The coronavirus pandemic has threatened to rapidly expand yawning gaps between the rich and the poor, throwing lower-earning service workers out of jobs, costing them income, and limiting their ability to build wealth. But by betting on big government spending to pull the economy back from the brink, United States policymakers could limit that fallout.
The $1.9 trillion economic aid package President Biden signed into law last month includes a wide range of programs with the potential to help poor and middle-class Americans to supplement lost income and save money going forward. That includes monthly payments to parents, relief for renters and help with student loans.
Now, the administration is rolling out additional plans that would go even further, including a $2.3 trillion infrastructure package and about $1.5 trillion in spending and tax credits to support the labor force by investing in child care, paid leave, universal prekindergarten and free community college. The measures are explicitly meant to help left-behind workers and communities of color who have faced systemic racism and entrenched disadvantages — and they would be funded, in part, by taxes on the rich.
Forecasters predict that the government spending — even just what has been passed so far — will fuel what could be the fastest annual economic growth in a generation this year and next, as the country recovers and the economy reopens from the Covid-19 pandemic. By jump-starting the economy from the bottom and middle, the response could make sure the pandemic rebound is more equitable than it would be without a proactive government response, analysts said.
disproportionately hurt women of all races and men of color, she said, “If we tailor the relief to those who are most affected, we are going to be addressing racial and ethnic gaps.”
From its first days, the pandemic set the stage for a K-shaped economy, one in which the rich worked from home without much income disruption as poorer people struggled. Workers in low-paying service jobs were far more likely to lose jobs, and among racial groups, Black people have experienced a much slower labor market rebound than their white counterparts. Globally, the downturn probably put 50 million people who otherwise would have qualified as middle class into lower income levels, based on one recent Pew Research analysis.
But data suggest the U.S. policy response — including relief legislation that passed under the Trump administration last year — has helped to mitigate the pain.
“The CARES Act to the American Rescue plan have helped to support more households than I would have imagined,” Charles Evans, the president of the Federal Reserve Bank of Chicago, told reporters during a call earlier this month, referring to the early 2020 and early 2021 pandemic relief packages.
across the board after slumping early last year, foreclosures have remained low, and household consumption has been shored up by repeated stimulus checks.
While the era has been fraught with uncertainty and people have slipped through the cracks, this downturn looks very different for poorer Americans than the post-financial crisis period. That recession ended in 2009, and America’s wealthiest households recovered precrisis wealth levels by 2012, while it took until 2017 for the poorest to do the same.