Covid’s first year of recession: who won, who lost?

Lately we’ve been hearing a lot about America’s billionaires who have increased their wealth by over $ 1 trillion in the past year as Covid precipitated the economy’s deepest recession since the 1930s. actual over the past year – as of the spring quarter of 2020 last year. until the spring term of 2021.

During the same period, however, the US stock markets hit record highs. Last week, in early August, they hit record highs almost every day in a row.

Much of this record boom in stocks and other financial markets is due to the fact that the US central bank, the Federal Reserve, has pumped nearly $ 4 trillion in virtually free money into banks and large corporations, even if they had excess liquidity. .

The Fed has indeed “pre-bailed out” the banks even when they were not in difficulty.

In addition, the Fed has indicated its intention to continue pumping free money into banks and even non-banks at a rate of $ 120 billion per month, until at least 2022. That’s over $ 2 trillion after nearly $ 4 trillion last year, even though no bank is in trouble or needs it.

But bankers and billionaires weren’t the only big beneficiaries of the government’s bailout policies over the past year.

The same is true for the vast majority of the largest American corporations. Beginning in January and February 2020, medium and large non-bank companies began to raise trillions of dollars in cash by selling their corporate bonds at very low rates made possible by the Fed which cut rates down. interest close to zero. In addition to this treasury of liquidity created by low Fed rates and record rates on corporate bonds, the same mid-to-large American companies have withdrawn hundreds of billions more from their lines of credit with banks, then got $ 650 billion in new congressional tax breaks in March 2020. They have also had to significantly reduce their operating costs (especially salary and facility costs) due to the closures. The combined result has been record earnings gains for big American corporations – not just American billionaires! What size?

Reports that have just been released in recent days reveal that 89% of Fortune 500 companies increased their revenues this last quarter (April-June 2021) by no less than 24.7% compared to the same quarter in 2020 when the Covid-induced recession has started.

By the way, this 24.7% income explosion compares to an average quarterly income gain of 4.5% over the past 5 years (without a recession); and 3.4% on average over the previous 10 years after the end of the last official recession in 2009.

Thus, American companies have fared very well in the wake of the recession, and not just the “tip of the iceberg receiving the wealth”, the American billionaires!

Unlike the record gains of billionaires, shareholders, and large corporations in general, in the same year more than 35 million American workers lost their jobs at one point or another. And at least 17 million are still unemployed: 12 million still receive unemployment benefits + 3 million abandoned from the workforce + 1.5 million are still wrongly classified as “on leave but working” by the State Department of Labor -Unis (which he admits to be incorrect but still refuses to correct).

These 17 million are double the “official” number of 8.7 million unemployed pushed by the government and repeated by the mainstream media. Both numbers come from government sources, but politicians and the media like to pick the best number even if it is only part of the total picture.

Over the past year, most of the U.S. workforce also experienced significant pay cuts, in part due to massive unemployment (no job equals a total pay cut) or hours of work. reduced work (millions converted to part-time from a full-time job), or just lower hourly wages over the same period. The wage collapse in the middle and lower end of the wage structure in the United States has left the highest paid, still at work, receiving their higher wages and salaries. This has raised the average wage in general while the vast majority have seen their real wages plummet. (The government and the media also like to report this distorted figure of the rise in wages over the past year).

As the economy started to reopen again this summer 2021, some workers have returned to work, but now it looks like the pace is slowing.

The Labor Department’s June and July employment reports reflect a resumption in rehiring, with many workers in the service industry starting to return to work. But these are not “job gains” or new jobs in the economy. These are “job returns”. In addition, there are now signs that rehiring is starting to slow down. Many industries and companies do not intend to put everyone who was laid off last year back to work. They have already started to implement AI and other technologies that allow them to move workers with machines and software. And they do.

Equally important, millions of workers who returned did so for jobs that offered fewer hours of work per week and therefore fewer weekly earnings than before the recession. This is probably one of the main reasons why many laid-off service workers resist returning to work. They will actually see less weekly pay because of the reduced weekly working hours. Others cannot return because affordable child care is not available. Others are not just because they realized that their service jobs were dead end, poorly paid and unstable jobs. Future waves of Covid could throw them out on the streets again. Who can blame them for not coming back!

As for small businesses, they too were hit hard by the recession, like workers and unlike their medium and large cousins.

Most accounts show that around a million small businesses have gone bankrupt despite the government’s tax bailout having provided around $ 1 trillion in guaranteed loans and outright grants since March 2020! With nearly a million small business bankruptcies, one can only conclude that a large chunk of the $ 1 billion loans and grants did not reach those who needed them most. Expose to what extent the small business bailout has been ‘played out’ and by that is a work in progress, but will certainly be revealed at some point.

Like workers and small businesses, the nearly 75 million tenants (in 48 million rental units) have also suffered the economic brunt of the pandemic. Many were evicted last year, despite the CDC-federal “moratorium” on rent payments. This moratorium – extended several times but which is now expected to end completely by October 2021 – has never been total. It only covered rental housing that was supported in one way or another by grants or federal rules. Millions of people have already fallen through the cracks of the moratorium. And the floor will collapse for everyone next October. (Only six states have additional moratoriums on state rents – none in the South or Midwest).

In recent weeks, the fight for the eviction of tenants has surfaced in the media, along with reports that $ 47 billion of the $ 52 billion in the March 2020 “Care Act” set aside for aid to residents. tenants have not yet been injected into the economy. The media like to portray this as due to a bureaucratic mess of the government. But he ignores the fact that resistance from landlords to deal with rent assistance is probably the real cause of the failure to disburse funds. Some landlords don’t like the fact that government assistance funds only cover 80% of the rent arrears. Others do not want to give up the right to collect all arrears in the future; others want to sell or convert rental units, others want to retain the right to evict while receiving assistance payments, and others want to continue evicting even if a single late payment occurs. The public is unaware — and the media generally refuse to explain it — that rent assistance payments must be deposited by both tenant and landlord. And millions of homeowners refused to file. Thus, the real cause of the non-payment of the $ 47 billion.

Then there are the high-profile child care assistance payments that began last July, as part of Biden’s “American Rescue Plan” (aka March 2021 $ 1.8T Covid Relief Act). While this is a positive program to offset the stoppage of supplemental unemployment benefits and rent assistance, what most Americans don’t realize is that it will only last until ‘in December 2021, then will also expire. Also, this is not new real money payments to households, but a July-December 2021 withdrawal of child care payments that would have been received from the IRS in April 2022 anyway in April 2022. the filing with the IRS for the 2021 period child care tax credit.

With recent developments – like the removal of unemployment benefits, the expiration of rent assistance, the play of small business bailouts and childcare allowances soon to expire and the end of loan forgiveness student – one can conclude that a period of “creeping progressive austerity for the many has already started – excluding of course the bankers, companies and investors for whom it seems the free money will continue to flow. The Fortune 500 companies, banks and US billionaires that have reaped massive income gains over the past year appear to be exempt from any future austerity.

Dr Jack Rasmus

copyright 2021

Follow Dr Rasmus on his blog,, on Twitter at @drjackrasmus, or tune in to his Alternative Visions radio show on the Progressive Radio Network every Friday at 2 p.m. EST.

Photo: Prachatai

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