(UnitedVoice.com) – Millions of Americans are falling behind on their rent, mortgages, utilities, and credit card bills. Some are even lining up at food pantries. In mid-March, state governments began closing down businesses deemed non-essential to curb the spread of COVID-19. Over the last four weeks, nearly 17 million Americans have filed for unemployment.
The $2 trillion CARES Act is supposed to help Americans make ends meet during the government-induced shutdown of businesses. On Wednesday, stimulus checks started going out to Americans. However, a study by Bankrate revealed that 31% of people who will receive the money say it will not sustain their financial well-being for even a month. Another 8% said it will not be enough to help them at all.
According to a Federal Reserve Study released in 2019, almost 50% of all US households have zero dollars in savings for an emergency and millions of Americans were only $400 away from financial hardship. Nearly 60% said they couldn’t tap into savings, borrow from family and friends, or sell something in the event they needed three months of living expenses.
Low-Wage Workers Feel the Brunt
Since the end of the Great Recession in 2009, those in the bottom 20% in income saw their money and investments decrease in value by 34%. While the cost of goods and services has gone up over time, incomes have remained mostly flat when factored in with rising prices. Since 2009, prices have gone up 20.58% according to the Bureau of Labor Statistics (BLS) consumer price index (CPI). In 2018, the median household income was only 3% higher than in 2000. For the poorest 20%, incomes decreased by 2%.
When money doesn’t maintain its purchasing value, it discourages savings and encourages debt. Debt also reduces a person’s ability to save as they have to work harder to pay for what they borrowed on top of interest. It’s a double whammy — make less money and increase debt to maintain a standard of living.
The American economy is not designed for saving. It’s built to spend. Nearly 70% of economic growth is dependent on consumer spending. When consumers don’t have money to spend during a national crisis, the government has to step in and provide a stimulus to improve the economy. It has now happened three times since 2000.
Is Relief on the Way?
It appears that many businesses across the country will not be allowed to open for the rest of April or perhaps even into May. Last week, members of Congress said they intend to pass another $2 trillion CARES Act 2 relief bill that provides another direct payment to Americans and extend unemployment benefits. Hopefully, all Americans can get back to work soon and start catching up on bills and rebuilding nest eggs for the future.
By Don Purdum, Freelance Contributor
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