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The Vicious Cycle of Covid-19 and Economic Inequality

The pandemic widened the gaps between the haves and have-nots—thus sowing the seeds of the next pandemic.

Spencer Platt/Getty
A near-empty New York City street in April 2020

This week, as the country spins into its third year of the Covid-19 pandemic, TNR has been taking a look back at the lessons of this era. That the coronavirus hit at one of the worst possible moments in our history is a big part of the story: The Trump administration, as one might have predicted, completely fumbled its response—though it should be said that our dysfunctional health care system, which cracked under the pressure of the public health crisis, wasn’t entirely his design. Nor was another key fertilizer of the pandemic: our pronounced state of income inequality.

The massive gap between haves and have-nots all but guaranteed that the pandemic would hit harder. Lawmakers in Washington, to their credit, initially intervened to ameliorate those effects and save untold lives. But this wasn’t enough to prevent income gaps from further widening during the pandemic. Moreover, the momentum that fueled policymakers in their drive to save the day has since reversed itself—they now seem just as bent on unsolving the problems they’d begun to address and returning us to the pre-pandemic status quo. This is a mistake, because a return to austerity will allow future Covid strains to wreak even more havoc.

Economist Joseph Stiglitz, writing in Scientific American this week, says that the most “significant outcome” of the pandemic “will be a worsening of inequality,” and he predicts that “the poorest will … suffer the most from the pandemic’s economic aftermath—in particular, from the loss of jobs, disproportionately concentrated in low-wage service sectors,” for potentially years to come. “Just how bad the situation will become depends on how long the disease rages and what policymakers do to control it and its consequences,” he writes.

Life has been much different for America’s plutocratic class. As the Institute for Policy Studies, or IPS, reported, the past few years have been a heyday for billionaires, whose combined wealth rose from $8.04 trillion to $12.39 trillion during the first year of the pandemic alone. In a separate study, IPS reported that corporate executives went to significant lengths to protect their wealth as well—boosting executive compensation through questionable practices such as “lowering performance bars to help executives meet bonus targets, awarding special ‘retention’ bonuses, excluding poor second-quarter results from evaluations, and replacing performance-based pay with time-based awards.” Meanwhile, as the gilded class were hauling off the loot, the rest of the world moved in the opposite direction: Globally, hundreds of millions of people fell below the poverty line as the world’s economy contracted.

These forces only deepened the pandemic’s ravages. As TNR contributor Melody Schreiber noted in The Guardian last month, the United States is the most economically unequal of all the G7 countries and, to boot, it offers no guaranteed sick leave. For all intents and purposes, inequality has become a significant comorbidity in the Covid era. As Schreiber notes, “America also has the highest death rate of any wealthy country” in terms of Covid fatalities, “with half of the deaths occurring after vaccines became available.” Globally, the inequality of the pandemic era is ensuring that Covid won’t end anytime soon. As Vox reported, rich nations have received 50 times the number of vaccine doses that poor nations have, giving the virus the chance to mutate into new variants that could evade vaccines and hit those same nations much harder.

Having learned some hard lessons from the Great Recession, America’s initial response to the pandemic included a number of interventions aimed squarely at diminishing the impact of economic inequality, some of which made a huge and welcome impact on American life. An expanded child tax credit, designed to be more amenable to household budgets, lifted millions of kids out of poverty. Sweeteners added to unemployment benefits had similar effects—in a (now deleted) tweet, economist Marshall Steinbaum enthused that the supplements “did more to ameliorate poverty than anything anyone in that institutional landscape [had] done in their entire lives.”

Since then, however, lawmakers have changed their minds. The expanded child tax credit sunsetted in December, plunging its beneficiaries back into poverty. Unemployment enhancements also met the ax. One-time backstops that allowed the Affordable Care Act to handle the strains of the pandemic are expiring as well, as are other successful programs like expanded free school lunches.

As Stiglitz noted, President Joe Biden’s Build Back Better plan was specifically designed to “make these achievements more permanent and to reduce inequality in all its dimensions.” That bill, however, lies in a state of near-death, thanks to a small group of centrist Democrats who stymied its advancement. Stiglitz’s prediction is stark: “If it fails to pass, we can expect an enduring increase in poverty. Matters will almost surely get even worse if the pandemic continues.”

It’s truly galling that such significant gains against poverty came about in the most trying time in our nation’s recent history and those in power are now opting to unwin those hard-fought victories. And it’s dismaying that the pandemic allowed the rich to get richer—a fact that is one of the likely drivers of the current elite discourse, which values “learning to live with Covid” over taking the steps to defeat it. To come this far, and learn this much, only to cast that hard-won knowledge aside and return to what TNR contributor Robin Kaiser-Schatzlein referred to as “the smoking heap of 2019” doesn’t merely disgrace the memory of all who have been lost to this dreadful virus, it ensures that we shall suffer countless more losses in the years ahead.

This article first appeared in Power Mad, a weekly TNR newsletter authored by deputy editor Jason Linkins. Sign up here.