Can we get back to "normal"? That would require addressing structural wealth inequality

Going back to pre-COVID reality won't save our economy. We need to restructure our grotesquely rigged system

Published February 9, 2021 5:50AM (EST)

Wealth Inequality | Coronavirus (Getty Images)
Wealth Inequality | Coronavirus (Getty Images)

This article was originally published by InsiderNJ. Used by permission.

Since the start of this mass death event, now on pace to kill a half million of our fellow Americans before the end of this month, our government has consistently failed to get ahead of the virus.

For decades we have plowed trillions of dollars, much of it borrowed money, into our military and security state apparatus in order to fight wars abroad on two fronts.

Of course, who does the media seek out after thousands of marauding Trump white supremacists almost seize the U.S. Capitol to disrupt the Electoral College and the peaceful transition of power? The very bipartisan array of generals and intelligence experts who didn't see it coming. Despite our armed vigilance against enemies abroad, we were easily upended from within by the lack of disposable masks or enough mutual regard for one another to embrace basic public health protocols so people we didn't know, or even our own family members, might live.

Here in the Northeast, we get daily briefings from New York Gov. Andrew Cuomo and New Jersey Gov. Phil Murphy, but the awful truth is that we are in unchartered territory despite their certitude that "a return to pre-pandemic normal" lies just ahead, on the other side of the next mountain of death.

The media fixates on each iteration of in-person dining and the question of how long the bars could remain open for the Super Bowl. It rarely asks the tough questions, like how our states and our nation will handle the reality that several million of the Americans infected by a still-mutating virus will likely have long-term disabilities that require extensive care.

At the same time, millions of American families teeter on the edge of the economic abyss of eviction or foreclosure, having gone through whatever savings they had, while the millionaires in Washington posture for partisan advantage.

Not calculated in the aggregate data crunched by policymakers is the long-term impact on the future lifetime earnings for a generation of students cut off from in-person instruction during the pandemic. A Pew Research Center survey found that one in five households with homebound students told researchers it was "very or somewhat likely" that their children would not be unable to complete their schoolwork because they lacked a reliable internet connection.

Here in the New York and New Jersey region, a year into the pandemic, both Cuomo and Murphy have said repeatedly that the pandemic has been most devastating for low-income communities of color where the lack of access to health care means that chronic untreated diseases had established a foothold, decades before COVID came calling.

Across the country, public health experts have flagged the same connection between race, poverty and the prevalence of the highly contagious and deadly virus. As it turns out, this is the same demographic cohort that is the backbone of the essential workforce that has borne the brunt of the pandemic. Yet even now some members of Congress would deny them an increase from the current $7.25 an hour federal minimum wage.

Credit President Joe Biden with opting to go big as he finalizes his $1.9 trillion COVID relief package to try to contain this hydra-headed crisis.

Biden was "in the room" in 2009 when he and Barack Obama came into office amid the Wall Street meltdown that cost millions of Americans their jobs, life savings, retirement accounts and homes. The recovery plan they fashioned bailed out Wall Street and assured liquidity at the top — at the expense of too Main Streets and Martin Luther King Jr. Boulevards that never saw a recovery.

Far too many of our elected officials were caught by surprise by the recent images of thousands of cars lined up to get a bag of groceries during the pandemic.

As early as 2009, Dr. Stephanie Hoopes, the national director of the United Way's ALICE project, had begun to document the prevalence of households in places like Morris County, New Jersey that struggled to make ends meet but were not on the radar — because they were not living below the actual poverty line, which failed to take into account the cost of essentials like child care or telecommunications.

This cohort was what United Way researchers would come to describe as "ALICE": Asset limited, income constrained but employed.

"ALICE is your childcare worker, the cashier at your supermarket, the gas attendant, the salesperson at your big box store, your waitress, a home health aide, an office clerk," describes the projects webpage. "ALICE cannot always pay the bills, has little or nothing in savings, and is forced to make tough choices such as deciding between quality childcare or paying the rent."

By 2018, a decade after the Great Recession, 37 percent of New Jersey's households were either living below poverty or struggling below the poverty line. Nationally, in that same year, the United Way reported that of the 121 million households in the U.S., 42 percent, or 51 million, "could not afford basic necessities of housing, childcare, food, transportation, health care, a smartphone plan, and taxes." And that was before the pandemic.

Since 2018, millions of Americans have lost their jobs and millions more have battled a life-threatening disease whose potential long-term health consequences are still not fully understood.

"ALICE families increased during the Great Recession and never really recovered 10 years after, so I would expect that things are even worse with the coronavirus recession," Hoopes said in a recent phone interview. "We are seeing an unequal impact of the recession on low-wage jobs, with women and minorities being hit harder than folks with a salary and higher wages."

According to Hoopes, much of the ALICE cohort finds itself caught up as essential workers, who are forced to work overtime outside their homes, putting themselves and their families at greater risk of COVID infection.

"These are the same households that have fewer resources to rebound in terms of attending to their own health or of being able to be able to miss work if they have to quarantine, care for a sick family member or home-school children," Hoopes said. "Then there's the second category of ALICE workers, who are not essential workers who have lost their jobs or had their hours cut way back. Those folks are suffering in different ways and the crisis has escalated much more quickly for them."

