This month, the Kairos Center is launching a monthly Policy Briefing. The briefings will highlight analysis informed by the 140 million people who are poor and dispossessed in this country, and their struggles against systemic racism, poverty, ecological devastation, militarism and the war economy. They will also challenge the false narratives that uphold unjust economic and political systems, including the narrative of scarcity.
This month’s briefing focuses on the legislative response to COVID-19 and why our society prioritizes the wealthy and powerful. Despite the staggering needs of the poor, our government response continues to be driven by the belief that an economy that benefits the rich will benefit the rest of us. All around us we see the direct consequences of this failed position. As Callie Greer from the Alabama Poor People’s Campaign reminds us, “This system is not broken. It was never intended to work for us.” While lawmakers consider another relief bill, we must continue to challenge this belief in the rich and build the power of the poor.
Predictable and Possible
by Shailly Gupta Barnes
Policy Director, Kairos Center
The COVID-19 pandemic has revealed fundamental inequalities in this country along the lines of race, income and access to basic needs. As the U.S. has become the global epicenter of the pandemic, it is clearer than ever that our great wealth has not been used for the general welfare. Rather, three people own the same amount of wealth as half the country, leaving 140 million people poor or one emergency away from being poor in the wealthiest country in the world.
The consequences of this inequality are lethal. Before COVID-19, there were 250,000 people dying every year from poverty and inequality; those 700 deaths per day went largely unnoticed, until this pandemic brought the reality of poverty to bear on everyone. According to Dr. Mary Bassett, Director of the FXB Center for Health and Human Rights at Harvard University, “The reason we were so vulnerable to this exceptional spread had to do with the many structural vulnerabilities that existed in the US: the high rates of poverty, the low rates of social protection, the lack of access to health insurance. All of these made it predictable that there would be a pandemic, because there was already a pandemic, including the loss of workers’ rights and the failure to ensure living wages.”
Indeed, we should not be surprised that the impacts of the pandemic have been so drastic, especially on the poor. It is predictable that without universal health care, millions of people will remain uninsured. It is predictable that without stable jobs, living wages and a guaranteed income, people will not be able to afford basic needs like housing, utilities and water. It is predictable that a government that prioritizes the wealthy will not prioritize the poor.
We now see how women, people of color — especially Black, Latinx and Native people — and the poor are disproportionately bearing the brunt of this virus. This has prompted widespread public support for bold government action to address long-standing social problems, including support for universal health care, keeping people in their homes and sending more resources to state and local governments. Low wage service workers are being recognized as “essential” to the economy, our flawed health care system has come under public scrutiny and some action is being taken to house the homeless, keep water running in our homes and secure close to $15 per hour for the recently unemployed.
And still, legislative efforts have not met the overwhelming need to focus on the poor and frontline workers. Instead, trillions of dollars have been released to financial institutions, corporations and the wealthy through low-interest loans, federal grants and tax cuts. Even the most recent attempt to redress legislative gaps provides more resources for lobbyists, mortgage servicers and health insurance monopolies, setting the stage for even greater wealth inequality, without securing health care, wages or income support for the unemployed. This is all unfolding as we enter the worst economic recession since World War II.
This is nothing new. As Callie Greer from the Alabama Poor People’s Campaign has been saying: “This system is not broken — it was never intended to work for us.”
Who Congress CARES for: A Tale of Two Responses
The legislative response to COVID-19 only reinforces this reality. Weeks before the CARES Act was passed, the Federal Reserve opened up $1.5 trillion in low-interest loans to financial institutions to keep the economy from crashing. The CARES Act then secured an additional $500 billion for corporations. Some of those same corporations are exempt from the paid leave requirements of the bill, so they’re keeping their “essential” workers at work even if they’re exposed to the virus, and often without essential protections, like masks and gloves or living wages.((The House version of the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act addresses these paid leave exemptions and extends unemployment payments through January 31, 2021. However, these payments should be pegged to economic indicators like unemployment and poverty rates, rather than an arbitrary date, to make sure there is relief available until the economy improves.))
The CARES Act also provides for $170 billion in tax cuts that will mainly go to those earning more than $1 million in 2019. This is in addition to the 2017 tax cuts, which will return $205 billion to the richest 20% this year, more than 100 times as much as will go to the poorest 20% of taxpayers.((Over the next ten years, the 2017 tax cuts will give $1.9 trillion to corporations and the wealthy.))
On top of this direct assistance to the wealthy, even those provisions that were intended to help struggling households and “Main Street” have somehow been garnished by Wall Street. The $350 billion that the CARES Act allocates to non-profits and small businesses is being quickly depleted. Economists from MIT and the University of Chicago found that in the early stages of these outlays, loans of more than $1 million accounted for roughly half of the overall funds. This means that large and wealthy companies that were seeking more money, including hedge funds and publicly traded companies, were favored over the small businesses for whom this program was intended. Finally, banks and creditors have been dipping into the $1200 stimulus checks – those with unpaid debts have had their checks seized by creditors when they so desperately need cash to pay for living expenses, not simply servicing their debt. The sum total of these checks is estimated to be between $250-300 billion. This totals well over $2 trillion that has gone to the wealthy in the past couple months.
