The Wall Street Journal ran a column on December 4th entitled “Who Got a Lot Richer During the Pandemic,” https://www.wsj.com/personal-finance/savings/who-got-a-lot-richer-and-who-didnt-during-the-pandemic-8dd238ab . I read it with great interest and found a gaping hole in the analysis.
The column starts by telling us the pandemic made Americans richer which many might think counterintuitive to reality. After all, 2020 saw many businesses were shut down for extended periods of time at the beginning of the pandemic. Depending on the state in which you live, the period many businesses were shut down was extensive.
I am sure that you saw the permanent closure of retail businesses and restaurants in your local community. Big businesses were allowed to operate, but smaller retailers were closed along with many service businesses.
The column cites that home values went up during the period. People had fewer opportunities to spend money in the absence of concerts, shows or amusement parks; less eating out; travel, etc.; so, they paid down debt or socked money into a savings account. On the other hand, with the reduction in commerce, the overall income of many people went down.
Apparently, the median household net worth went up 30% during the period. It almost makes you want to yearn for another pandemic.
The column barely touches on the real reason for the financial improvement. That was government handouts. Otherwise, while the citizens of the United States were getting wealthier, the government was getting ever so much deeper in debt.
First, let’s look at one of their assertions. The price of housing would have only gone up for one of two reasons: 1) There was greater cost for replacement housing because of the cost of raw materials and/or labor; or 2) There was greater demand. There certainly was greater demand in certain parts of the country as people used this crisis to reevaluate their lives, particularly in states that had heavy-handed pandemic rules. We all know the states that lost population and the ones that gained new residents which drove up the cost of housing in those states. The only reason the price of housing might not have gone down in the states that lost population is because of government regulation which drove people out in the first place.
Second, the savings that people had from not spending money. During ordinary times people do not save a high enough percentage of their income for two main purposes. First, retirement savings. Second, a cash cushion for emergencies or extraordinary expenses like medical, home repair or car repairs. If people were putting more money aside for those two reasons and paying down credit card debt that is excellent news. How did that occur? Were people really saving more money from their earnings? Were they cutting down on their expenses and being more responsible? Not really. The major source of how they improved their net worth was through transfer payments – all those “emergency” funding programs.
Proof of this is the significant increase in credit card debt accompanied by delinquencies on that debt. Americans did not become more responsible about their spending habits.
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The program that has received the most attention is one relieving college loans that the Biden team keeps trying to stuff down everyone’s throat – even those who never went to college. It is nearly impossible to figure out how much has been taken off the debt rolls for individual households. The best figure I could find was $770 billion. A transfer from those with the debt to the rest of us (the American people) is how this was done.
Then there are the various other programs: The Paycheck Protection Program (PPP), enhanced unemployment benefit programs, and the Employment Retention Credit (ERC). These programs made some sense when the pandemic started and businesses were forced to be closed, but they dragged on and on and on. The ERC program is still funding money. Transfers were made to businesses and individuals, reducing their debt and increasing their net worth, while our governments — particularly the fed — went deeper into debt.
The WSJ column then breaks down the wealth by race, which is seemingly mandatory today even though no one asked. Of course, those with “white privilege” made off the best. Check that, it is actually Asians who have the highest average net worth of any group in America. So much for our racist economy.
Since the beginning of the pandemic in March 2020, the national debt has increased about $8 trillion. It is good that individuals’ net worth went up an estimated 30% during that period, but did it really when it was largely due to government transfers? We need to be accurate.
