The pandemic is accelerating both income- and race-based wealth and income inequality in the U.S. in several ways: the pandemic economic stimulus programs, the distribution of unemployment, and overproportionate deaths in Black and Latinx communities
by Richard Krushnic
While the pandemic stimulus through mid-June 2020 reduced the poverty rate, it still has increased wealth and income inequality. The pandemic stimulus is an improvement on the 2007-2009 stimulus because the former stimulus did nothing to assist low- and moderate-income households. Both the Paycheck Protection Program (PPP) and the modified unemployment benefits have benefited such households, whereas in the previous great recession no programs benefited them.
As of June 18, 2020, $513 billion had been loaned to businesses through the PPP. The amount that has been paid out in unemployment benefits under the pandemic regulations, including the extra $600 per week, has not been tabulated, but is deemed to have reduced the poverty rate. Guessing that 30 million of the 40 million that have applied for unemployment benefits have received an average of $1,200 a week for an average of 5 weeks, $180 billion would have been expended so far in unemployment benefits. Assuming that the initially required 75% of PPP benefits ($385 billion) expended to date, the two stimuli would have totaled $565 billion in benefits to middle- and working-class workers. However, it must be noted that those same workers will have to repay through their state taxes, all of the unemployment benefits they have received, in order to replenish unemployment reserves for the next pandemic or non-health-related recession, and taxpayers will also have to repay, with interest, the PPP funds expended, since the funds were borrowed by the Treasury.
Meanwhile, the Federal Reserve Bank’s privately owned assets (the Fed is owned by private commercial banks) have ballooned during the pandemic by around $2 trillion so far, and are projected to increase by another $2 to $5 trillion. At least $454 billion of Treasury (taxpayer) money has been obligated to absorb the first losses on Fed loans made with this money. The taxpayers have never before guaranteed to absorb losses on the private loans made by the Fed. It is likely that this money will be lost by the taxpayers, since Fed loan underwriting requirements have been gutted. The Fed has eliminated bank reserve requirements, relaxed bank capital requirements, extended lending to corporations with junk-status debt, and included collateralized loan obligation issuers in eligible borrowers; pretty much guaranteeing that the taxpayers will lose their $445 billion of loan guarantees.
Of all the Fed pandemic loan programs so far, $150 billion was pledged to states; but since the money can only be used for coronavirus expenses, and has to be paid back with interest; it doesn’t help deal with operating deficits due to lost revenues. The interest they pay will be much higher that the .25% corporations will pay as they borrow trillions from the Fed’s discount window.
We have all heard how badly managed the first $350 billion of pandemic business lending went: commercial banks did the lending, made all the decisions, and loaned most of the money to their larger business customers. Just in case you are reassured by some added regulations in the second tranche of business lending, contemplate this: Blackrock, the world’s largest financial asset manager, has been granted a no-bid contract by the Federal Reserve Bank, to administer up to $4 trillion in Fed loans and bond purchases, backed by the taxpayers $454 billion, which will be the first money lost, when any of the Feds loans aren’t fully repaid. Recall that Blackrock was preeminent in the collateralized mortgage securities that looted the U.S. public to the tune of $2 trillion, caused the global recession, was a preeminent firm in the reward bestowed by the Obama administration on the thieves to the tune of roughly another $2 trillion, and then purchased more of the foreclosed homes than any other of the 10 purchasers sold by the Department of Housing and Urban Development at rock-bottom prices. Blackrock purchased 80,000 of the 10 million foreclosed homes, and still rents them out. Who could be better qualified to administer $4 trillion of private pandemic relief backed by $454 billion of taxpayer money?
Note that Blackrock administers $7 trillion of investments, much of which is the pensions of U.S. workers. It, not the workers, votes the stock; and through its voting stock holdings, it has controlling interests in many of the largest U.S. corporations. In the press it is often referred to as the most powerful company in the world, a shadow bank larger than the biggest banks.
One can argue that around $565 billion of public Treasury and private Fed pandemic relief has benefited middle- and working-class workers so far, and more such aid will probably come; but in comparison to the $4 trillion obligated so far, and probably more to come that will be steered by Blackrock the wolf, it seems guaranteed that pandemic relief will accelerate wealth and income inequality.
Billionaire bonanza, IPS, 4-23-20—Corporate Transparency Act, 10% millionaire income surcharge, more progressive estate tax, wealth tax, shut down global hidden wealth system.
