In the Pandemic, Only the Rich Get a Safety Net

Posted in: Tax and Economics

Few parlor games are more popular, especially on the Right, than to blame the poor for their poverty. The poor are poor because they are lazy, while the rich are rich because they are industrious, or so we are told. Because so many cling to these shibboleths as a drowning man to passing flotsam, we should take particular note when events reveal their falsehood.


More than 8 million people have slipped beneath the poverty line since May. How many people is that? That’s nearly every man, woman, and child in Maine, Montana, Rhode Island, Delaware, South Dakota, North Dakota, Alaska, Vermont, and Wyoming. They did not slouch their way to penury; they were driven to it by a relentless virus and a pitiless state.

Researchers have found that in normal times, roughly half the people who enter poverty climb back out within a year, most often because of a return to employment. But these are not normal times. A study by the investment bank Evercore ISI found that by late August of this year, employment rates for workers earning more than $16 per hour were more or less back to pre-pandemic levels. By contrast, employment rates for workers earning less than $16 per hour remained 27% below where they were in February and were falling sharply, creating the K-shape recovery that so many feared. And this is not because the working poor have suddenly decided not to work. According to a July report by the Economic Policy Institute, nearly 12 million workers who lost their job because of the pandemic have no chance of being called back. Their jobs are gone forever.

Yet these numbers, as awful as they are, actually understate the magnitude of the current crisis. According to the Census Bureau, during the first week of October almost 23 million adults, or more than one in ten adults nationwide, reported that people in their household sometimes or often did not have enough to eat. Though conditions are bad all over the country, some states stand out. In Louisiana, Alabama, Arkansas, West Virginia, New Mexico, Nevada, and Texas, more than one in eight adults reported their households were short on food. In Mississippi, it was one in six. Even in New York, the wealthiest city in the country, the number of people who cannot afford food may reach 2 million by the end of the year, an increase of nearly 40% from pre-pandemic levels. Their hunger has nothing to do with indolence.

And even if a person is not struggling to put food on the table, that doesn’t mean they are financially secure. The same Census Bureau report found that 78 million adults in this country—nearly one in three—live in households that cannot afford essential expenses. It’s not just food, but rent or mortgage, utilities, medical insurance, etc. For households with children, the number is even higher: 40% are having difficulty paying their bills. (Note that the eviction moratorium imposed in September by the CDC, effective through the end of 2020, does not forgive rent or mortgage payments. People still have to pay their bills. They just can’t be evicted if they don’t—at least, not until the moratorium expires on New Year’s Day.)

Earlier in the year, government support made a difference. Some estimates are that the stimulus package passed this spring, especially the extra $600 per week in unemployment benefits and the one-time payment of $1,200, prevented 17 million people from falling into poverty. But those payments have long since ended, and today Republicans dither while people suffer. Democrats in the House approved a new $2.2 trillion package that would restore some of the benefits extended earlier, but the White House balked and Republicans in the Senate want none of it. Senate Republicans act as though the suffering has ended and the virus is gone. Yet the country reported more than 85,000 cases last Friday, smashing the single-day record.

While Republicans have decided to let the poor fend for themselves, there is one group to whom federal policy has been assiduously, persistently benevolent: the wealthy. As I have pointed out before, the Federal Reserve has taken extraordinary steps to support the U.S. financial system. It has kept interest rates exceptionally low, and pledged that it would make unlimited purchases of government-backed debt to stabilize the markets. This comes on top of the $2.3 trillion in liquidity it introduced into the banking system in the form of short-term loans.

Most observers credit the Fed’s decisive and sustained action with providing a major boost to the stock markets, which have all but recovered from the pandemic. Both the Nasdaq and S & P 500 recently returned to record levels, making this the briefest bear market in U.S. history. Those whose money is in the market, in other words, have more than fully recovered, at least financially, from the crisis.

But most Americans are not in the market—at least not to a meaningful extent. Most surveys find that a bit more than half of all Americans have at least some direct or indirect exposure to the stock market, meaning they own shares in personal accounts or through things like employer-funded pension or retirement plans. Yet this number vastly overstates the extent to which most Americans benefit from a booming market. Eighty-four percent of all stocks owned by Americans are held by the wealthiest ten percent of American households. For the poorest half of Americans—roughly 160 million people—the stock market is meaningless.

Janet Yellen, the former chair of the Federal Reserve, hit the nail on the head when she said, “The stock market isn’t the economy. Individuals and businesses are not going to make it through this unless they get grants, and only the federal government can do that.” Democrats in the House understand this; Republicans in the Senate and White House do not.

And when the wealthy sell those shares and reap the benefit of their government-created windfall, they won’t pay the same taxes as working men and women. Government policy gives them another break by taxing long-term capital gains at a substantially lower rate than regular income. Let’s say some lucky sod sells his federally-inflated shares after a couple years and makes $440,000 in capital gains. He’ll pay just 15 percent of that in federal taxes. That’s only a little higher than the effective tax rate paid by a New York City cop making $80,000 per year, the average for the NYPD.

Somebody go tell the cop he’s not sufficiently industrious.


One day, the coronavirus will be behind us. As we survey the wreckage, a desperate cry will come from the bread lines. Someone will suggest we increase federal support for the poor. Mark my words: Republicans will warn against it and lecture us sternly, “The poor have only themselves to blame.”

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