Tag: economic equality

When Politicians Tell Voters They’re Dining on Fine Fare But Voters are Eating Hot Dogs: How Bidenomics Exacerbates the President’s Political Problem

~ Karen Petrou ~ Leave a comment
  • Bidenomics is based on assertions that the economy is doing well thanks to the President, but most Americans believe it isn’t because the economy according to Biden is not the economy most Americans experience every day.
  • The aggregate unemployment level in which the President takes such pride doesn’t reflect real unemployment or – far more important – real wages.  The bottom 50% of U.S. households would have to earn $5,000 more today just to buy what they bought at the end of 2019 despite the wage gains in which the President and Fed take such pride.
  • Progress curbing inflation isn’t as the President portrays it because almost two-thirds of Americans are living paycheck to paycheck and skimping on or even skipping goods and services.  Only a quarter of middle-class households can now afford a home, down from fifty percent in 2019.
  • Effective political rhetoric recognizes reality.  The President must thus speak to policy changes, not past accomplishments, and make it clear he understands how hard most households have it.

For Mr. Biden to gain voter traction on economic policy, he’ll need to persuade the two out of three voters who disapprove of his economic record despite proclamations of progress each time job numbers go up and inflation seems to go down a bit.[1]  Bouncing GDP numbers haven’t and won’t suffice because GDP is a poor measure of prosperity across the distributional income and wealth curves.  Low unemployment numbers also aren’t persuasive because they come in part from the large number of people no longer in the market because wages are still so low.  Employment numbers are also buttressed by the millions of Americans holding down multiple jobs to make ends sort-of meet. 

Continue reading “When Politicians Tell Voters They’re Dining on Fine Fare But Voters are Eating Hot Dogs: How Bidenomics Exacerbates the President’s Political Problem” →

Pick Your Poison: Abandoning Regulated Banking in Search of Financial Inclusion

~ Karen Petrou ~ 1 Comment

By Karen Petrou

  • Transaction and savings accounts are critical to financial security and inter-generational economic equality.
  • Nonbank offerings might increase financial inclusion, but pose risks to safeguarding savings, personal privacy, and consumer protection unless or until consumer-finance standards symmetrically apply to banks and nonbanks offering like-kind products to vulnerable households.
  • Public-utility, postal, or CBDC alternatives to bank accounts are a long way off and may not effectively safeguard high-risk households. 
  • Expanding low-cost, no-risk bank accounts is a critical near-term policy option.
Continue reading “Pick Your Poison: Abandoning Regulated Banking in Search of Financial Inclusion” →

The Low-Income High-Risk Myth

~ Karen Petrou ~ 2 Comments

By Karen Petrou

In the wake of the great financial crisis, an axiom of consumer finance is that high-risk borrowers are disproportionately lower-income people.  Indeed, the term “subprime” has become a virtual synonym for the lower-income households generally designated with low credit scores and, thus, the subprime sobriquet.  However, a growing body of research demonstrates conclusively that subprime borrowers were not the villains of the mortgage debacle at the heart of the 2008 cataclysm:  it turns out that prime borrowers behaving in subpar ways defaulted far more often than low-income households trying to become homeowners. Continue reading “The Low-Income High-Risk Myth” →

Why We Need Baby Warbucks: Equities as a Pathway to Equality

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By Karen Petrou

There is an extensive literature on the “unbanked.”  But what of those one might call the “unsecured?”  In previous blog posts, we have pondered “equality banking” and “equality insurance.”  Now, we turn to equality investing, doing so not just because savings at ultra-low interest rates has become the road to ruin, but also because several retail brokers have redesigned entry-level investing with considerable equality upside.  Although caution is always warranted when products are aimed at inexperienced investors, “fractional share” options and no-commission fees could make a meaningful difference for millennial and lower-income households hoping to have enough put aside over time to own a home, ensure a secure retirement, and protect their families from the unexpected. Continue reading “Why We Need Baby Warbucks: Equities as a Pathway to Equality” →

The Low-Skill Losers

~ Karen Petrou ~ 2 Comments

By Karen Petrou

As we have noted, here and here, the Fed is devoting increasing analytical – if not yet policy-maker – attention to the unequalizing impact of unconventional policy.  It’s a start – a major problem besetting central banks in countries without a robust middle class – i.e., the U.S. – is that old-school representative-agent thinking leads to unanticipated, unequal outcomes when wealth and income are disproportionately enjoyed by the very few, very rich.  It is for this reason that the Fed’s touted employment benefit and “robust” economy in the wake of post-crisis policy has done so little for so many who remain so angry.  A new Fed paper helps to show why. Continue reading “The Low-Skill Losers” →