By Rhea Bhammer
The aphorism, ‘the rich get richer and the poor get poorer,’ has never rung truer than in the times of the coronavirus pandemic. While close to 40 million Americans filed for unemployment, the collective wealth of America’s 600-plus billionaire club surpassed a whopping $700 billion during the crisis, according to the Americans for Tax Fairness and the Institute for Policy Studies. Amid the global pandemic, Jeff Bezos, CEO and founder of Amazon, saw his fortune grow by an estimated $48 billion between March to June 2020. As of August, Bezos officially became the first person in the world worth over $200 billion. The question remains, with the stock market plummeting by 37% in March, how did America’s 1% continue getting richer? The answer to this lies in the parallel between the 2007-2008 stock market crash and the economic disorder in the first few months of 2020. While most Americans experienced severe financial losses, a significant proportion of billionaires saw their fortunes flourish. Following the housing market collapse, the median income of the bottom 99% increased by only 0.4%, while the income of America’s top 1% increased astronomically by 31.4%.
Here are two reasons why. For one, the government gave more financial resources to banks and large corporations, creating relief for homeowners by aiding the reduction of interest payments. This meant that homeowners benefited directly from the emergency government aid. Secondly, when the stock market was finally back on its feet, the passing of the Troubled Asset Relief Program under the Obama administration resulted in disproportionate bailout packages, allowing for the affluent to continue making investments and thereby profit, which the working classes were unable to afford the luxury of. This is only further exemplified by a survey conducted by the Federal Reserve in 2019, wherein the results showed that close to 40% of American adults would not be able to afford an emergency expense of $400, cash or otherwise, making investing in the stock market unfeasible. In the housing market crisis, the exceptionally low-interest rates mandated by the Federal Reserve therefore only benefitted the wealthy who already had disposable cash to invest in the first place, further widening the wealth gap. This could be seen in the coronavirus-rooted stock market crash in March when the virus had officially been declared a pandemic, dropping 2,997 points on the Dow — one of the largest point changes in its history. In three months’ time, however, a handful of the world’s wealthiest billionaires saw their fortunes grow by at least half of their existing net worths. This, again, was partly made possible by the Paycheck Protection Program, a $669-billion business loan established by the Federal Government that helped businesses maintain their payroll and retain employees. The PPP loans, too, have an interest rate of 1%, with no collateral required.
What lets billionaires stay billionaires, then, is government funds combined with their own resources that yield profits. What’s more, is that business-friendly tax laws and IRS loopholes allow for the rich to stay at the top. For example, regulatory filings with the Securities and Exchange Commission revealed that Amazon paid an effective tax rate of only 1.2% on $13.3 billion worth of pre-tax income, contributing a mere $162 million in federal income taxes; this being in 2019, after having paid no federal tax for two years consecutively in 2017 and 2018. If the system responsible for bridging the wealth and income inequality gap acts as its own biggest deterrent, then who is responsible to level the playing field?