Conversely, the CARES Act fails to meet the economic needs of the poor, even those who are on the frontlines of this crisis. There have been nearly 40 million jobs lost in the past two months. According to a survey by the Federal Reserve, 40% of people in poor and low-income households who had a job in February lost that job in March. Unemployment systems have been overwhelmed and eligible recipients have been standing in lines for hours, with many millions unable to file applications to receive payments. If and when they’re processed, those unemployment payments will count as unearned income against SNAP allocations. This means that, although one in five children is hungry, millions of people will be forced into a situation where they will need to choose between unemployment payments and food stamps; they are being told that they cannot have both. Already, food banks are stretched beyond capacity. This is not a question of a lack of food. Tens of millions of pounds of food are rotting and being dumped and destroyed, but ensuring that families have food on their tables is still not a legislative priority.
It should not be a surprise, then, that the $1200 stimulus checks have largely been spent on rent, food and bills. Indeed, short of monthly guaranteed payments for the duration of this recession, even a second round of payments will fall far short of the pressing needs of poor and low-income households on the frontlines of this pandemic.
The legislation also fails to provide for critical public health needs. Right now, we need access to universal health care, but the CARES Act leaves millions of people without health coverage and does not guarantee free or affordable treatment. It does not require Medicaid expansion in the 14 states that did not expand coverage under the Affordable Care Act. And it does nothing to keep hospitals open to administer testing and treatment.((Since 2010, at least 120 have been closed and 1 in 4 rural hospitals is currently at risk of closure.)) In fact, hospitals have been closed even during this pandemic and health care workers are losing their jobs. Rather than expanding Medicaid, the House version of the HEROES Act funds COBRA, subsidizing private health insurance companies, while leaving millions still uninsured.
Nor does the legislation secure the two basic requirements to contain the spread of this virus: housing or water. You cannot shelter in place securely without a home, but the bill undercounts the housing insecure population by 10 million people, doesn’t guarantee housing for all or provide any support for people who are out of work and who will need to pay rent and mortgages by the end of the summer. By April, there was a 15 percent increase in the number of renters who couldn’t pay their rent on time and homelessness is projected to increase by 40% in the weeks ahead. This is a crisis that cannot be fixed without rent and mortgage cancellations and secure housing for all.
Likewise, it is impossible to wash your hands without access to water, yet CARES does not address the long-standing crisis of water affordability or water shut offs in the country. The House version of the HEROES Act includes a temporary moratorium on water and utility shut offs, but it does not provide relief for water or utility payments. This means that, once the moratorium is lifted, millions of people will have to pay those mounting bills and their access to water will remain insecure.
The list goes on. The CARES Act put students with disabilities at risk of losing their financial assistance; excludes incarcerated and undocumented people entirely; and indigenous, native and tribal communities remain woefully underserved and neglected, without testing, treatment or even information about the pandemic.
In short, the CARES Act provides the wealthy with a comprehensive welfare program, while the poor and frontline workers receive piecemeal and haphazard relief.
Faith in the Rich
This is the logical result of the system that was in place before this pandemic. This system treats injuries to the rich as public crises requiring massive government action, but injuries to the rest of us as the unfortunate results of bad luck and personal moral failures. It is able to do this — and sustain this inequality — through the creation and reinforcement of the powerful ideological belief that an economy that benefits the rich will benefit the rest of us. We are seeing now how this holds true even in a crisis that affects us all. The rich will still be prioritized over everyone else.
This belief is at the core of the curriculum of most, if not all, economics departments in colleges, universities and graduate schools in this country, and it shapes our fundamental understanding of what the economy is and how it works. Notions of “job creators” or “makers and takers” or “trickle down” illustrate the popular versions of this idea: that the wealthy are the engine of our economy and their well-being will translate into ours.
It is easy to see how this plays out in policies that directly favor Wall Street, corporations and the wealthy. But we see this belief even in policies that appear to be more liberal and equitable. The CARES Act provides free testing without treatment, unemployment insurance without living wages and identified essential workers without securing essential protections. The failure to fully care for workers and the poor is in part the consequence of the fundamental faith that the rich will construct a healthy economy out of this crisis, an economy that can and will take care of us. But the power of this belief defies what we see every day about how the economic interests of the rich do not correspond with ours.
One of the economic concepts that undergirds this belief is known as pareto efficiency. Pareto efficiency says that the resources of an economy are efficiently distributed if an action makes someone better off, without making anyone else worse off. This may sound fair, but it creates and defends as “efficient” an economy where a few individuals can accumulate tremendous amounts of wealth.
By way of example, if two people are walking down the street and find $100, they could decide to split that money in many different ways: $50 each, $25/ $75, or one of them could keep all of it. All of these are considered efficient, because nobody is made “worse off” by any of the different distributions. Even a situation where one person keeps the $100 and the other gets nothing is considered efficient. This is true even if that person has many times more wealth than the other. This concept obscures the massive inequality that defines our society. It also guards the wealth of someone like Jeff Bezos from having to “share” it with others (through taxation or other means), because he “earned” his billions without making anyone else “worse off.”
