Friends,
It’s hard sometimes for ordinary people to follow economic issues. A big reason why economics stories are so inscrutable to laypeople is that they are oversaturated with numbers—swamped with a dizzying array of percentages, pricetags, fractions, and charts. For just that reason, we try to avoid unnecessary over-numbering here at The Pitch—and those numbers are often unnecessary because at its heart, economics is about who gets what and why, not who can land the highest score with the most zeroes.
But sometimes the news is in the numbers. That’s the case in this shocking new CNBC report. So let’s just go ahead and get the numbers out of the way:
The richest 10% of all Americans now own 89% of all American stocks.
The Federal Reserve reports that the wealthiest one percent of all Americans made $6.5 trillion in stock and mutual funds gains during the pandemic.
At the same time, the bottom 90 percent of American households made just over one trillion dollars in wealth from their 11-percent share of the stock market.
The number-free takeaway from all this is that never before in American history has so much of the stock market’s wealth been in the hands of such a tiny handful of wealthy people. It’s yet another lever that the wealthiest households are pulling to shift trillions of dollars away from the retirement accounts and household assets of the vast majority of Americans, thereby worsening income inequality.
This stock ownership inequality is a big reason why the wealthiest one percent of all Americans now hold more wealth than the entire American middle class:
And this should also serve as a reminder that the stock market is not the economy. The media loves to cover the daily ups and downs of the stock market as an essential indicator of America’s economic health, but that couldn’t be further from the truth. When stock prices soar and shareholders take home big paychecks from stock buybacks, 90 percent of all Americans see virtually none of that wealth. Until that changes—until we all can own a piece of the American economy—the gap between the haves and the have-nots will continue to widen.
The Latest Economic News and Updates
How You Can Help Build Back Better
By the time you read this newsletter, the narrative surrounding the Build Back Better Act will likely have changed three or four times from the headlines as I write this. Congresspeople and the Biden Administration are still deep in talks about how much to include and how much to cut from the reconciliation bill, and Wednesday morning alone saw at least two bogus stories about West Virginia Senator Joe Manchin that were debunked almost as quickly as they appeared.
My best advice at times like these is to ignore all the “palace intrigue” stories that claim to take you inside the halls of power and explain what’s really happening behind closed doors. Those stories are always placed by interested parties who have an agenda to push, and so they don’t offer a complete picture of the process.
Instead, you should follow the leaders who you trust and whose values align closely with yours—Washington State Representative Pramila Jayapal is a local favorite of mine—and respond to their calls for action. Leaders are discussing changes to the bill that would make a significant impact on the daily lives of Americans—paid leave is on the chopping block, according to the New York Times—and so politicians who are in on the conversation can signal which priorities need to be defended through constituent action like emails and phone calls. That’s the best way to keep a hold of your sanity and make sure that you can have the most impact during frustrating times like this. And if the Washington Post’s story about new taxes on billionaires and stock buybacks being on the table is true, Senate Democrats will require a good amount of support from the public to navigate the final bill through the inevitable trickle-down blowback.
The (Picket) Lines Have Been Drawn
As high-profile strikes continue around the nation, battle lines are being drawn. Agriculture Secretary (and former Iowa Governor) Tom Vilsack made an appearance at a picket line around a John Deere plant in Des Moines yesterday to support striking workers—a move that would have widely been seen as politically unwise just two years ago. At the same time that Vilsack was making his appearance on the picket line, Janelle Jones, the chief economist at the Department of Labor, enthusiastically tweeted her support for striking workers:
You’d have to look as far back as President Lyndon Johnson’s administration to find such full-throated support for striking workers from a high-level White House staffer. Meanwhile, a unionization drive at Starbucks stores in Buffalo has attracted the attention of the New York Times—and Starbucks corporate headquarters, which has closed several stores and brought in additional management at some contested locations. The stakes continue to rise.
It’s Not Inflation If Someone’s Walking Away with All the Profits
We spent a lot of time talking about inflation and supply-chain issues in last week’s newsletter, so I don’t want to dwell too much on rising prices this week. But I came across two very important perspectives on rising prices in the past week that I wanted to share with you. The first is Robert Kuttner’s piece in The American Prospect about how the “just-in-time” production techniques adopted by corporate America over the last few decades have caused our supply chain problems.
Back when most supplies were sourced domestically, we never had a supply chain crisis—because we made most of the stuff at home. There were some imports, but they did not overwhelm ports. And back when we had a regulated trucking industry and a strong Teamsters Union, we never had shortages of truck drivers because these were good jobs.
Those changes were made, of course, to maximize shareholder value—to sacrifice deep investments in American production and labor in exchange for a wafer-thin production and delivery chain spread across the globe. And Matt Stoller points out that while diaper prices have climbed 14 percent this year, that hasn’t stopped diaper manufacturers from doing over $2 billion in stock buybacks, enriching shareholders at the expense of consumers and workers. That $2 billion in profits could easily have been applied to temporarily keep costs low, but instead it was just handed out to the shareholder class with no strings attached.
