The Specter of Austerity May Be Looming
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As the Dow Jones Industrial Average hit record after record, reaching nearly 30K at its highest point on February 12th of this year, the Trump administration touted the strength of the longest U.S. economic recovery in history, while critical scholars and journalists argued it was only a recovery for the wealthy few — pointing to stunning wealth inequality in the face of booming markets.
Indeed, by 2019 Warren Buffett ($88.3B), Bill Gates ($97B), and Jeff Bazos ($160B) owned more than the entire bottom 50% of American households combined. Further, according to Pew Research Center, only the wealthiest families experienced gains following The Great Recession, and “as a result the wealth gap between America’s richest and poorer families more than doubled from 1989 to 2016.” Wealth disparities in the U.S. are further exacerbated by race: the median wealth (household net worth) of Black families ($3,500) is only two percent of whites ($147,000), with Latinx households ($6,500) fairing slightly better at approximately four percent that of white counterparts.
Perhaps rising wealth inequality shouldn’t be surprising given the government response to the Great Recession of 2008, which was to bail out the very banks and corporations that engaged in the theft and fraud that caused the financial crisis in the first place, while working people were saddled with incredible debt, thrown out of their homes, and lost their jobs. By 2010, a billionaire-backed astroturf “Tea Party” movement joined a new Republican senate and growing Republican-dominated state houses to demand that the cost of the recession and bailouts be covered not by those responsible and with the money to cover it—but born by families and local communities. They demanded austerity for working people while the largely white owning class ran away with the bag.
Following 2008, austerity took shape in the U.S. largely at the state and local level. This is because unlike the federal government, states and local districts require a balanced budget by law. When an economic recession hits and state/local revenues drop due to a shrinking tax base (people out of work, getting paid less, relocating to cheaper places, and so forth), states and local governments cannot simply print money or run on a deficit. They must tax and/or cut their way out of the shortfall, and, cut they did. According to a 2012 Brookings Institute study, following the market dump in 2008, per-person state spending was cut by an average of over $100. In addition, “29 states cut services to the elderly, 34 cut spending on K-12 education, and 43 cut funding to colleges and universities.” These largely hit to public sector services and employment, and these cuts and job losses had a disproportionate effect on people of color—Black households in particular.
Over 20% (1 in 5) of Black adults in the U.S. work in the public sector, and among them, Black women are most sensitive to cuts in public employment and services. In fact, research suggests that “the black/white employment gap for women increased almost six-fold during the post-recession years.” While it is true that employment returned for many of these Black workers—unemployment rates in late 2019 were at a near 50-year low — the “jobs recovery” consists of much lower paid, lower skilled, more precarious forms of employment. In fact, six of the ten occupations tracked to add the most jobs in the next decade are “low skill,” and pay less than $27,000 per year.
Whatever one might think of the jobs recovery, the global COVID-19 pandemic and simultaneous economic downturn have completely erased that progress in the last four weeks, with an astronomical 22 million people filing for jobless claims. In response to the health and economic crisis the federal government passed stimulus packages, including the CARES Act, that seem to repeat the mistakes of 2008, but with greater largesse and perhaps a more depressive effect on the lives of working people. Rather than provide stimulus and support for the millions of Americans losing their jobs, healthcare, and livelihood amidst a global health emergency, approximately 80% of the most recent stimulus will go to those earning over $1M per year — in comparison to the one time, heavily means-tested, seriously delayed $1,200 “relief” checks for the common worker.
Further, the stage seems to be set for brutal austerity down the line as state and local budgets predict massive shortfalls. In fact, major investment banks predict the GDP will shrink by nearly 30% as unemployment continues to rise and the country struggles with ongoing shelter-in-place orders. Such a contraction could cause a trillion dollar shortfall in state budgets across the country and will overshadow the $150B support for states provided in the CARES Act. This poses a unique threat to working class people and people of color who most depend upon the jobs and public services that will be stripped away to balance budgets on their backs.
Moments of fiscal crisis and austerity are also seized to privatize public sector services and employment. Nowhere is this threat and its implications more clear than in the case of the U.S. Postal Service. Already hamstrung by the Postal Accountability and Enhancement Act that forces the USPS to somehow cover the retirement health care costs for all of its workers seventy-five years into the future (something not required of any other entity in the U.S.), the USPS is now reporting 30% drops in mail service and projects, a $13B revenue drop in 2020 due to the pandemic. So far, neither the Trump Administration or Congress have stepped in to fund this public institution that has been a site of stable Black employment and labor struggle since the Civil War. Risks to the USPS are risks to Black workers, noting that 21% of postal service workers are Black (37% are women). Further, the USPS offers public retirement pensions as a federal employer and USPS salaries average $55k per year — significantly more than the median household income for Black families in the U.S. ($41.5K in 2018).
Whether through state budget cuts to public education or a failure to fund public institutions like the USPS, austerity could pose significant threats to the lives of working people — Black women and households in particular. So far, federal policy responses to the pandemic and apparent economic crisis are not sufficient to stave off these threats, but instead, seem to ensure them.