In a different example, if one person were to ask another person for $100 out of their wallet, and receive it, this would be considered inefficient. One person gained $100, but the person who gave the $100 is, economically speaking, “worse off.” Again, this is true even if the person who gave the $100 had many times more wealth than the other person. Pareto efficiency thereby provides a useful argument against taking wealth away from people, even if you are one of the 3 white men who have as much wealth as half of the country.
This is because pareto efficiency does not make any moral judgments on the distribution of resources in an economy. Prioritizing the rich is not a moral choice, but merely an efficient way to grow the economy, regardless of how that wealth is used or distributed. In this way, economic principles like pareto efficiency help to justify the endless accumulation of wealth and power in the hands of a few and defend decisions to keep that wealth intact. So long as the pie is getting bigger, there is, theoretically, more pie for everyone.
Politicians on both sides of the aisle are influenced by this ideology and refuse, even in this crisis, to touch the accumulated wealth of the few. In New York state, Democratic Governor Cuomo passed an austerity budget that will cut $300 million from their hospitals. In Philadelphia, Mayor Jim Kenney revised the city’s five year budget to include government layoffs, salary cuts and cuts to public services. Neither Cuomo’s nor Kenney’s budgets made the proactive decision to tax the wealth in their constituencies. The same is true in Washington state, where Governor Jay Inslee has been told to exercise political courage to pass an austerity budget. This is for the same state that is home to two of the wealthiest people in the world.
Without increased resources from the federal government — or the willingness to tax the wealthy — state and local governments will face severe budget crises, especially as revenues from income taxes and sales taxes plummet. To balance their budgets, these cuts will continue and states will take more drastic actions. We are already seeing states re-open prematurely and can anticipate a second, more lethal wave of the virus. More likely, many states will run the risk of fiscal crisis, falling into receivership and being taken over by emergency management boards to sort out their finances. Over the last couple decades, we’ve seen this play out in hundreds of cities, such as Flint and Detroit during their water crises. Each time, things get worse for the poor and those who weren’t already poor often find themselves in the same position as the poor, without basic democratic protections, resources or support from their elected officials.
The Power of Poor People
Of course, the rich are not the driving economic force in the country. It has become crystal clear during this pandemic that poor people, including frontline workers, actually fuel this economy. At the 2018 April launch of the Poor People’s Campaign: A National Call for Moral Revival, Rev. Claudia de la Cruz from New York reminded us that, “we may not run this country, but we make it run.”
In the months leading up to the 1968 Poor People’s Campaign, Rev. Dr. Martin Luther King, Jr., articulated a clear formula for how the poor can claim the power that resides within our communities. He said: “Power for poor people will really mean having the ability, the togetherness, the assertiveness and the aggressiveness to make the power structure of this nation say yes when they may be desirous to say no.” This is the kind of power that can break through the fallacies of our current system, its unfounded faith in the rich and reveal a new way to organize our society.
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Indeed, popular movements arising out of deep economic and social discontent have compelled our government to take concerted action in the past. The organized outrage of the early 20th century broke out in a time when another pandemic and roaring inequality brought this country into the Great Depression. Facing mass unemployment, hunger and homelessness, millions of people demanded government action to secure jobs, labor protections and the general welfare. The unemployed councils of the 1920s and 1930s, and widespread popular resistance, sowed the seeds for the Social Security Act, Federal Housing Administration, Works Progress Administration and the Tennessee Valley Authority. Some decades later, the Great Society of the 1960s reshaped the federal budget: it reduced military spending, increased funding for social welfare and entitlement programs, established Medicare and Medicaid, created Head Start and passed the National Environmental Policy Act.
Each of these programs had their limitations, but they all redefined the role of government, pushed back against the power and ideology of the rich and channeled the wealth of this country towards the needs of the poor. This did not happen haphazardly. It was the result of poor people taking action together.
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Today, we see the early rumblings of similar action taking shape and bringing people together in new and powerful ways. Healthcare workers, nurses, students, childcare givers, food service workers, big box store employees, agricultural workers, delivery and mail carriers and others are taking action to call out gross inequities and make known what it is that we need. Actions to cancel rent are spreading across the country; homeless moms who have taken over empty homes are making visible the demand to house everyone; and wildcat strikes among low-wage workers, service workers, health workers and others are calling for living wages, guaranteed incomes, the right to unions and universal access to health care.
At a recent strike in Durham, North Carolina, Bertha Bradly, a 60 year-old fast food worker said, “I want people to know here in Durham, North Carolina, we’ve got to keep striking. We’ve got to strike around the world. We need to strike more than today. We need to strike every day. We need to shut it down, that’s what I want people to know, and let them know we are not just essential workers, we are humans. Let’s shut it down.”
This is a call for non-cooperation with a system that didn’t work for most of us before this crisis and doesn’t work for us now. It’s a call to assert our essential humanity and demand an economy that directs the abundance of our time towards people, not profits. It’s a call to be free from want, debt and fear.
This is not too much to ask. It is possible right now. And it is exactly what we need.