COVID-19 Shines a Bright Light on the Precariousness and Divides of American Life

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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.

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David Himmelstein

CUNY

Dr. David Himmelstein is a distinguished professor of public health and health policy in the CUNY School of Public Health at Hunter College, adjunct clinical professor at Albert Einstein College of Medicine, and lecturer in medicine at Harvard Medical School. He has served as chief of the division of social and community medicine at Cambridge Hospital.

Nick Hanauer

Pitchfork Economics

Nick Hanauer is one of the most successful entrepreneurs, investors, and managers in the Pacific Northwest with over 30 years of experience across a broad range of industries including manufacturing, retail, e-commerce, digital media and advertising, software, aerospace, health care, and finance. He is a co-founder and partner of Second Avenue Partners, a Seattle-based venture capital firm that provides management, strategy, and capital for early stage companies. 

Barry Ritholtz

Ritholtz Wealth MGMT

Barry Ritholtz has spent his career helping people spot their own investment errors and to learn how to better manage their own financial behaviors. He is the creator of The Big Picture, often ranked as the number one financial blog to follow by The Wall Street Journal, New York Times, and others.

Barry is the creator and host of Bloomberg’s “Masters in Business” radio podcast, and a featured columnist at the Washington Post. He is the author of the Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy (Wiley, 2009). In addition to serving as Chairman and Chief Investment Officer of Ritholtz Wealth Management, he is also on the advisory boards of Riskalyze, and Peer Street, two leading financial technology startups bringing transparency and analytics to the investment business.

Barry has named one of the “15 Most Important Economic Journalists” in the United States, and has been called one of The 25 Most Dangerous People in Financial Media. When not working, he can be found with his wife and their two dogs on the north shore of Long Island.

Richard Florida

City Lab

Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.

Janet Gornick

CUNY-Stone Center

Janet Gornick attended Harvard University, where she was awarded a B.A. (psychology and social relations, 1980), an M.P.A. (Kennedy School, 1987), and a Ph.D. (political economy and government, 1994). She is currently a professor of political science and sociology at The Graduate Center, CUNY. From September 2006 to August 2016, she served as director of LIS (formerly the Luxembourg Income Study), a cross‐national data archive and research center located in Luxembourg, with a satellite office at The Graduate Center. Since September 2016, she has served as director of the James M. and Cathleen D. Stone Center on Socio‐Economic Inequality. The Stone Center includes the LIS satellite office, known as the US Office of LIS.

Ken Jacobs

UC Berkeley Labor Center

Ken Jacobs is the chair of the Labor Center, where he has been a labor specialist since 2002. His areas of specialization include low-wage work, labor standards policies, and health care coverage. He has recently worked on economic impact studies of proposed minimum wage laws for the cities of Seattle, Los Angeles, and San Jose, and conducted analyses of the public cost of low-wage work. Jacobs is the co-editor, with Michael Reich and Miranda Dietz, of When Mandates Work: Raising Labor Standards at the Local Level (University of California Press), an edited volume on the impacts of labor standards policies in San Francisco.

Steven Pitts

UC Berkeley Labor Center

Steven Pitts came to the Labor Center in August of 2001 from Houston, Texas. Steven received his Ph.D. in economics with an emphasis on urban economics from the University of Houston in 1994. His master’s degree is also from the University of Houston and he holds a bachelor’s degree from Harvard University. For the fifteen years prior to his arrival at the Labor Center, Steven taught economics at Houston Community College and, for five years, he was an adjunct lecturer in the African American Studies Program at the University of Houston. At the Labor Center, Steven focuses on issues of job quality and Black workers. In this arena, he has published reports on employment issues in the Black community, initiated a Black union leadership school, and shaped projects designed to build solidarity between Black and Latino immigrant workers. Currently, a major area of his work involves providing technical assistance to efforts in developing Black worker centers around the country.

April Sims

WSLC AFL-CIO

April Sims was elected Secretary Treasurer of the Washington State Labor Council, AFL-CIO by its affiliated unions in December 2018 and she began her four-year term on Jan. 5, 2019. She is the first woman of color to be elected as a WSLC executive officer.

April has served as the WSLC’s Political and Strategic Campaign Director since November 2017, working to develop shared agendas with labor and community partners, to advance strategic organizing campaigns (raising wages, naturalization, revenue reform, etc.), and to recruit, train and elect political champions for working people. She first joined the WSLC in September 2015 as Field Mobilization Director, working with WSLC-affiliated unions and community partners to support and encourage the participation of individual members with many different political, legislative and community programs.

Prior to joining the WSLC staff, Sims served as the Legislative and Political Action Field Coordinator for the Washington Federation of State Employees, AFSCME Council 28 (WFSE), where she was responsible for member education, communication, and mobilization around legislative issues and political campaigns. She was a WFSE member, shop steward, elected union officer, and union staffer from 2002-15.

