic lifestyle, one major question is the fate of brick-and-mortar retail (especially malls) in the face of online shopping. While Covid-19 laid the axe to several retailers, those which survived have begun to adapt to the new era of shopping. Already some established shopping traditions, such as single-day discount events à la Black Friday, are being eschewed in favor of targeted marketing and data-driven sales, which produce more margin. Individual stores become distribution centers; the logistics of online ordering make curbside pickup as much as 90% more cost-effective than delivery, and shipping orders from local stores costs about 40% less than from a warehouse. In order to remain justified, outlets and malls alike will need to focus on their niche – the social experiences of shopping. Some retailers are already blurring the lines between online and in-person experiences, with virtual fitting rooms, live streams, and augmented reality technology. Still, with the world still in the grips of the coronavirus, many shoppers have been hesitant to return to stores in-person. If physical retail is to survive, it must navigate the ever-shifting terrain of the shopping landscape, leveraging its inherent social offering in synergy with a robust online approach.
Electric Cars Are Coming. How Long Until They Rule the Road?
The New York Times
Automakers and governments around the world have set their sights on electric vehicles as a key solution to climate change. However, it could take decades for electric vehicles to dominate the roads and have a dramatic impact on greenhouse gas emissions. The primary reason for this is that “fleet turnover” will be very slow. Today, fewer than 1% of vehicles on the road in the US are electric. While automakers expect a quarter of sales to be electric by 2035, the percent of electric vehicles on the road will only increase to 13% thanks to the reliability and durability of gasoline-powered vehicles which stick around for an average of 12 years. If the US truly wants to move to a fully electric fleet by 2050 to meet President Biden’s goal of net-zero emissions, then sales of gasoline-powered vehicles would have to end altogether by 2035. This is a very daunting and perhaps impossible task, so policymakers need to consider additional strategies.
Ideas that have been proposed include creating policies to buy back and scrap older cars, expanding public transit and encouraging biking, walking and ride-sharing to reduce American’s dependence on car travel. Others have suggested a tax on carbon dioxide emissions, though lawmakers are worried about the political pushback of such taxes and the effects on low-income drivers. Another option could be to reshape housing and transportation systems in cities so that citizens are less reliant on cars to get around. Regardless of the policies that are put in place, it is also necessary that emissions are not increasing from the cars that are still on the road. If Americans continue driving more total miles each year, the country will need 350 million electric vehicles by 2050, but if vehicle travel remains flat for the next 30 years, the US needs only 205 million electric vehicles on the roads to cut emissions. In order to facilitate the transition to electric vehicles, policymakers need to make it less convenient to own a gasoline-powered vehicle.
A sugar rush’: why the Fed fears a booming US economy won’t last
James Politi, Financial Times
Last week, the Federal Reserve offered an optimistic assessment of the US economy’s ability to recover from the pandemic. It has upwardly revised growth forecasts to 6.5% and has predicted that unemployment will fall to 4.5% by the end of 2021. While there may be a sharp economic acceleration this year, growth will slow down significantly in the long-term. The 6.5% growth forecast must be assessed in the context of 2020’s 3.5% contraction. Much of this year’s growth will be driven by government stimulus and increasing vaccinations. As senior economist, Laura Rosner-Warburton, at MacroPolicy Perspectives puts it, “The fiscal stimulus is a one-time sugar rush. It’s big — but it’s still a one-time package; one set of cheques is going out. And after that, we’ll go back to fundamentals.” A potential relapse in the virus is a concern that central bankers have held onto. Furthermore, as fiscal support and stimulus begin to fade, the labor market may continue to struggle. Though the recovery is looking promising, there is still much uncertainty.