In their Feb. 5 joint press appearance, Cuomo and Murphy came out swinging at Washington, not on behalf of ALICE workers but over the $10,000 cap on the federal income tax deduction for local property and state taxes enacted as part of the Republicans' $1.7 trillion 2017 tax cut, which proved to be a major windfall for the nation's biggest corporations and wealthiest families.

With a tangible sense of grievance, both governors correctly observed that the cap had the result of transferring wealth from higher-taxed blue states to red states. They argued that this cap on property tax deductions was an extra penalty, on top of New York and New Jersey historically sending billions more to Washington than they get back in federal spending.

They argued that if the nation is to restore its pre-COVID economy, states like New York and New Jersey must be made whole on the SALT tax, and should get a cut of the $350 billion state aid that President Biden has proposed that reflects the proportionate impact of the pandemic.

But simply seeking to restore the pre-COVID economy cannot address the nexus of systemic racism and exploding wealth inequality that set the stage for the devastation of the pandemic. Both New York and New Jersey have their own ways of rigging the economy for the top one percent, who also, coincidentally or otherwise, are large campaign donors.

As Peter Woolley, the director of Fairleigh Dickinson University's School of Public and Global Affairs, pointed out in a recent op-ed, this effort by Democrats like Cuomo and Murphy to reinstate the full property tax deduction for homeowners coincides with millions of Americans being "on the brink of eviction":

That limit of $10,000 is relatively recent, a product of the faux Trumpian tax reform of 2017, the gift-of-the-century to America's global corporate behemoths, Wall Street, and the upper-end of Main Street. But at that upper end of Main Street, where people own properties big enough to be taxed well over $10,000, there is apparently discontent — despite that they also had their top income tax rate reduced by four percentage points (to 35% from 39%).

The kind of structural change required to spark the broad-based economic expansion we need requires looking at the old arrangements and subsidies in light of current circumstances. For decades, even as productivity grew and technology proliferated, America's working class couldn't catch a break as student and medical debt exploded while wages declined or remained flat.

Should the fabulously house-rich be able to build ever larger castles that act as shelter not just for their family but for their income, while so many are homeless or living in unsafe conditions, where COVID and other diseases can run rampant, threatening not just families but entire communities?

Should New York State continue to let investors hold on to the 5 cents per $100 transaction that was first imposed by a Republican governor in 1905 and collected up until the 1980s, when a Democratic governor and New York mayor decided to let the investor class keep it?

New York Assemblyman Phil Steck, an upstate Democrat doesn't think so. He has been leading the charge to stop letting the investor class keep the nickel.

"The tax is in sum and substance one quarter of one percent, it's nothing," Steck said in a phone interview. According to recent data he cited, it amounted to $1.6 billion in June of 2020 alone. "In the last 10 years, we have given up $138 billion," he said. "It is the classic race to the bottom. The whole public sector has been starved. It all started with Reagan and the anti-tax thing and the idea that government is bloated. Yet huge private corporations have as much bureaucracy as government."

My advocacy of Steck's position recently earned me the disapproval of Errol Louis, a Daily News columnist and anchor for the cable news channel NY1, who suggested that pursuing that nickel was a fool's errand in today's world, where we need to do all we can to placate big wealth.

The fact that "the 1905 law remains on the books" has created "an artifact in everybody's stock market paperwork," Louis writes.

The tax is still calculated, but 100% of it gets returned. That makes it seem as if a mouth-watering treasure has been handed over to Wall Street players for the last 40 years. It's a tempting target for activistslabor unions and cash-strapped state lawmakers.

A few weeks ago, for example, reporter Bob Hennelly of the Chief-Leader asked Gov. Cuomo about the tax at a news conference. "It's generated, in the last 10 years, $138 billion, even as the state closed hospitals to communities of color," Hennelly said, noting that "we're shoveling out this hidden subsidy to Wall Street."

Not so. Whatever the merits of not collecting the tax, the digital revolution has scrambled, and nearly obliterated, the remaining connections between Wall Street as a physical place and the multi-trillion-dollar financial transactions of the stock market, which take place on computers that can be sited anywhere in the world.

Louis observes that "most of the billion or so transactions processed by the New York Stock Exchange each day" actually take place across the Hudson River, on servers in Mahwah, New Jersey. "It isn't clear whether New York has the legal authority to tax those transactions."

The legal analysts I have consulted suggest that New York would prevail if it had the political will to press its case. But that, of course, would mean annoying some very deep pockets who've been running the table for a long time.

If Andrew Cuomo and the rest of the Empire State's elected officials are too queasy to go after nickels from Wall Street, perhaps it's time, as some in Congress believe, for a national stock transfer tax. Imagine just how many nickels we could have collected toward funding the Green New Deal from GameStop's roller-coaster stock market ride.

By Bob Hennelly

Bob Hennelly has written and reported for the Village Voice, Pacifica Radio, WNYC, CBS MoneyWatch and other outlets. His book, "Stuck Nation: Can the United States Change Course on Our History of Choosing Profits Over People?" was published in 2021 by Democracy@Work. He is now a reporter for the Chief-Leader, covering public unions and the civil service in New York City. Follow him on Twitter: @stucknation

MORE FROM Bob Hennelly