This article is the first of an ongoing series exploring the flaws in our society the current pandemic is exposing, in the hopes that we demand more than just a return to “normal” when this crisis passes. And this too shall pass.
For being the richest nation in the world, the working class of the United States sure is poor.
Like, really poor.
A recent study showed that 40% of Americans don’t have the cash on hand to cover a $400 expense. Another study showed that just 48% could cover a $1000 expense, without borrowing or selling their possessions.
This article does a great job explaining how our current populous is little more than neo-serfs, laborers that enrich others, few finding a way to get ahead themselves.
How did we get here?
Wages for the working class of America haven’t moved much in half a century. You read that right. For fifty years, despite many items’ costs spiralling way up — namely college, housing — our wages have remained as they were.
Meanwhile, corporate profits and productivity have almost never been higher. President Donald Trump liked to, until very recently, claim he was presiding over the greatest economy of all time. Nuances to whether or not that’s the case aside, there’s little question that America is richer as it’s ever been.
Here’s the chart for corporate profits on a slightly longer time frame:
So where is that money going, if not to the labor force that’s outputting the products and services?
Nearly all of it is streaming into the hands of the very few. Most of it isn’t even a 1% problem — their share has risen relatively modestly. In fact it’s just one hundredth of one percent, or about 3M Americans, that have seen the lion’s share of the gains.
Which is bad enough in good times, if you care to pay attention, but in bad times…
No Room For Recession
Recessions are cyclical. They are not only inevitable, but they are, in many ways, healthy. In business terms, market corrections and pull backs provide opportunity for further growth opportunities. They also limit volatility, making more devastating bubbles and crashes less likely.
Think of it like a controlled burn versus a full blown forest fire: better to lose a little than to lose a lot.
All that usually means very little to most Americans, the ones who lose their jobs, their homes, and struggle, waiting for the economic cycle to turn back around.
The rich, of course, do just fine. The losses they take usually don’t force them out of their homes, or leave them with no source of income.
But what happens when we enter a recession when half of all Americans are more or less poorer than they’ve ever been?
The COVID Effect
The COVID-19 pandemic is going to explore this grim reality. In just a few short weeks, millions of Americans have lost their jobs, and according to most analysis, it’s going to get much worse before it gets better. Millions more will find themselves jobless in the coming weeks and months as we fight to contain this virus.
And it could get dire. The unemployment rate during the Great Depression — the hardest financial time our country has ever seen — was about 25%.
This week, James Bullard, President of the Federal Reserve Bank of St. Louis, warned that the unemployment rate could reach 30%.
To be clear, this is not some doomsday economist on the fringes of academia. This is the president of one of our nation’s top financial institutions.
Regardless of where that number eventually falls, one thing appears clear: America is about to have more unemployed people than its had in nearly a century.
And, as indicated above, the majority of those don’t have the savings for much of anything, certainly not enough for three months of rent and food.
Which means the government will have to take action.
Too Little Too Late
Just this hour, the Senate has passed a $2.3T stimulus package. It heads next to the House, where it is expected to pass, and there’s no indications that Trump will do anything other than sign the bill into law.
Even if all of that happens tomorrow, analysts estimate it will take the IRS from four to six weeks to process and send out the $1200 stimulus payment (more for families).
Which sounds great, until you realize, without savings, you’ve now missed April and May’s rent. Even if your rent happens to be less than $600, it’s very likely that the fines and fees your landlord will charge will not catch you up.
While many states have put a moratorium on evictions, that may not make much of a difference. If one is unable to catch up — something that’s impossible if one is still out of work — it’s only a matter of time before the eviction ban is lifted and that person faces homelessness.
While the current stimulus package is badly needed, it’s already too late to avoid catastrophe for some, and will arrive too late for millions more.
The Unemployment Rush
Typically these moments are mitigated by state programs for unemployment insurance. While often not generous, they’re usually enough for a displaced person to get by until they can find employment once more.
The federal stimulus package just signed also includes $600 a week for the newly unemployed — which is in addition to the state benefits.
Which all sounds great — until you have millions of people applying all in the same week.
Reports are coming out from every corner of the country of the exhaustive process in trying to qualify for unemployment, from broken websites, hours long call times (sometimes just to be disconnected), and more. Which all sounds terrible to begin with, so just imagine if you need to get approved to make rent this month.
The Cost of Poverty
All of this is going to snowball, and it’s going to cause debt, payday loans, fees and fines on the country’s most vulnerable, because they lack the cash today to delay it. Which means, to keep these people from total financial ruin, the government will have to pick up the tab for all of those additional expenses.
Put sharply, coming up short now will cost far more later, if we want to avoid depression like conditions.
Which means, much like the COVID-19 response, we’re left wondering if the government will ever take strong enough action to actually get ahead of the societal collapse.