Biden continues vow to ‘tax the rich’
Club for Growth Co-Founder Steve Moore discusses issues with Biden’s budget and how it could increase inflation on ‘Kudlow’
The coronavirus pandemic plunged Americans into recession. Instead of emerging poorer, many came out ahead.
U.S. households added $13.5 trillion in wealth last year, according to the Federal Reserve, the biggest increase in records going back three decades. Many Americans of all stripes paid off credit-card debt, saved more and refinanced into cheaper mortgages. That challenged the conventions of previous economic downturns. In 2008, for example, U.S. households lost $8 trillion.
In some ways, the singularity of the Covid-19 recession—and the recovery—shouldn’t surprise. The scope of the pandemic was unprecedented in the modern era.
ECONOMISTS PREDICT HIGHEST GROWTH IN 37 YEARS AS CORONAVIRUS PANDEMIC RECEDES
So was the government’s financial response. The U. S. borrowed lent and spent trillions of dollars to keep the economy from plunging further than it did.
These actions were at the center of the unusual nature of both the recession and the recovery. They have also powered much of the stock market’s unexpected boom. Rock-bottom interest rates lured more investors into stocks; workers stuck at home tried their hand at trading and tech giants gained even more ground during the shutdown.
The stock market, in turn, became the driver of the household wealth gain, accounting for nearly half the total increase.
That has produced a lopsided distribution of the wealth gains, since well-off households are more likely to own stocks. More than 70% of the increase in household wealth went to the top 20% of income earners. About a third went to the top 1%.
The gains were even more heavily concentrated at the top when Americans were grouped by wealth instead of income. (Wealth is calculated by subtracting a household’s liabilities—like mortgages and college debt—from assets such as homes and stock-market investments).
MOST CFOS FORECAST STRONG US ECONOMIC RECOVERY FROM THE PANDEMIC
Stay-at-home orders sent the economy into a free fall at the start of the pandemic, but the shock proved short.
Americans with higher-income jobs fared especially well. Many white-collar employees were able to work from home, and they saved money by not commuting or eating out. The government’s stimulus checks and expanded unemployment benefits kept afloat restaurant servers, housecleaners and others in low-wage service jobs who got laid off.
Many lower-income workers came out ahead. By October 2020, for example, household checking-account balances of the bottom 25% of income earners had risen roughly 50% from the year before, according to the JPMorgan Chase Institute. But much of their wealth increase came in the form of stimulus checks and unemployment benefits, which will peter out as the economy recovers.