Facts and feelings in the US
What we have articulated in the main article this week is that people's feelings do not necessarily reflect what they truly believe. Let's be honest. People say what they say for many different reasons — and there is usually an agenda. For example, someone would exaggerate or even lie simply because it grabs more attention. Sensationalism sells! Others may make things worse than they are in hopes of gaining sympathy and help.
To demonstrate this divergence, we looked at a qualitative study done by Pew Research Center, which surveyed 10,334 adults in the US in January 2021 (the full report can be found at https://www.pewresearch.org/social-trends/2021/03/05/ayear-into-the-pandemic-long-term-financial-impact-weighsheavily-on-many-americans/).
Table 1 shows more than half (51%) of those surveyed said the economic impact from the Covid-19 outbreak would make it harder for them to achieve their financial goals. This includes 58% from the lower-income group, 50% from the middle-income group and even 41% from the upper-income group. Notably, 40% of those who have not experienced job/wage loss also felt the same way! Of those who said their financial situation was better than a year ago, 35% still claimed it would be harder to achieve their financial goals.
Now, compare this rather pessimistic picture with facts. Chart 1 shows statistics on net worth for US households from the Federal Reserve. A huge majority (80%) of US households saw stronger growth in their net worth in 2020 than in the past five years (2015 to 2019), on average. The remaining 20% of households still saw gains, albeit of a lower percentage.
Another example: The Pew survey also showed more people saying they saved less — all groups except for those in the upper income — versus the number of people who said they had saved more since the pandemic began (see Table 2). According to the US Bureau of Economic Analysis, however, US households have accumulated huge excess savings — on top of what they would have saved if the outbreak had not happened (using the average from 2016 to 2019) — through the pandemic (see Chart 2). According to estimates by Moody's Analytics, the cumulative excess savings amounted to some US$2.6 trillion ($3.5 trillion). The excess savings are now fuelling the pent-up demand in consumer spending.
In fact, this Covid-19 pandemic has seen governments pushing out aid stimulus packages of unprecedented scale. As a result, the private sector is reporting fewer bankruptcies than the average year, pre-pandemic (see Table 3).
Meanwhile, public debt has risen sharply, with the debtto-GDP ratio higher than ever (see Chart 3). Put another way, governments have shouldered a lot of the financial burden in this pandemic. Governments worldwide are socialising private obligations. And this is the fact.