By Angela Vullo
July 9, 2020–Much has been hypothesized lately on the current crisis that faces our country. With all the attention on COVID-19, the deeper underlying crisis has gotten buried. It’s time to pull back the mask. Unmask Wall Street, and build infrastructure.
What we will uncover is an economy already deathly ill, dominated by the Wall Street system which has presided over the decades-long destruction of our productive capability in manufacturing, R&D, infrastructure, and the labor force. The social consequences of prioritizing finance over the necessarily long-term investment in technological progress have been horrifyingly obvious in the opioid crisis, the increased mortality rate, exacerbated racial tension, obscene inequality, and other social ills.
The public health crisis and ensuing economic debacle have done nothing to disrupt this reality. Indeed, top Wall Street looters are continuing to go unscathed, and even enjoy stoking the flames of racial tension among the have-nots. You can almost hear them chuckling all the way to the bank, as no one pays attention to their crimes.
Finger-pointing that other sections of the population are suffering less than you will do nothing to improve the situation. Until there is a political movement which demands policies to dethrone Wall Street and replace it with FDR-style policies of economic progress for all, our nation is headed toward disaster.
The Fed’s Disaster Program
On June 30, 2020, as U.S. deaths due to the virus reached over 125,000 and unemployment over 45 million, the House Financial Services Committee held a hearing entitled, “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response.” Testifying before the committee were Federal Reserve Chairman Jerome Powell and Treasury Secretary Steve Mnuchin.
To set the stage for the hearing, Wall Street on Parade, the day before, compiled some questions to be asked of Powell and Mnuchin. Question number one was the following:
Since September 17, 2019, the Fed has made more than $9 trillion cumulatively in revolving repo loans to the trading houses on Wall Street at interest rates far below what the market would charge. Since mid-March, the Fed has made hundreds of billions of dollars of these loans at almost zero interest to Wall Street, that is, at 1/10th of one percent interest. Why, then, is the Fed charging the State of Illinois 3.82 percent interest on its loan under the Municipal Liquidity Facility? The states of our nation build our roads and bridges and educate our children, along with funding many other essential services. Why should a state have to borrow from the Fed at 38 times the rate of a Wall Street trading house?
Needless to say, that question was not asked, or answered. Nor were there satisfactory answers given to questions about the slowness of spending to support businesses, states and local governments, and non-profits, about the Administration’s plans for future recovery programs, or looming disasters once current emergency spending, such as the emergency aid for the unemployed, runs out at the end of July. There was even a certain amount of happy talk about prospects for a recovery sooner than expected.
The question is, recovery of what? As of early June, the markets had recovered most of their losses for the year. Is that what we need?
Before COVID, we were told that the economy was the “best in U.S. history,” as shown by the fact that the stock market was so high and unemployment low. If this was the case, why the need for a Wall Street bailout such as the repo loans cited above?
After COVID, when the stock market began to decline, it was blamed on COVID. However, the underlying reality was much different.
Financial experts estimate that the total amount of derivatives on the balance sheets of the Wall Street Banks is approximately $275 trillion, give or take a trillion or two. The huge bubble in corporate debt is threatening to pop. In addition, the great unemployment figures that were cited were based on low wage service jobs, and probably 2-3 per person, at the same time that high-paying manufacturing jobs continue to disappear.
For the moment, however, Wall Street is riding high. ABC News reported on July 2, 2020:
Between March 18 and June 17, as the pandemic raged, the combined wealth of the 614 U.S. billionaires increased by $584 billion, according to an analysis released late last week by the Institute for Policy Studies, a progressive think tank based in Washington, D.C. The researchers calculated the billionaires’ wealth gains based on real-time data from Forbes.
Experts said the wealth of the richest Americans is tied more closely than the rest of America to the stock market, which crashed at the onset of the crisis but has rallied since — largely detached from the broader economic picture.
When you create a society where corruption is rewarded, as on Wall Street, at the same time that opportunities for achievement dwindle, you have the makings of one very justifiably angry population. Our society is leaving many of our people out in the cold, with no way out but to rebel. When young people are taking their own lives, or the lives of their loved ones, because they have a reckless disregard for human life, Houston, we have a problem.
We cannot simply spend ourselves out of this mess. The only way out is to return to the kind of scientific progress that once made our country great, and inspired our young people to use their minds, instead of posting their latest selfie on the internet. Without this kind of significant change, I’m afraid to say, we are doomed.