Kathryn Edin

Princeton University

Edin is one of the nation’s leading poverty researchers. A qualitative and mixed-method researcher, she has taken on key mysteries about the urban poor that have not been fully answered by quantitative work: How do single mothers possibly survive on welfare? Why don’t more go to work? Why do they end up as single mothers in the first place? Where are the fathers and why do they disengage from their children’s lives? How have the lives of the single mothers changed as a result of welfare reform? The hallmark of her research is her direct, in-depth observations of the lives of low-income women, men, and children.

Gary Evans

Cornell University

Professor Evans is an environmental and developmental psychologist interested in how the physical environment affects human health and well being among children. His specific areas of expertise include the environment of childhood poverty, children’s environments (housing, schools, playgrounds, toys), cumulative risk and child development, environmental stressors, and the development of children’s environmental attitudes and behaviors.

Olga Miranda

SEIU 87

Olga is President of SEIU Local 87 in San Francisco. The SEIU was founded in 1921 in Chicago as the Building Services Employees Union (BSEU); its first members were janitors, elevator operators, and window washers.
Today SEIU is the fastest-growing union in North America, uniting workers in the United States, Canada and Puerto Rico. Over 25 percent of our members whom identify as immigrants – a constant tribute to the union’s roots. From the start, SEIU has embraced its heritage as a union of immigrants and has stood on the frontline of immigrant justice.

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Stephanie Porta

Organize Florida

As a community organizer, Stephanie Porta has spent the last 15 years working to support Florida’s low income communities in their fight for equity and dignity. Her work has led to raising Florida’s minimum wage in 2004, passing police accountability reforms, winning foreclosure prevention programs, affordable utility campaigns, electing progressive officials and much more.

In 2010, Stephanie co-founded Organize Florida to work on the needs of Florida’s low and moderate income communities and now acts as Executive Director. The membership organization has grown quickly and has membership in 17 counties across mid-Florida. In 2014, Stephanie championed efforts to pass Earned Sick Time in Orange County, and in 2016 supported outreach efforts to more than two million voters across Florida. Stephanie has been recognized by the Orlando Sentinel, Orlando Weekly, Orlando Magazine & Orlando Women’s Magazine for leadership on government transparency and issues facing the working poor.

Beth Babcock

Empathways

Elisabeth Babcock (Beth) is the President and CEO of Economic Mobility Pathways (EMPath), an international charitable organization dedicated to creating new pathways to economic independence for low-income families. EMPath uses its unique “action-tank” business model to design, build, and test new approaches for creating economic mobility and then shares them with other organizations and governments.

Mike Buchman

Solid Ground

Mike is the Communications Director for Solid Ground in Seattle, WA. Solid Ground works to end poverty and undo racism and other oppressions that are root causes of poverty. Solid Ground envisions a community beyond poverty and oppression where all people have equitable opportunity to thrive.

Stephanie Kelton

Stony Brook University

Stephanie is a leading authority on Modern Monetary Theory, a new approach to economics that is taking the world by storm. She is considered one of the most important voices influencing the policy debate today.

Her forthcoming book, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy (June 9, 2020), shows how to break free of the flawed thinking that has hamstrung policymakers around the world.

 

Lawrence Katz

Harvard University

Lawrence F. Katz is the Elisabeth Allison Professor of Economics at Harvard University and a Research Associate of the National Bureau of Economic Research.  His research focuses on issues in labor economics and the economics of social problems. He is the author (with Claudia Goldin) of The Race between Education and Technology (Harvard University Press, 2008), a history of U.S. economic inequality and the roles of technological change and the pace of educational advance in affecting the wage structure. 

 

Stacy Mitchell

ILSR

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and analysis, and partners with a broad range of allies to design and implement policies to reverse corporate concentration and strengthen local enterprise.

Mitchell has also written for The AtlanticBloombergWashington Monthly, and Wall Street Journal.  She’s the author of the book Big-Box Swindle. Her perspective and research are frequently cited in news media and she’s appeared on several national radio shows and podcasts, including NPR’s On The Media and Chris Hayes’ Why Is This Happening?

 

"Income inequality is the greatest problem facing America today. It effects our other two major inequality issues, racial inequality and gender inequality. Income inequality must be remedied or America will inevitably collapse into a Banana Republic without drastic legislative and societal action."
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Jacob Hacker

Yale University

Jacob S. Hacker is Stanley Resor Professor of Political Science and Director of the Institution for Social and Policy Studies at Yale University. A regular media commentator and policy adviser, he is the author or co-author of five books, numerous journal articles, and a wide range of popular writings on American politics and public policy. His most recent book, written with Paul Pierson, is American Amnesia: How the War on Government Led Us to Forget What Made America Prosper—a New York Times Book Review Editor’s Choice and a best business book of 2016 according to the management magazine Strategy+Business.