Economy’s rough road to recovery after dismal 2020

If you think 2021 gives us a clean slate to reopen the economy, what we really have is a very full chalkboard that needs a whole lot of erasing before we can even begin anything.

Brace yourself as we assess how we begin the new year and what the year we left behind left us.

According the universities of Chicago and Notre Dame, the pandemic has thrown 7.8 million more Americans into poverty; defined as a family of four with a yearly income of just $26,200.

As of Jan. 1, the overall U.S. poverty rate stands at 11.75%; essentially the entire population of California. That's the largest and fastest increase in poverty since the 1960s when tracking poverty began. 70% of Americans have less than $1,000 in savings. 45% have no savings at all.

UC Berkeley Haas Business School economist Jim Wilcox said instead of sending virtually everybody stimulus checks, much of which went into savings accounts and the stock market, the Biden administration will narrow who gets future checks to those who actually will spend it: primarily low-income workers and women.

"We can direct much more of our help to those who really need it. as opposed to send $600 or even $2,000 checks to the vast majority of the population that hasn't lost any salary income and hasn't lost any retirement income," said Professor Wilcox.

On the other hand, U.S. stock markets are at or near record levels. Even so, the median 401(k) balance is $22,217, the best indicator of what the majority of Americans have saved for retirement.

Of those age 60 to 80, the average balance is $176,000.  But, if a senior withdraws only 5% a year to keep the principal amount from decreasing, that produces an $8,800 check; which equates to just $733 a month, minus mandatory income taxes.

But, the pandemic hit so hard, 27% of working or recently unemployed folks have taken early withdrawals from their retirement savings accounts and almost 20% of those continuing to contribute are contributing less.

Big picture, when President Trump took office, the national debt was just shy of $20 trillion. Today, the debt is $27 trillion and climbing, a 35% increase, a debt that equates to $189,000 each and for every one of the 143 million U.S. taxpayers.

So, the financial mess the new president inherits depends, more than ever, on massive vaccinations.

"If we do get an effective vaccine out to millions and millions of people, that will speed along the recovery both medically and economically and financially and psychologically for all of us," said Wilcox.

Then, the reopening of businesses, employing as many as possible and the entrepreneurial spirit can heal the new year's deep wounds.