New Haven Register (New Haven, CT)
Dow 30,000 and 54 million food insecure
President Trump came out of his bunker this week to pardon a couple of turkeys and take credit for the Dow Jones Industrial Average, or DJIA, cracking the 30,000-point mark for the first time in history. In normal times, this would be a notable accomplishment. However, we are not in normal times. The DJIA rise must be put in the context of another statistic that came out this week from Feeding America reporting that 54 million Americans are food insecure. In other words, while the stock market is reaching new highs, millions of Americans, including tens of millions of children, are going to be hungry.
As an economist and someone who once worked for as a securities broker, I know the DJIA is a flawed measure of society’s well-being. The DJIA does give us one indicator of how well equity-holding Americans are doing. And while 55 percent of American adults are invested in the stock market, the distribution of Americans who own the stock market is far less egalitarian. The wealthiest 10 percent of all Americans own 84 percent of stocks. Also, there are differences in racial ownership. Sixty-one percent of white households own stocks compared to 31 percent of non-Hispanic Blacks and 28 percent of Hispanics.
This seeming incongruence between the DJIA’s performance and the millions of Americans lining up in food lines during this pandemic can be explained by the two different realities facing Americans.
One reality is that of wealthy and high-income Americans who can continue to work, often from their homes, and are experiencing increased savings because there is literally nowhere to go and little to do. In April, the U.S. personal savings rate skyrocketed to over 33 percent. It has since come down to 13.6 percent, but this is significantly higher than the average personal savings rate of 6.5 percent since January 2000. Much of that saving has gone into the stock market, explaining the rise in the DJIA. As more money goes into the market, propping up the DJIA, the wealthy are getting wealthier.
The other reality is that working-class Americans, who had very little savings at the start of the pandemic, have exhausted their savings, millions have lost their jobs, they have lost the $600-a-week unemployment supplement provided earlier in the year, they have lost their employer-based health insurance, and now they are on the verge of losing their protection from being thrown out onto the street by their landlords who no longer have to abide by the federal moratorium on evictions. And on top of all this, they and their children are hungry, and they line up for food in the wealthiest country in the history of the world.
President-Elect Biden is going to inherit an economic and health care mess in January that did not have to happen. Instead of reviewing the painful past, there are some things that are clearly going to have to be addressed early in the administration.
First, the administration is going to have to impose strict national restrictions for at least eight weeks in order to starve the virus. Without bringing down the infection rate and the stress on our health care system, the economy, despite the performance of the DJIA, will never recover. Unfortunately, our political system of one president at a time forces us to endure and survive for the last seven weeks of the do-nothing Trump administration. But on Jan. 20, this is job No. 1.
Secondly, the administration, hopefully with Congress’ support, needs to reimpose the $600 a week payments to Americans who have lost their jobs and extend eligibility for this benefit until defined economic metrics are attained. This support is necessary to keep people in their homes and keep them and their children fed. This support should be targeted to those who need it most.
Thirdly, the administration needs to redirect the Paycheck Protection Program away from reimbursing small companies to cover their labor costs to a system that helps small companies pay their fixed costs of insurance, utilities, rent, taxes, leases and bank debt. Absent this reorientation of the PPP, the economic contraction will spread to commercial real estate, banking, insurance, local and state government and other pillars of the economy. The Biden administration should use the federal unemployment enhancement to take care of workers, thus freeing up resources to support small businesses who also are threatened with eviction and bankruptcy. In a pandemic depression, small businesses do not need help for their workforce when there are no customers.
And finally, the Biden administration should provide unemployed Americans subsidies to purchase health insurance on the Affordable Care Act state exchanges. This pandemic has laid bare the case for moving away from an employer-based health insurance system supplemented by Medicare for the elderly and Medicaid for the poor to a system of health insurance based on citizenship. There is a role for private health insurance companies in this model, but it is unnecessary to have health insurance linked to employment.
I am sure I am not telling Biden anything he does not already know. Americans need help right now. The DJIA could go to 40,000 and it would not feed hungry Americans. Unfortunately, we might be forced to wait until Jan. 20 to make the changes necessary to heal this nation. We literally need to survive until then.