As I listen to news anchors express their surprise at the rising stock market amidst an economic disaster, it highlights a common misunderstanding of what the stock market represents at this moment in history. I have yet to see anyone explain why the rising stock market is a bad sign, so I’ll break it down. What we are witnessing is small businesses being consumed by larger businesses, and the pandemic widening the wealth inequality gap. This is precisely why the rising stock market is actually a bad sign for America’s overall economic health.
When the pandemic hit, many businesses were forced to close. People generally stayed at home as much as possible. This unfortunate reality played right into the hands of companies like Amazon, Walmart, and other large, publicly traded companies. They were already positioned to absorb the new business with a delivery apparatus already in place. What happened thereafter is much worse than many people may understand. In addition to absorbing the business of local stores in the short-term, those businesses are now absorbing the business of the thousands of small businesses that have already failed.
Who is the rising stock market helping?
Roughly 55% of Americans own stock in one form or another, mostly in retirement accounts like a 401K. Most of those people have watched their accounts grow dramatically over the last four years, even with some huge dips at the beginning of the pandemic. Those people might be inclined to say “the economy is doing well”. Well, they could not be more wrong.
This economy has been destabilized. Stability is fundamental to any economy. In order to restore stability, a massive effort to restore the financial welfare of middle and lower income Americans and small businesses must be undertaken. Our current trajectory is a short cut to modern slavery. As a result of our Federal government’s woefully inadequate actions on both the pandemic and the economy, millions of Americans have been devastated. Millions have watched their jobs disappear, and thousands of business have shut down indefinitely, if not permanently.
Meanwhile, the 45% of Americans that do not own stock have fallen further behind. Millions of Americans are out of work. We are seeing food banks with lines that stretch for miles, such as we have not seen since the Great Depression. In addition, the number of Americans that own stock is dropping, as some Americans displaced by the pandemic have been forced to sell their stock in order to survive.
How do we rebuild the middle class?
Here’s the problem. When America was truly great, the wealthiest Americans (Carnegie, Mellon, Rockefeller) paid an effective tax rate of about 70%. Basically, that is what created the middle class in America. Today, our tax code is such that the wealthiest Americans pay little to no taxes. For those who identify as “Reagan Republicans”, I have a fun little fact for you. It was during the Reagan Administration that the highest income bracket paid less tax than those below it for the first time in US history. It was called “trickle down economics”, and the bogus economic theory actually marked the beginning of the end of the middle-class. Yes, it was during the 80’s that wages stagnated and have not significantly risen since.
Take a long look at Jeff Bezos. Amazon has basically taken over the planet, and the pandemic has enriched them exponentially. They are the perfect example of the pandemic widening the wealth inequality gap. When citizens make that much money, they have a civic duty. Seriously Jeff, why are you not sponsoring relief projects for billions of dollars? It would be different if you paid any taxes, but you don’t. OK, so you gave 3B to environmental causes. Good for you, but seriously? I am imagining some kid approaching you and asking if you have any money to save the planet. You pull $100 from your pocket and give him 3 $1 bills. He looks at you with disgust and says, “Mr. Bezos, I said this money would go to saving the planet. You have all that money and $3 is the best you can do?”
How do we change our course?
The Federal government completely failed in their pandemic response, causing thousands of small businesses to fail. They did, however, pass out trillions of dollars in corporate welfare to larger companies, many of whom didn’t need it. Now those displaced small business owners will have to borrow money to reopen their businesses. Who will they borrow from? Well, quite possibly from a lender that got bailed out with their tax money. Get it?
Let’s just be clear on where we stand today. The stock market is rising at the expense of small to medium size businesses that have been cannibalized by the pandemic. That is why the rising stock market we see today is a bad sign. The only way out of this mess is very simple. The tax code must see a dramatic change that includes the wealthiest Americans paying their fair share. That tax revenue can then be spent on massive projects like the infrastructure. Those kind of projects create good jobs and will serve to rebuild the middle class. Those projects are what pulled the US out of the Great Depression. The only way this can all happen is if the Democrats win the 2 senate seats in the GA runoff election. If not, Americans will see the wealth gap continue to widen for at least another 2 years.
-Rondym Kiefe