Painful, Ugly Realities
As the characteristics of those contracting and dying of COVID begin to hit the light of day, a much different picture is being painted than was generally expected. No longer are the deaths just a bunch of dead statistics, but those of real people. People are dying not just from COVID alone, but from a multitude of contributing factors, which involved their everyday conditions of life. COVID might have been the deadly catalyst, but ultimately, the cause of death was much more complex and heinous.
For example: More than 40 percent of all deaths from COVID in the United States have been of residents of nursing homes. Another major cluster of infections, which have produced higher rates of infection and death than the general population, has been in the prisons. A third is meat-packing plants.
In the cases of prisons and meat-packing plants, of course, the population being hit is heavily non-white, for systemic reasons totally outside the realm of COVID.
During the House Financial Services Committee hearing on June 30, Chairwoman Maxine Waters gave the following overview:
The pandemic continues to have a terrible impact. More than 126,000 people have lost their lives in the U.S., and this past Sunday, there were over 40,000 new cases of COVID-19, the highest number of daily cases yet.
The unemployment rate in May was 13.3 percent, nearly four times higher than it was last May. All of the job gains of the past decade have been wiped out.
Communities of color have been affected disproportionately both by the virus and its economic impacts. The Centers for Disease Control reports that as of June, Black and Latino Americans are 4 to 5 times more likely than Whites to be hospitalized for COVID-19. And half of all black adults are not working.
During the 2008 foreclosure crisis, we saw a similar disproportionate impact on communities of color. This was followed by an unequal recovery, where white households regained the wealth they lost; black and brown households are still trying to catch up. We cannot endure another unequal crisis or unequal recovery. Your agencies and Congress must do all that they can to ensure that history does not repeat itself.
Rep. Waters’ focus on inequality is being widely echoed by think-tanks and others. In a news report from ABC News on July 2, 2020, Chuck Collins, the director of the program on inequality at the Institute for Policy Studies, referred to extreme inequality as the “preexisting condition” to COVID, which has been accelerating for 40 years.
In the same report, Dr. Mary Bassett, Director of the FXB Center for Health and Human Rights at the Harvard T.H. Chan School, linked the racial disparity to poverty. “To be black or Latino or Native American in the United States is to have a much higher risk of being poor,” Bassett said.
Is Inequality the Problem?
While others debate how to restructure our inequitable system, an op-ed in the July 1 edition of the New York Times reported on philosopher Dr. Harry Frankfurt’s challenge to the notion of income inequality as usually conceived. I quote:
An influential essay published in 1987 by the philosopher Harry Frankfurt suggests that we have misidentified the problem. Professor Frankfurt argued that it does not matter whether some people have less than others. What matters is that some people do not have enough. They lack adequate income, have little or no wealth and do not enjoy decent housing, health care or education. If even the worst-off people had enough resources to lead good and fulfilling lives, then the fact that others had still greater resources would not be troubling.
When some people don’t have enough and others have vastly more than they need, it is easy to conclude that the problem is one of inequality. But this, according to Professor Frankfurt, is a mistake. The problem isn’t inequality as such. It’s the poverty and deprivation suffered by those who have least. . . .
Professor Frankfurt’s essay didn’t persuade all his fellow philosophers, many of whom remained egalitarians. But his challenge continued to resonate and, in 2015, even as concerns about economic inequality were growing in many corners of society, he published a short book in which he reaffirmed his position.
And Professor Frankfurt, it seems, has a point. Those in the top 10 percent of America’s economic distribution are in a very comfortable position. Those in the top 1 percent are in an even more comfortable position than those in the other 9 percent. But few people find this kind of inequality troubling. Inequality bothers us most, it seems, only when some are very rich and others are very poor.
Even when the worst-off people are very poor, moreover, it wouldn’t be an improvement to reduce everyone else to their level. Equality would then prevail, but equal misery is hardly an ideal worth striving for.
So perhaps we shouldn’t object to economic inequality as such. Instead, we should just try to improve the position of those who have least. We should work to eliminate poverty, hunger, bad schools, substandard housing and inadequate medical care. But we shouldn’t make the elimination of inequality our aim.
The Role of Despair
On February 2, 2020, this writer penned the article “Congress Fiddles While Deaths of Despair Mount: The Masque of the Red Death”. COVID had not hit the United States yet, but it was already impacting China, Italy, and other countries in a major way.
However, another disease was fast at work in the United States, the disease of despair. Thousands of American citizens were taking their own lives, whether it be from drug overdoses or other forms of suicide.
Congress should have acted then, calling for emergency measures to deal with the increased death rate. The deaths now, from many different causes, are piling up, and every day that passes, the despair grows.