The businesses owned by minorities are overwhelmingly the smallest businesses, the mom and pop stores in our smallest commercial districts, and the smallest firms in services and manufacturing. These are the businesses not being addressed by the pandemic stimulus programs, the businesses that don’t need and can’t repay loans of $250,000 and above. These tiny minority businesses will therefore be the ones that fail in greatest proportion. Since business ownership is one of the key mechanisms for increasing wealth and income equality, the stimulus programs will accelerate the racial wealth and income inequality in the country.
Let us remind ourselves that the Black-White wage gap has not changed since the 1950s, despite other victories of the civil rights movement. ‘The Black-White Wage Gap Is as Big as It Was in 1950,” [New York Times, By David Leonhardt, 6-25-20] reminds us that before the pandemic, over 30 percent of black men between the ages of 25 and 54 were not working. Incarceration rates are twice as high as those of Hispanic men, and six times higher than those of white men, as we were so well reminded recently by The New Jim Crow, which informed us that the prison-industrial complex was created to continue the structural racism that had been temporarily threatened by the Civil Rights Movement in the latter 1950s and the early 1960s. Leonhardt informs us that in 2014, approximately 1.5% of all white men between the ages of 25 and 54 were institutionalized (nearly all institutionalization mean prison), versus 8% of black men. 9.5% of non-institutionalized white men were out of the labor force (not looking for work), versus 16% of black men. And 6% of white men were unemployed, versus 10% of black men. So in total, 17% of white men between 25 and 54 weren’t working, versus 34% of black men.
We are informed by “Unemployment rose higher in three months of COVID-19 than it did in two years of the Great Recession,” [Pew Research Center, by Rakesh Kochhar, 6-11-2020] that the unemployment rate in May was nearly 16% by the U.S. government’s estimate. When we add the 9 million unemployed who have given up looking for a job, a category that has substantially risen from the 5 million in February, we find the COVID-19 recession is comparable to the Great Depression of the 1930s, when the unemployment rate is estimated to have reached 25%.
Rakesh gives us some details: “The unemployment rate for women in May (14.3%) was higher than the unemployment rate for men (11.9%). The unemployment rate for black men in May (15.8%) was substantially less than the peak rate they faced in the Great Recession (21.2%). Among other men, Hispanic workers faced an unemployment rate of 15.5% in May, higher than the rates for Asian (13.3%) and white (9.7%) men.” This tells us that the additional unemployment during the pandemic so far, has increased income and wealth inequality among workers a little, but NOT a great deal, compared to before the pandemic, except, perhaps for women, who are suffering greater unemployment due to their overrepresentation in tourism and restaurants.
Wealth and income inequality has been significantly increased, however, between the wealthiest 1% and the rest, as has been noted in numerous reports, with the greatest increases in inequality arising between the wealthiest .25% and the rest.
But none of the above adequately addresses the income and racial impact of pandemic unemployment for the roughly 10 million undocumented immigrants in the U.S. and the roughly 6 million of them who were working prior to the pandemic. They are not fully included in labor force statistics, are among the first to be fired in downturns, and are heavily Hispanic. So it is safe to say that the pandemic has increased the income and racial inequality between Whites and Hispanics in this regard, more than official statistics show.
Disproportionate deaths are both a result of inequality, and will increase income- and race-based inequality in the pandemic’s aftermath
The Color of Coronavirus: Covid-19 Deaths by Race and Ethnicity in the U.S. [APM Research Lab, 6-24-2020] tells us that the COVID-19 mortality rate through June 23, 2020 for U.S. Blacks is 2.3 times as high as the rate for Whites and Asians, twice as high as for Latinos and Pacific Islanders, and 1.5 times as high as for Indigenous.
“Black Americans represent 12.4% of the population in the U.S., but they have suffered 23.8% of known COVID-19 deaths—i.e., they are dying at roughly twice their population share. 26,747 Blacks have lost their lives to COVID-19 through June 23….18,568 Latino Americans are known to have lost their lives to COVID-19.” 31.1/100,000 Latinos have died, compared with 28.5/100,000 Whites.
I think it is fair to say, therefore, that 15,117 of the 26,747 Black deaths and 1,690 Latinx deaths are probably due to racism. Policy needs to take into account the increased economic difficulties experienced by surviving families and the need for grief support as part of comprehensive health care–noting, of course, that racial disparaties in access to preventative and acute care, underfunding of health care facililities in low income communities, and the racial biases of some health care providers have themselves contributed to these death rates. Otherwise these deaths will further exacerbate the economic difficulties faced by Black and Latinx people, increasing overall wealth and income inequality in the future.