Stoller writes often about corporate monopolies and how profits are never returned to consumers in the form of low prices. In one recent report, he charted the rising price of beef and the plummeting price of cattle due to monopolization in the beef industry over the past decade:
You see that yawning, ever-growing gap between sinking cattle prices and skyrocketing beef prices? That money isn’t going to ranchers. It’s not going to consumers. It’s going to corporate profits and a handful of wealthy shareholders.
How State Lawmakers Are Preempting Democracy
A new paper from the Economic Policy Institute adds a little more nuance to the national conversation about the economic starvation of America’s heartland. It turns out, state lawmakers in the Midwest are far more likely than their contemporaries in the North and West to preempt local regulations that strengthen worker power, protect the public health from Covid-19, and build economic security for people of color. Put another way: Cities and towns throughout the Midwest are enacting local legislation that combats skyrocketing rents, shrinking wages, and racist segregation-era policies. State lawmakers are blocking that legislation by quashing local power.
“Undoing harmful forms of preemption across the country, and especially in the Midwest and the South, is a critical step in promoting progress,” the authors conclude. “By failing to do so, present-day Midwestern lawmakers are reinforcing the deep inequality that their predecessors’ racist actions incubated throughout the region.”
It’s due to local failures like this that the federal Occupational Safety and Health Administration—OSHA—is trying to strip Utah, Arizona, and South Carolina of workplace safety authority. OSHA argues that those three states failed to keep workers safe during the pandemic, and that those failures are drastic enough to require federal intervention.
For the last fifteen years or so, progressives have taken the idea that states and cities are “laboratories of democracy” to heart by enacting higher minimum wage laws, worker protections, and other progressive legislation into law. But these stories show the limits of that philosophy: sometimes, those “laboratories of democracy” fall under the jurisdiction of trickle-down state governments that can put an end to the experiment. And too many workers live in states that don’t take their safety into consideration at all. For the millions of families living in those regressive states, only a robust federal intervention can truly make a difference in their lives.
Two Charts Proving the Pandemic Stimulus Worked
As Congress continues to argue about the importance of direct investments in the American people, more and more data shows that those investments helped avert economic disaster during the pandemic. One chart, via Noah Smith, shows how strong our economic recovery has been in comparison to the recovery from the Great Recession of 2008:
And the second chart, via Claudia Sahm, shows how significant the stimulus checks were for American families of color:
Real-Time Economic Analysis
Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.
On Friday morning at 10:30 am, join Jessyn and I for Civic Action Live. We’ll discuss the remarkable pro-worker push that’s happening around the country, the shocking new numbers behind American income inequality, and take your questions in real time.
In this week’s episode of Pitchfork Economics, Jessyn and Paul talk to two excellent journalists, the Washington Post’s Amy Goldstein and the Economist’s Elliott Morris, to explore why poverty declined last year when every mainstream economist predicted that the exact opposite would happen. The social safety net, bolstered by pandemic stimulus funds, performed exactly as it should. So why don’t we reform the safety net so it works that way all the time?
In his Business Insider column, Paul looks at the ways big corporations like Walmart have extracted wealth from rural America—and explains how we can revive American rural economies through small business growth.
Closing Thoughts
Earlier this year, Washington’s state legislature finally passed a capital gains tax, joining 41 other states and the District of Columbia in taxing extraordinary profits from the sale of stocks and luxury goods. Revenue from the tax, which isn’t collected until after the first $250,000 in profit from the sale of stocks within a given year, would be invested in childhood education programs and a tax rebate for low-income families. Unsurprisingly, a handful of ridiculously wealthy Washingtonians have decided to fight the tax, both at the ballot box and in the courts.
I wanted to call your attention to this editorial by Washington State Budget & Policy Center Senior Fellow Andy Nicholas, which point-by-point refutes the arguments against the capital gains tax. I’m sharing this not just because I agree with Nicholas, but because he demonstrates how to effectively communicate on economic issues.
I’m especially fond of this passage, which argues that paying the tax isn’t a matter of guilt or morality, but of good economic sense:
Every $10,000 we invest in high-quality early learning for a child today will increase their lifetime earnings, and those of their parents, by over $120,000. Any sensible financial adviser would encourage an investment with such a high rate of return, and lawmakers were right to make such an impactful down payment on our future prosperity and quality of life.
And he concludes by saying that the revenue raised from the tax is “good for the economy, for businesses and for people throughout our state — now and in the future.”
It’s a rare pleasure to see someone make a pro-business case for progressive economics as Nicholas does here. For decades, trickle-downers have framed their opposition as anti-business, anti-profit tyrants, but the truth is that raising wages, investing in education and infrastructure, and establishing regulations that protect the common good are great for business. If the people of a state aren’t healthy, prosperous, and optimistic about their future, they aren’t going to be able to participate in the economy to their fullest potential.
Yes, you and I both know that taxing the wealthy and investing in our neediest neighbors is the morally right thing to do. But the truth is that it’s good economic sense that works out better in the end for everyone—including the wealthiest among us. When we make that argument, we win. And I do love to win.
Be kind. Be brave. Mask up. Get vaccinated.
Zach