Pandemic Stimulus Will Accelerate Wealth and Income Inequality

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.

A Massachusetts Infrastructure Bank funds disaster relief and preparedness

This piece was originally presented by steering committee member Steve Snyder as testimony in support of the Massachusetts Infrastructure Bank bill when it was first filed in 2017. The coronavirus makes the ability of public banks to ease crisis-caused economic disruptions especially relevant now.

As a chartered bank owned by the State and People of Massachusetts, the Massachusetts Infrastructure Bank is mandated to serve the needs of its citizens through its loan program. Disaster relief and public health emergencies are now occurring with increased frequency and they must be responded to quickly in order to save lives, preserve communities and businesses, and maintain our vital infrastructure. Institutions, strategies, IT infrastructure, and personnel plans are in place, but the bottleneck is in funding that is responsive, adequate, and sustained.

A state-owned bank can also respond rapidly and flexibly because its profits do not have to be maximized in the short-term to serve absentee shareholders. As a public institution, it can effectively coordinate with the local public safety, media, hospital, business, finance and insurance sectors as well as other state and federal agencies


The 1997 Red River Flood inundated both Grand Forks ND and East Grand Forks MN. The public Bank of North Dakota’s rapid response was key to Grand Forks’s recovery

The consequences of a rapid response are clear in the following example. During the Grand Forks flood in the spring of 1997, the state-owned bank of North Dakota quickly established nearly $70 million in credit lines for the state Division of Emergency Management, the state National Guard, the City of Grand Forks and its state university, and the rebuilding of a key dike. The Bank of North Dakota also worked with local financial institutions and foundations to raise and coordinate relief funds both for Grand Forks and other areas affected by spring floods. Further, BND negotiated forbearance on student loans and housing loans backed by the federal government. It also reduced interest costs for farmers.

The flood inundated 75% of homes, impacted five thousand businesses, and necessitated the evacuation of 50,000 people. Throughout the months of recovery the Bank of North Dakota tirelessly supported its citizens. As a result, Grand Forks lost just 3% of its population between 1997 and 2000. By contrast East Grand Forks across the river in Minnesota lost 17% of its population during the same period.

Having ready credit for saving lives and rebuilding meant that the community of Grand Forks and its tax base were largely preserved.

Massachusetts needs a state-owned infrastructure bank that can provide credit to rebuild our communities in the event of a disaster and support shared economic prosperity. For this reason, in addition to the improved safety and profitability of our State’s deposits, we urge you to support creation of a public Massachusetts Infrastructure Bank.

“Infrastructure is boring!”

The Covid-19 pandemic has focused the attention of public bank advocates on immediate economic needs: small business loans, municipal finance in the face of a tax base collapse, and how to support the unemployed and vital non-profits, such as hospitals and food banks.

Our 2019-2020 bill, on the other hand, focused on infrastructure, and right now it might feel as if the things that the word “infrastructure” bring to mind, like roads, highways or bridges, are not just dull but almost irrelevant.

But consider this: As in 2008 and after, funding “shovel-ready” projects can be a way of putting people back to work in the face of long-term unemployment arising from business failures. And those projects can also help us prepare for the challenges of climate disruption, a crisis we must face head on and proactively if we’re going to escape disaster.


An urban rain garden provides an attractive solution to downtown storm runoff

With green infrastructure, planners, engineers and municipalities have developed practices, and in some places taken political steps, to preserve and enhance natural systems’ ability to keep water clean, improve public health, control noise, prevent flooding, and cool the air.

Curridabat, Costa Rica, is a suburb of the country’s capital, San Jose, and far from wilderness. But the country’s commitment to biodiversity led local officials to think differently about how to manage heat, open space, and biodiversity. If Costa Rica could create biocorridors to connect its jaguar population, why not build greenways in urban areas for people?

As this article details “Curridabat’s urban planning has been reimagined around its non-human inhabitants. Green spaces are treated as infrastructure… Geolocation mapping is used to target reforestation projects at elderly residents and children to ensure they benefit from air pollution removal and the cooling effects that the trees provide. The widespread planting of native species underscores a network of green spaces and biocorridors across the municipality, which are designed to ensure pollinators thrive.” Curridabat’s former mayor even took the step of recognizing pollinators as citizens during his 12-year term.

In most cases we don’t think of infrastructure very much at all until it fails us, or until technology or economic systems force us to think about it in a new way, and encourage investment in new systems (electrification a few generations ago, broadband now), or disinvestment in others (the replacement of streetcar service with privately owned autos). While our immediate attention is focused on getting through the COVID-19 pandemic, we have to keep an eye on climate, rising sea levels, and potential impacts on food, water, and energy. Massachusetts is already reimagining “built” infrastructure to incorporate natural processes, for instance a proposed Widett Circle wetland. Our Massachusetts Infrastructure Bank bill imagines infrastructure in broad, locally-determined terms, leaving room for innovative projects that work with nature—and may make infrastructure a little more interesting to Massachusetts voters and taxpayers.

