The Americans are getting rich, helped by the policies of the Federal Reserve in case of a pandemic

Photographer: Edwin Remsberg / VW Pics / Universal Images / Getty Images

Americans have become, through some measures, richer during the pandemic than ever.

It is a difficult thing to understand, what is happening with the economic collapse and growth among the unemployed, homeless and hungry. But there is a whole class of people – at least the top 20% of those who win – who did not have to worry about such issues.

For them, not only was it relatively easy to do their white-collar jobs at home. Except The Federal Reserve’s unprecedented emergency measures – including reducing reference rates to zero – have also lined its wallets. They refinanced their mortgages at record rates, bought second homes to get rid of cities and sought to increase the value of shares and bonds in their investment accounts.

Their massive accumulation of wealth is largely hidden tax sense by all those who do not enjoy the same easy access to credit or financial markets. As the net worth of the household reached a new record, hundreds of thousands It is estimated that businesses have closed permanently, more than 10 million Americans are out of work and almost three times as many hungry at night.

Even when a new democratic administration intends to seek Billions of dollars in additional spending to supplement the Covid-19 aid package last month, economists warn of the dire social and political consequences of the dramatic widening gap between people who do not have in America. With income inequality close to the highest in at least half a century, the country’s response to the financial devastation caused by the coronavirus raises questions about who emergency measures were designed and who was left behind, they say.

“There probably wasn’t a better time to be rich in America than today,” said Peter Atwater, an assistant professor at William & Mary, who popularized the notion of “K-shaped” recovery to describe the strong separation of economic wealth. “Much of what political decision-makers have done has been to allow the rich to come back faster because of the pandemic.”

In the last 10 months, people with higher incomes have had, relatively speaking, quite well.

Employment for The top quartile of workers – those earning more than $ 60,000 a year – have already returned to levels a year ago, according to data from Opportunity Insights, a non-partisan research institute based at Harvard University.

And as the blockades engulfed the nation, millions of people, especially those at the top of the American socioeconomic ladder, managed to redirect money they would otherwise have spent on things like entertainment, meals, and travel to savings. or, better, investments.

For many, it has borne fruit. Due to the Fed’s efforts to support the economy, US stocks peaked after the outbreak, while last year’s bonds accumulated the most in more than a decade.

Wealth Gap

The first 20% of the winners own almost all the shares held by American households

Source: Federal Reserve

“If your wealth is captured by financial assets, you will be back in business as soon as possible,” he said. Amanda Fischer, policy director at the Washington Center for Equitable Growth. “People with the lowest incomes, who don’t even have to pay taxes, have the biggest barrier to climbing.”

As their investment accounts grew, wealthy Americans received another gift.

Mortgage rates, largely driven by the same forces that sent stocks rising to dizzying heights, fell to their lowest level official.

Homeowners, especially those with clean credit scores, have taken advantage. Refinancing has accelerated to the fastest in nearly two decades, according to Fannie Mae, allowing millions of lenders to reduce their monthly payments.

Leaving behind

For those at the other end of the spectrum, things are very different.

Employment for the bottom of U.S. winners – those earning less than $ 27,000 a year – remains more than 20 percent below January 2020 levels. Last month, nearly 30 million adults lived in households where it was not enough to eat. , according to the US Census Bureau’s Household Pulse Survey, up 28% from before the pandemic. In Louisiana, the hardest-hit state, one in five people now faces food shortages, according to the poll, with blacks being even worse.

Uneven recovery

Employment for small employees is still 21% below the pre-pandemic level

Source: Opportunity Insights Economic Tracker (https://tracktherecovery.org)

Millions are busy figuring out how to keep their homes, rather than borrowing against them. More than a third of US adults living in households that have been left behind on rent or mortgage payments are likely to face eviction or foreclosure in the next two months, according to a December Census Bureau survey.

As the launch of the first Covid-19 vaccines creates more optimism in financial markets, many debt-struggling lenders find it harder than ever to see a path to recovery, even after additional aid measures approved by Congress in December.

“It simply came to our notice then sense that it is approaching or is at the bottom of the rock “, he said Bradford Botes, director of Bond & Botes Bankruptcy Law Firm in Birmingham, Alabama. “We hear much more despair.”

Botes said that for many of the people his firm has advised in Alabama, Tennessee and Mississippi, government unemployment benefits and incentive checks simply have not reduced them.

“That money was used by people just to get through,” he said. “The extra stimulus was not enough to make any difference to ordinary Americans.”

“Rustic installations”

To be clear, the fiscal packages adopted by Washington were among the largest the country has ever seen and, for the most part, targeted the nation’s most needy. In coordination with monetary incentive, have undoubtedly helped dozens of Americans stay employed and put food on the table.

However, the growing economic inequality that has accompanied these efforts illustrates the limitations of the response, according to critics.

By easing credit conditions through the Fed, lawmakers were able to quickly support large corporations and richer people. But distributing aid to smaller firms and low-income workers has proved much more difficult.

Delays in providing assistance, as well as confusion about eligibility rules and criteria, have hampered many of these programs.

Read more: Fed is waking up up to race – in the new struggle for equality

Of course, it is no coincidence that the monetary policy mechanism worked smoothly, while the fiscal equivalent took off. A more regular use is seen.

For about four decades, U.S. governments have largely delegated business cycle management to an independent Fed – in line with the economic orthodoxy of the time, but now falling under increased control. Fiscal policy, better suited to regulating the distribution of pie, has fallen out of fashion, with the exception of the crisis instrument. And over the same period, inequality steadily spread.

According to Fischer, the pandemic has shown how the infrastructure that the US government could use to reach Americans on a daily basis is broken and in dire need of reform.

“Congress has done a pretty good job of bringing money to the people, but we have failed to repair decades of rusty plumbing,” she said. “The fact that the Fed has the infrastructure to make a bond purchase program, but not to do anything else, is a choice, not an inevitability.”

More help

For their part, Fed officials have regularly acknowledged that the monetary stimulus is far from a panacea and that the central bank has only limited tools to target specific economic outcomes.

“The Fed cannot give money to certain beneficiaries,” Fed Chairman Jerome Powell told reporters at a Dec. 16 news conference. “Elected officials have the power to tax and spend and to make decisions about where we, as a society, should focus our collective resources.”

A central bank spokesman declined to comment further.

When it comes to fiscal policy, many economists argue that failure to act on another major round of stimulus could delay economic recovery just as vaccines are released to the general public.

Millions of people will see their unemployment benefits expire in mid-March if the measures approved by Congress in December are not extended. In the meantime, states and local authorities could be forced to further reduce already strained budgets to offset losses in tax revenues.