May 27, 2020 427 PM
As the COVID-19 crisis continues with no end in sight, the unemployment rate has reached a staggering 20%, with upwards of 33 million Americans out of a job and left wondering how they’re going to put groceries on the table. Adding in the third of renters who are unable to make their April rent, this is shaping up to be the worst year for American workers in modern history.
If you read so many of the headlines of the financial press, however, there’s no cause to worry because, after all, Wall Street just had their best month in decades.
The ugly truth, however, is that unless you’re part of the wealthy elite who benefits from the success of the markets, this rally will have little to no bearing on the day-to-day economic reality for you –– and the media would do well to remember that.
Viewing the market as a way to check the pulse of the American economy is inherently flawed because it only represents a small number of wealthy people. According to the U.S. Census, only 32% of Americans have access to 401k (the most accessible form of investment), half of Americans don’t own any stocks at all, and the wealthiest 1% of households hold 50% of all available equity. The stock market is useful for telling you how speculators and corporations are feeling about the future of the economy, but it says nothing about how average Americans are actually doing day-to-day.
In fact, before the coronavirus crisis began and the market took a nosedive, Wall Street investors were celebrating a record breaking bull market, oblivious to the struggles that everyday Americans were facing. A full 40% of Americans did not have savings of over $400 dollars for emergencies and 78% of workers were living paycheck to paycheck during that same period, and these horrifying statistics have only become worse under the increased economic pressure from coronavirus.
Those “bull market” statistics were not representative of an economy that was experiencing widespread prosperity, but instead displayed how the vast amount of income inequality has rapidly created two different worlds for Americans. The same is even more tragically true of Wall Street’s current rally.
This difference highlights the two realities people face today in the United States. The separation between those realities lies in how you earn your living: are you part of the majority who works for your paycheck or are your part of the few that invest?
The GOP loves to spread the myth that the stock market is directly tied to the well-being of working Americans because it allows them to dump massive amounts of money into the pockets of wealthy corporations and businesses and claim a victory for saving the economy. In reality, that money stays in the pockets of their wealthy friends, while everyone else is left scrambling for scraps. Supply-side economics hasn’t worked in several decades, and now is not the time to try again. But that hasn’t stopped the Trump administration and the Federal Reserve from pumping trillions into bailing out Wall Street as a way out of the economic woes brought about by the pandemic.
Bailing out wealthy investors and corporations will only prolong the economic slump, and true economic recovery will only arrive when working Americans have enough money to spend. After all, consumer spending accounts for nearly two-thirds of our economy, so if consumers cannot afford to spend –– the economy will come to a grinding halt.
Wealthy people like myself are terrible consumers, we tend to invest our extra capital and do little to contribute to our consumer-based economy. This is why we need to stop prioritizing the investments of wealthy individuals and start putting money into the hands of ordinary Americans who will spur the economic growth we need.
It’s time we stopped conflating market success with widespread economic success. Record breaking markets mean next to nothing to the millions of families who are out of work and cannot afford to pay their bills. So if we want to come out of this economic slump with a better economy for all, we need to start considering metrics that take into account the well-being of the poorest American. As long as we consider the market a representation of the economy, we will continue to bailout the wealthiest first.
Dale Walker is a retired financial services executive, living in San Francisco. He currently serves on the boards of Beneficial State Bank, the Graduate Theological Union and Pacific Vision Foundation. He is an active member of Patriotic Millionaires.