Whately Selectboard endorse H935/S579

On March 11, the Selectboard for the town of Whately unanimously voted to support H935/S579, An Act Establishing the Massachusetts Infrastructure Bank.

As the board pointed out…

As its name provides, H935 focuses its efforts on mitigating chronic deficiencies in our public infrastructure, including, of great importance to us in Western Massachusetts, farmland preservation, public land management, and even climate change mitigation. These issues are not new to anyone in the Commonwealth, unfortunately, neither is the ongoing difficulty in paying for them. What is new in H935 is the concept of paying for these projects by harnessing the power of our already existing banking system to fund an extraordinary public need.

Whately is a small, rural town where infrastructure projects tend to fall in a “middle need” range, too costly to be paid out of free cash, or through loans from community banks, but not costly enough for bonding. For example…

…here in Whately we have been saving our Chapter 90 funds for years to fund the gap between what we can secure from MassDOT ($500,000+/-) and the actual cost ($680,000+/-) of the Williamsburg Road Bridge Replacement Project. Were we able to have borrowed this $180,000+/- from a public infrastructure bank, at favorable interest rates with a simple application form and standardized underwriting criteria, we would have saved limited staff resources and used our Chapter 90 funds for other important projects.

You can read the letter here.

We are thankful for the Selectboard’s support and hope that they will continue to speak up in favor of a public bank bill when it is filed in the next session.

Poole and Girling: “Public banking would help speed the economic recovery from COVID-19”

Isaiah Poole, editorial manager of the Next System Project at the Democracy Collaborative, and Rick Girling of the California Public Banking Alliance, offer a clarion call for state and city public banks in today’s The Hill. They emphasize that state and city-owned banks can put public money to work to rebuild the economy not just in the face of pandemic-related budget crises facing some 90% of US cities, but to create a more economically just “new normal,” and should be instituted immediately. We agree!

“A public bank, capitalized with the deposits that cities now park in Wall Street banks, will be a ready source of funds to help people and businesses sustain themselves through these hard times and rebuild,” they write. Shifting state or municipal money from Wall Street banks provides the public bank with the capability to make loans, including loans to small- and medium-size businesses.

They note that a public bank could be mandated to fund affordable housing, community hospitals and health care facilities, disaster preparedness, and local Green New Deal projects to help prepare for and hopefully hold off some of the worst harms related to a changing climate.

They point out that times were hard for way too many in this country even before the economy ground to a halt. A return to “normal” must not include the gulf that exists between the “haves” and everyone else.

While our public infrastructure bank bill, as originally filed, had a narrower mandate than the banks Poole and Girling envision we agree that a “new normal” ought to foster economic justice and respect for the quality of life in every city and town, regardless of the income and assets held by the residents. For rebuilding Main Streets across the country, we need public banks now.

Chuck Turner

We note with sadness the passing of Chuck Turner, a long-time community advocate, organizer, and former Boston City Council member, who joined our advisory board in our early days when our focus was on establishing a public bank for the greater Boston area. He was a source of information, good strategy, and inspiration, and we honor his decades of work to make his city a place of fairness and respect where all its people can thrive. We join with people and organizations, especially in his home neighborhood of Roxbury, in expressing our respect and gratitude for his life and work.

Joanna Herlihy, 1934-2019

Our group has lost one of its founding members: Joanna Herlihy, of Cambridge, Massachusetts, who passed away at home on November 29. As a public banking advocate she was instrumental in moving us from our early focus on a public bank for Boston to our current statewide legislation. We will miss the precision and determination that she brought to our cause and our thoughts are with her family and her friends.

Joanna was someone who was just as willing to address envelopes as write legislation, and she lent her intelligence, her work ethic and her passion for justice not only to public banking but to many campaigns and causes over her life. She helped pass Cambridge’s rent-control law, joined the 1969 student-led occupation of Harvard’s University Hall to protest the ROTC program, and served as an OAS observer in Haiti’s first modern free election. She was an advocate for climate justice and an active committee member of the Massachusetts Green-Rainbow party. She was also a farmer in Ontario for several years, and served a tour in Jamaica in the Peace Corps. She will be greatly missed.

Joanna’s family requests that donations in her name be made to the Haiti Democracy Projector the Schumacher Center for New Economics.

“MA Should Join CA, ND, in Starting a Public Bank”

Couldn’t agree more with this column by Jason Pramas in DigBoston!

Jason quotes our “Clear Case for a Public Infrastructure Bank” document, which lays out some of the documented problems with Massachusetts’s roads, bridges, tunnels and water systems, and gives results of a survey we did of Massachusetts mayors which demonstrated a need and interest in alternatives to current funding sources, including state or federal grants and bonding.

