The Billionaires Are Winning

From Farhad Manjoo’s, “Even in a Pandemic, the Billionaires Are Winning”. The title should begin, “Especially in a Pandemic”.

Manjoo turns to Chuck Collins, a scholar of inequality at the Institute for Policy Studies, to tell the sordid story.

“In previous recessions. . . billionaires were hit along with the rest of us; it took almost three years for Forbes’s 400 richest people to recover losses incurred in 2008’s Great Recession.

But in the coronavirus recession of 2020, most billionaires have not lost their shirts. Instead, they’ve put on bejeweled overcoats and gloves made of spun gold — that is, they’ve gotten richer than ever before.

On Tuesday, as the stock market soared to a record, Collins was watching the billionaires cross a depressing threshold: $1 trillion.

That is the amount of new wealth American billionaires have amassed since March, at the start of the devastating lockdowns that state and local governments imposed to curb the pandemic.

On March 18, according to a report Collins and his colleagues published last week, America’s 614 billionaires were worth a combined $2.95 trillion. When the markets closed on Tuesday, there were 650 billionaires and their combined wealth was now close to $4 trillion. In the worst economic crisis since the 1930s, American billionaires’ wealth grew by a third.”

Meanwhile, as the rise in homelessness and strained food banks illustrate, ordinary people are losing.

Weekend Assorted Links

1. Nothing Says Midwest Like a Well-Dressed Porch Goose. Long live regional differences.

2. The people behind ESPN W, the “women’s version” of ESPN, got it going on. This story, “Scout Bassett’s incredible journey from an orphanage in China to the Paralympic Stage“, is typical of their inspiring reporting. At minimum, check the vid near the bottom of the story. Go Bruins.

3. “I’m a Developer. I Won’t Teach My Kids to Code, and Neither Should You.”

“Coding is not the new literacy.”

Thesis, learning coding syntax, by itself, is woefully insufficient. Excellent argument with serious pedagogical implications for Ms. Zema, other middle school math teachers, parents, everyone really.

4. World Geography quiz. The ten fastest growing cities are all projected to be in. . . ?

5. A silver lining to the market sell-off? Trump advisers fear 2020 nightmare: a recession. Granted, poor form to even suggest that a recession would be a positive development, but what if that is what it takes to exile him to his golf courses?

6. This is important “sports” journalism.

 

Personal Economic Balance

First Born (FB) likes her Starbucks and thinks nothing of dropping 4 bills at Schultz’s stores. Last summer she capitalized on her selective private liberal arts education to secure a part-time job weeding a neighbor’s yard. Late summer, on the way to a concert in Portland, I asked, “Would you keep drinking Starbucks if each time after your last sip you had to immediately walk outside the store and weed for thirty minutes?”

The “probably not” look on her face was a thing of beauty. Maybe there’s a glimmer of hope she’s learning the value of a dollar, or more specifically, four dollars.

Gears spinning in her head, and captive in the Japanese compact, I decided to launch into my “economic balance” talk which was so brilliant it deserves this larger audience.

The economic balance equation is a simple, three-parter: One’s hourly wage + one’s hours spent working – one’s purchases also known as expenses, overhead, or standard of living.

If a person make’s $10/hour and chooses to spend $4 for a Starbucks drink, then the cost was 30 minutes of work time (rounding and after taxes). For a therapist, plumber, or attorney making $100/hour, the same Starbucks costs 3 minutes of work time. I would not weed for 30 minutes for a extra hot, nonfat, grande green tea latte, but I would for three.

Let’s zoom in on each part.

1) Hourly wage. The challenge here is that in the U.S. in the last ten to twenty years the average person’s wages have fallen relative to (very low) inflation mostly as a result of amped up global economic competition. U.S. consumers buy inexpensive goods from China; to try to stay competitive, companies shift their manufacturing operations to distant places where their labor costs are greatly reduced; a lot of workers lose their jobs; margins shrink; and then new workers are offered some of the previous jobs at much less than their predecessors made.

Or the domestic version. States experience massive budget debts as a result of recession, increased unemployment outlays, accelerating health care and higher education inflation, and unsustainable pension promises to public employees. Educators in Washington State get their pay reduced and the state is still $2b in the hole. Few people make $100/hour, most are much closer to $10.

2) Hours spent working. Unemployment is high as is underemployment and economists expect that to remain the case for the foreseeable future. Record numbers of unemployed have quit looking for work and don’t show up in the 9.1%, and for 20-24 year olds, unemployment is 15+%. The double whammy income challenge—how to increase one’s average hourly wage and hour’s spent working in a sputtering economy? Add in the 2007-2008 bursting of the housing bubble and it’s a triple whammy since many people owe tens of thousands more on their homes than they’re now worth.

Which leads to, 3) take your pick—expenses, overhead, or standard of living—the key variable in many, many people falling even further out of economic balance. Workers can’t throw a switch and increase their pay or their opportunities to work additional hours because the changes in the global and national economy are beyond their individual control. Those changes are not temporal either, they’re long-term and systemic. We live in a new economic reality of intensified competition from all over the globe. Don’t listen to politicians who want you to believe we’re special. We’re not.

Often there’s a debilitating time lag between workers’ lower wages, reduced hours, and accustomed standard of living.

Seneca said, “. . . the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man.” My 21st Century adaptation, “The person who adapts to making less money and learns to enjoy a less materialistic life, is the truly rich person.” Our expenses are the part of the equation we have the most control over. Worth repeating. Our expenses are the part of the equation we have the most control over. That means we have to do a better job of distinguishing between the few things we need and the neverending number of things we want.

One example. While it’s increasingly vogue to argue otherwise, many contend a college education is a necessity, but attending one that charges $50k+/year is obviously not. Due to a mix of factors—including off-the-charts economic anxiety, age-old social status concerns, and slick higher education marketing campaigns—too many high school seniors enroll in colleges that are more expensive than their families can realistically afford. As a result, many twenty-two year olds, whether they make it to graduation or not, end up deeply in debt. Some authors, comparing them to indentured slaves, are referring to them as “indentured students”.

If a young person’s scholarships, merit aid, personal and family savings, and part-time work can’t cover the cost of their preferred college, they should choose a more affordable path. If you’re a parent being asked to extend yourself beyond what’s possible, it’s okay to say, “Can’t afford it.” The double economic whammy will be challenging enough, why make it a debt-ridden triple one?