With so much attention still focused on the pandemic and unemployment, lockdowns and quarantines still making headlines, it’s easy to miss that America is becoming a tale of two nations. In the first there is a very small number of people that is super wealthy and becoming even more so. In the other there are multitudes of people who are going through financial purgatory. Some believe the disparity in income is unfair and setting the stage for even worse problems.
The wealth gap is not new; it started decades ago. But it has been exacerbated by the pandemic. Following are just a few of the statistics that describe what’s going on out there.
The Worst Of Times
*Bloomberg reports that since the downturn began many millions of low- and even middle-income people who had always purchased their own food now turn to food banks to put bread on their tables. And even with these handouts hunger in America has become a very real crisis. Millions of people are experiencing it and it’s not only adults that are affected. Feeding America, which runs the largest network of food banks in the US, estimates that at the end of 2020, one out of every four children was suffering from hunger.
*Moody’s Analytics reports that approximately 12 million households now owe on average more than $6,000 in back rent, utilities, and late fees, and they are living with the threat of eviction hanging over their heads. According to CNBC, these households have accumulated a combined $70 billion in unpaid rent. Landlords can no longer afford to carry this burden as they too are in financial distress because of so much unpaid rent.
*The number of people trying to hang on to their homes by paying rent on a credit card has increased 70% from last year according to an analysis by the Federal Reserve Bank of Philadelphia.
*Employment among individuals who earn $27,000 a year or less is down 20 percent from pre-pandemic levels. This helps explain why the number of Americans living in poverty has risen to 52 million in November.
The Best Of Times
At the same time so many people are in desperate situations, others are making more money than ever. According to Forbes’ Real Time Billionaires List on Dec. 21, 2020, the top billionaires grew their wealth by an average of 57% in the last year. The booming stock market, coupled with huge gains in the valuations of their businesses, are responsible for most of those gains.
Leading these billionaires with the highest increase in net worth is Elon Musk, founder and head of both Tesla and SpaceX. Musk’s assets are worth $129 billion more now than they were a year ago - an amazing gain of 523%. Tesla benefited from increasing sales of its electric vehicles in 2020 and from reports that it plans to introduce others. SpaceX’s estimated long term valuation doubled after the company made important breakthroughs in rocket technology. Musk has displaced Amazon’s Jeff Bezos as the world’s richest person.
Bezos saw the second highest growth in net worth, with a $74 billion increase. Ongoing quarantines and lockdowns are fueling growth in online shopping and have driven Amazon’s stock price 69% higher since the beginning of 2020.
Bill Gates, Mark Zuckerberg, and Warren Buffett are among the other super-rich who have enjoyed huge gains in their net worth. Not every billionaire had a great 2020; some, in fact, lost significant money during the pandemic. But on average, their wealth has increased by 27%, with those in high tech and healthcare enjoying the biggest gains.
“Never before has America seen an accumulation of so much money in so few hands,” said Frank Clemente, Executive Director of Americans for Tax Fairness. “As tens of millions of Americans suffer from this pandemic, a few hundred billionaires add to their massive fortunes.”
Most people are focused on surviving from day to day and are not giving thought to their long-term needs. However, these are also important, and one of them is their retirement.
Even before the pandemic struck, more than 100 million Americans had nothing saved in an employer or personal retirement account; now the savings of tens of millions more have been wiped out.
This means that unless there is a major improvement in the economy very soon, their chances of being able to retire by age 65 or even by 70 will decline. Unlike their very rich counterparts, the poor and the working poor also are struggling to keep up to date on their credit cards, student loans, and other debt.
Street Smarts, Book Smarts
Poor people also were impacted more by school closings than were the very wealthy. The think tank Brookings Institute estimates that students began “fall 2020 with roughly 70% of the learning gains in reading relative to a typical school year... In mathematics, students will have less than 50% of typical gains.” And the longer it takes until schools get back to normal, the more students will fall behind expected growth. The very rich can easily get around this problem because they can afford to hire private tutors.
The virus has already caused a big spike in the homeless population, and that could spiral even higher if renters don’t get help. Although these numbers still have not shown up in official statistics, they are very evident from the increased number of tent cities springing up across the country.
Homeless people, some obviously suffering from health problems, lie on streets and look lifeless. Many millions of people who can’t pay rent are terrified of joining their ranks. The very rich, on the other hand, are fortunate in that they don’t have these worries.
America is trying to resolve very difficult problems, and even brilliant people are not sure what the solutions are. Let’s pray we see miracles in the months ahead. We need them.