He details California’s adoption of AB 857, which permits the creation of ten public banks over the next twelve years in California, following state review and approval of their business plans. The California bill doesn’t put any restriction on the financing these banks can provide, although they will not be providing retail banking services to individuals. Proponents of AB 857 made a strong case for the bank being able to finance projects that big banks might pass by because of concerns about limited return on investment, such as small business loans and affordable housing. As the LA Times pointed out,

“Proponents say public banks can pursue those projects and support local communities’ needs while being free of the pressure to obtain higher profits and shareholder returns faced by commercial banks. Support for public banks also has grown since the financial crisis a decade ago and since Wells Fargo & Co. was embroiled in a slew of customer-abuse scandals in recent years.”

Jason points out that the California bill gives a boost to public banking efforts nationwide, including our bill, H.935/S.579., noting that a Massachusetts bank could start with infrastructure financing and then evolve and expand its mission to provide the broader range of services that the Bank of North Dakota offers, and that California banks are looking to offer as well. This is something we’ve discussed as well, and the bill as filed does leave broadening the mission open.

One of the outstanding strengths of the California campaign was its outreach to potential organization and political support. In the end, AB 857’s endorsers included the city councils of many of the state’s largest municipalities, unions, citizens groups, and political organizations, representing more than 3 million California voters. Lots of citizen lobbying in Sacramento helped drive the bill to the governor’s desk, where Governor Gavin Newsom was already on record in support of the concept.

Advocates for public banking were also darn near indominable, working on city level campaigns for years preceding the bill’s filing and the subsequent media focus on the issue. They refused to give up, reframing a 56-44% city ballot question defeat in LA as a victory for a very low-budget campaign introducing a new idea to millions of voters on a tight time frame. That dedication paid off.

Jason points out that it was the same kind of grassroots movement that built the Bank of North Dakota a hundred years ago. As for Massachusetts? “With the help of you and few thousand friends, who knows?” We could use a few thousand advocates with our state legislature, and we don’t mind coming out to meet you all a dozen or so at a time. If you’d like to invite us to talk to a group—union meeting, party city or town committee, civic organization, etc,or just want to know more as an individual voter, please contact us!

Dueling CA columnists pan and praise public banking

This opinion piece, “Myths about Wall Street Banks,” is author and public banking activist Rick Girling’s reply to an article critical of the California public banking movement entitled “Myths about LA’s Public Banks,” by Jack Humphreville.

Both essays are worth reading, as they reiterate and in some cases respond to a lot of the common criticisms lobbed at public banks, including cost, risk, cronyism, and lack of public support.

Girling doesn’t answer every argument Humphreville raises, but easily could. For instance, the idea that Measure B’s defeat last November at the ballot box means that public banks do not enjoy public support is belied by the more than 100 organizations and more than one dozen city councils that have gone on to endorse the current state bill, AB 857. In fact, any campaign that, like Measure B, starts off with no money and very little time to explain a very new and somewhat confusing idea, and then wins 44% of the electorate over, should really look at that election as an outreach opportunity rather than a defeat, which is just what the California Public Banking Alliance has done.

AB 857 is going to return to committee, Assembly, and Senate deliberation later in August, and the expectation is that if it passes in the legislature it will be signed into law by Governor Gavin Newsom. From then it’s up to public banking advocates and city or county government to take the next steps toward devising economically viable plans for public banks. Those of us who are working on public banking across the country are hopeful for the bill, and optimistic that we’ll have some excellent models to work from before too long.

Public bank potential rests on building a movement

A little-known fact, especially in the US: a quarter of all banks are state-owned public banks. Yet not all of them operate effectively, equitably, or in response to the needs of the people they ostensibly serve.

The potential of public banks to work for the benefit of cooperatives, small business, equitable economic development, and fair trade is not always realized, says Thomas Marois, Senior Lecturer in Development Studies at University of London, in this video.

We need to build and maintain a popular movement to keep the public in public banking and forestall problems with corruption and bad management. That way we can have a banking system that can support businesses and farmers during down times as well as good, lend for socially progressive and environmental purposes, and privilege the common good over simply focusing on profit.

Marois is right to point out that access to money and credit can’t be left to the private sector, and that civil society has to push for public banks that are small d-democratic and committed to working for the common good. That means that organizers have to overcome the public’s gut-level cynicism about the competence and honesty of government and possible reluctance to expend the time and energy to play even a small role in ensuring that public banks function properly. It’s therefore exciting to see how California activists have been bringing local campaigns and different groups on board to endorse state bill AB 857, which would allow cities and counties to set up their own public banks. We hope that broad support helps ensure favorable reports out from Assembly committees this week!