On July 1, the Washington Post reported on a national spike in opioid overdoses, which have begun to overwhelm localities which previously had seen a decline. While official statistics will not be available for months, the on-the-ground tracking is alarming:
Suspected overdoses nationally — not all of them fatal — jumped 18 percent in March compared with last year, 29 percent in April and 42 percent in May, according to the Overdose Detection Mapping Application Program, a federal initiative that collects data from ambulance teams, hospitals and police. In some jurisdictions, such as Milwaukee County, dispatch calls for overdoses have increased more than 50 percent.
The Post article plausibly links this increase to the economic devastation, isolation, and other disruptions during the coronavirus crisis. Those realities have clearly accelerated the epidemic of deaths of despair throughout the nation.
Flattening the Curve
There is no question that we must flatten the curve of infection spread in order to decrease the COVID death rate. The same is true for job loss. But, if we are going to solve the even greater economic sickness, that requires actually changing the rules of the game.
During the period of the FDR-JFK era, our economy was almost the reverse as to what it is today. Investments into manufacturing and industries were much greater than investments into financial wheeling and dealing. Controls of Wall Street speculation through Glass-Steagall and other regulations were in place. In a sense, we could describe the appropriate strategy as flattening the curve of financial transactions, while lifting that of investment in the productive economy.
While no one saw COVID, per se, coming, the warning signs for a new pandemic, as well as a multitude of other catastrophic events, were there. Imagine that COVID never happened. Would we be out of the woods? Not by a long shot. What about other crises that are out there looming on the horizon, whether it be a deadly bacterium in the water system, a bridge or tunnel that is over 100 years old, or maybe the antiquated and overloaded national power grid? When your critical infrastructure is 50-100 years old, or older, there is a big selection available. Take your pick.
The danger from this current financial bubble, coupled with the disintegrating infrastructure is a deadly combination, and it is not going to go away, and will continue to wreak havoc on the population.
Currently, our lawmakers are searching for the magic bullet as to what will put the country back on track. Will it be another stimulus? Or, maybe investments into health care. What about transportation, education, or affordable housing? They all sound good, but none of them will work in isolation.
During the 1930s, and systemic crises going all the way back to the Black Death, systemic crises were always a combination or conjuncture of factors. This current conjunctural crisis has three components: financial, physical (as in the collapse of infrastructure), and social. All three interrelated parts must be addressed simultaneously if we are to correct the problem and dig ourselves out of this deep, deep hole.
An Infrastructure Solution?
On April 28, 2020 the American Society of Engineers ASCE), who reported in 2017 that the U.S. report card for infrastructure was D+, released the results from a new poll. Here are their findings:
If there is anything that can bridge the partisan gap between Americans, it’s reliable, safe, and high-quality infrastructure. In fact, 80% of Americans support rebuilding our nation’s infrastructure more than almost any other top issue facing the current Administration.
What does this 80% number mean? Americans support infrastructure investment more than reforming our healthcare system (77%); increasing availability of high-quality childhood education (72%); and ending the opioid crisis (72%). Nearly everyone (97%) said that America’s infrastructure is at least somewhat important. Only strengthening the economy ranked slightly higher, at 81%.
For more than 40 years, we have seen and lived the effects of the collapse of infrastructure. The middle class has shrunk, wages have stagnated, union membership has declined, and overall life expectancy has dropped. People are feeling the pain.
This decline is reflected in COVID deaths, jobs and business losses, and social unrest. The demonstrations have been attributed to racial discrimination and police brutality, but, at this point, it would be impossible to separate those protests from the reactions to the overall components of this decline.
Fortunately, some members of the U.S. Congress have responded to the demands from many national organizations, state and local elected officials, union leaders, and grassroots organizations who are calling for a National Infrastructure Bank to begin addressing this crisis.
On March 31, 2020, H.R. 6422 was introduced into Congress by Representative Danny Davis, (D-IL), calling for a $4 trillion National Infrastructure Bank. Despite other congressional bills to build infrastructure, this is the only one that is even in the ballpark.
The bank would build the country as a whole. It would invest in all infrastructure, urban and rural, hard and soft, transportation, power, water, schools, hospitals, affordable housing, broadband and more.
H.R. 6422 would create 25 million new jobs. It would level the playing field by paying Davis-Bacon Wages, promote Project Labor Agreements and Buy American, along with investments into poor and disadvantaged communities, citing the 1964 Civil Rights Act. The jobs program has a big focus on youth, through its call for apprentice programs to train new hires, enticing young people to join the work force.
Wouldn’t it be nice if this were the “new normal?”
Until these kinds of provisions are enacted, the dying will continue. How long can we afford to wait?