Today’s blog post was originally going to further examine the complex, multi-faceted issue of housing affordability, but the fairly recent emergence of the COVID-19 on everything in our lives has bumped that important topic to a future date. Many people have known for many years (and decades even) that day-to-day life for the vast majority of Americans is a truly precarious thing, but it’s taken a global pandemic to shine a very big spotlight on that, and the many stark dimensions to the class divide.
This divide is multi-factored, according to a recent NY Times article, ‘White Collar Quarantine’ Over Virus Sparks Class Divide:
In some respects, the pandemic is an equalizer: It can afflict princes and paupers alike, and no one who hopes to stay healthy is exempt from the strictures of social distancing. But the American response to the virus is laying bare class divides that are often camouflaged — in access to health care, child care, education, living space, even internet bandwidth.
In New York, well-off city dwellers have abandoned cramped apartments for spacious second homes. In Texas, the rich are shelling out hundreds of thousands of dollars to build safe rooms and bunkers.
“This is a white-collar quarantine,” said Howard Barbanel, a Miami-based entrepreneur who owns a wine company. “Average working people are bagging and delivering goods, driving trucks, working for local government.”
Another NY Times article, “She’s 10, Homeless and Eager to Learn. But She Has No Internet”, documented the plight of the a one of just the many thousands (estimated 114,000) of NYC homeless and housing insecure children attempting to continue learning via the internet during this time, yet many don’t have access to the internet:
Allia Phillips was excited about picking up an iPad from her school in Harlem last week. She did not want to miss any classes and hoped to land on the fourth-grade honor roll again.
On Monday, the first day that New York City public schools began remote learning, the 10-year-old placed her iPad on a tray she set up over her pillow on a twin bed in a studio that she shares with her mother and grandmother inside a homeless shelter on the Upper West Side.
And then, Allia saw nothing.
“I went downstairs to find out that they don’t have any internet,” said Kasha Phillips-Lewis, Allia’s mother. “You’re screwing up my daughter’s education. You want to screw me up? Fine. But not my daughter’s education.”
For many, this recent shock has exposed the fact this economy was hardly “the greatest of all-time”, as President Trump likes to repeat, and certainly not all that it was cracked up to be anyway. The Washington Post weighs in on this topic:
In hindsight, however, the economy had blemishes. The record-high stock prices the president routinely touted became disconnected from companies’ underlying value, obscuring warning signs such as excessive borrowing, according to economist Michalis Nikiforos of the Levy Economics Institute of Bard College. Total corporate debt surged past $10 trillion, equal to nearly one-half the nation’s annual output.
“This shock does not come at a time when the economy is otherwise healthy,” he said. “There are very significant fragilities in the U.S. economy and elsewhere.”
On the eve of the crisis, one-quarter of the country’s largest companies had more cash going out than coming in, according to Goldman Sachs. The economic shutdown will quickly cause the share of American companies that are cash-flow negative to nearly double, meaning they could be in danger of starving for funds.
Small businesses face an even tighter deadline: half of the respondents to a Goldman survey said they will not last more than three months if the virus-induced shutdown persists.
According to a recent Forbes.com article, 78% of Americans are living paycheck to paycheck, while estimates of 50% or more have no emergency savings to tap during such an event. The service economy now accounts for at least 67% GDP, according to a Deloitte research study in 2018. Over 80% of U.S. jobs are in the service industry. This includes small business and the burgeoning “gig economy”, where basically everyone is required to be their own mini “company”, meaning forced to cover all the things that regular employment would have covered. This includes healthcare, social security taxes, and a rainy day fund to cover for any unemployment gaps or severe shocks like this one.
Nearly 3.3MM people filed for unemployment benefits this past week alone. MarketWatch is estimating that up to 37MM total jobs could be lost due to the pandemic. The latest sign of duress is that many presumably “safer” white collar jobs are also already being slashed, according to the Washington Post. Curbed is reporting that millions of Americans will have trouble making rent next.month. Now, with much of the economy entirely shut down due to no fault of their own, but due to the COVID-19 outbreak, where do those people turn make rent, mortgage, credit card payments, buy food, and maybe most importantly, procure healthcare coverage precisely at the time when they might need it the most? For now, it would appear that that SOME of those people can turn to the government and its most recent estimated $2 TRILLION fiscal stimulus package, which covers all sorts of lobbyist-driven goodies for large corporate interests (including yet another tax break for the 1%), but also enhanced unemployment benefits, checks for up to $1,200 ($2,400 for married couples) who meet certain income thresholds.
Will it be enough to prevent the economy from going into a full-fledged recession or depression, which will unnecessarily result in the economic ruin and devastation of lives for many? What about those millions who still can’t get access to affordable healthcare, right when it may be needed the most? What happens to them? We are about to find out. What else could have been done? Well, according to the NY Times, many countries, instead of turning to unemployment insurance, including Denmark, the UK, and the Netherlands are basically trying to freeze things in place and guarantee incomes for all workers for up a % of their full pay.
Here’s an excerpt from the article:
In Denmark, political parties from across the ideological spectrum joined with labor unions and employers associations this month to unite behind a plan that has the government covering 75 to 90 percent of all worker salaries over the next three months, provided that companies refrain from layoffs.
The Danish government also agreed to cover costs like rent for companies that suffer a shortfall in revenues. These two elements are collectively estimated to cost 42.6 billion Danish kroner (about $6.27 billion), after factoring in the savings on the unemployment insurance system.
The aim of this approach is to prevent the wrenching experience of mass unemployment, while allowing businesses to retain their people rather than firing and then hiring them again. Once normalcy returns, companies would be in position to quickly resume operations, restoring economic growth.
Why didn’t the U.S. take what is seemingly the simplest approach as well? Well, according to the article, it all boils down to simple ideology and what our super rich class deems acceptable and not acceptable:
The primary reason that this sort of approach appears unthinkable in the United States is the same one that limits options to expanding health care and lowering the cost of university education: Wealthy Americans have proved adept at shielding themselves from taxation.
“You don’t have a comprehensive welfare state in the United States, because it implies a politically unacceptable level of redistribution,” said Jacob F. Kierkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. “As long as you’re not willing to tax wealthy people and give some of the money to people who are not wealthy, these sorts of options are not on the menu.”
If the pandemic goes on for many more weeks and months, will these measures be enough to keep millions of Americans afloat during this time and beyond? Or will it require more drastic action? We are about to find out.