Booms And Busts
Inequality often widens after recessions. Low-wage workers are more likely to lose their jobs in the downturn, and it takes longer for the benefits of the recovery to reach them. Both patterns were clear in the aftermath of the 2008 financial crisis.
But in the Covid-19 crisis, policy makers found a way of cushioning the blow. Direct payments to households as well as beefed-up unemployment benefits ensured that millions of low-paid Americans didn’t suffer a sharp decline in income after losing their jobs. The same tools could prevent inequality from widening in future downturns—if policy makers are prepared to use them.
A plan for so-called automatic stabilizers—which would immediately release support payments tied to economic conditions when a recession arrives—has been endorsed by about two dozen Senate Democrats and members of the administration, but hasn’t been included in the president’s plan. He’s also only allocating $2 billion for modernizing creaky unemployment systems that struggled to cope with the pandemic layoffs.
Race And Education
Racial divides are apparent in every area of the economy, from the yawning wealth gap between Black and White Americans to labor markets where the jobless rates for Black and Hispanic workers are persistently higher.
One measure in Biden’s plan aims to pump $46 billion into historically Black colleges and universities. William Spriggs, chief economist to the AFL-CIO and a professor at Howard University, an historically Black institution, is critical of the plan and backs reparations as a broader and more direct strategy for closing racial divides.
“It shows no understanding of the size of the wealth gap,” he said of Biden’s college plan—pointing out that Black households headed by college-educated workers typically have the same wealth as those headed by White high-school dropouts, so degrees are no guarantee.
Other parts of Biden’s program may bring particular benefits to Black Americans. Spriggs cites the investment in pre-school education. “That makes a huge difference for Black children,” he said. “They just don’t have the same access to quality early childhood education—and we know how big that investment pays off.”
Doctors And Bills
Health is one of the most visible dimensions of inequality in the U.S., the only major advanced economy that doesn’t guarantee universal care. Life expectancy is significantly longer at the top of the ladder. One study concluded that the U.S. health care system effectively redistributes income from the poor to the rich.
Biden is seeking to spend $200 billion on extending health-insurance tax credits in the Covid-19 relief plan. He didn’t include the proposals for Medicare expansion and drug price reform that some Democrats have pushed for. One wing of the party, headed by Senator Bernie Sanders, supports a universal system.
About 10% of the U.S. population is uninsured, rising to more than one-third for Hispanic adults. Even among those who have coverage, about one-third are “underinsured”—meaning they have high deductibles or medical bills—and that share is growing. One in three Americans skips medical care to avoid high bills.
This article was provided by Bloomberg News.