by Gary Alexander

October 5, 2021
American households are sitting on a boatload of wealth. On September 23, the Federal Reserve reported that the net worth of U.S. households topped $134 trillion on June 30—up from $128.4 trillion in the first quarter and $103.8 trillion on March 31, 2020, when Covid struck. We’re 29% richer in 15 months.

Most of this increase in wealth came from rising stock prices and real estate values, but a huge rise in cash savings also contributed to the gain in wealth. The amount of cash and cash equivalents on our home balance sheets reached $16.5 trillion in the second quarter, up from $12.7 trillion at the end of 2019, and the bottom 50% of households (measured by income) are holding 37% more cash than before COVID.

This means two great things – we have plenty of fuel to buy more stocks, when we feel “the coast is clear,” and the American consumer has plenty of cash for the upcoming holiday season. It also means we don’t need any more “helicopter money” from Uncle Sam in the form of indiscriminate checks in the mail sent to about 80% of Americans, nor do we need the kind of Omnibus spending bills now wending their way through a Congress trying to invent new ways to send cash to middle-class and wealthy Americans.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Contrary to political posturing, this wealth is spread throughout all income levels. Economist Ed Yardeni examined data from the Fed’s Distributional Financial Accounts for his blog on September 3, 2021:

The bottom 50% is still trailing the super-rich, but they gained liquid assets at the fastest percentage rate.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The Democratic Congress and Biden Want to Throw More Money at Affluent Americans

Despite all this wealth and all the new money floating around in the economy – and despite two straight years of $3 trillion federal deficits and a looming “debt ceiling” debate and deadline – two gigantic bills are currently floating through Congress totaling nearly $5 trillion in spending. They are filled with old-fashioned “pork.” Nobody could (or has) read every word of these bills because they change almost daily as lobbyists rewrite one passage or another. Last week’s version was a nearly 2,500-page draft totaling $3.5 trillion in new spending, but there’s no solid proposal on how to pay for it. As the head of the Ways and Means Committee, Rep. Richard Neal, said, “Let’s hold off on the ‘pay-for’ until we are at the altar.”

For now, there’s a $7,500 credit for buying an electric car, and more if the car is made in America, then $2,500 for a used EV, so you can get rich buying or selling the same darn car. You can also get a 15% rebate for an electric bike (see Steve Moore, “Congress is back to serving up the pork,” Washington Examiner, September 21, 2021). According to a Wall Street Journal editorial (“Entitlements for the Affluent,” September 28), here is a cornucopia of spending plans for middle class and affluent families:

#1: The child-care allowance would be raised to $3,600 per child under age 6, and $3,000 for children ages 6 through 17. A married couple making $150,000 a year with four children (two under age 6, two above) would qualify for $13,200 a year. The same family earning $400,000 could still get up to $8,000 a year. In wealthy states like Massachusetts, where child-care prices are higher, a family of four earning $200,000 a year could receive $23,000. Even at $367,000 in income, that family could get $10,000.

#2: Paid family leave reaches about two-thirds of a parent’s average wages for up to 12 weeks a year for both full- and part-time employees, and for newborns both parents are entitled to this leave, so a married couple with a newborn, each earning $200,000, could each collect over $1,000 in weekly benefits, making $24,000 of paid leave in a year. A couple making $100,000 each would be eligible for the same benefits.

#3: Expanding ObamaCare could give a 60-year-old head of household in Arizona earning $350,000 a year an ObamaCare a subsidy of $21,309. Even at $500,000 in income, that family would still get $8,559 in healthcare, and a $12,500 EV tax credit. A couple making $800,000 can still qualify for some credits.

#4: The state and local tax deduction (SALT) above the current $10,000 cap, could be the biggest bonanza of all for the high-tax blue states, and Pelosi will send the bill for these entitlements to red states.

Maybe I’m old fashioned, but doesn’t anybody pay for their own children or basic health care anymore? Can’t anyone negotiate leave with their employer without some Mafia don in DC enforcing the contract?

All of these new benefits seem to be based on declared income, without any detailed look into the needs of a household – just like those helicopter (“stimulus”) checks sent to about 75% of working Americans. But a family could have a great deal of savings, investments, inheritance, multiple homes, or other help.

This looks like a move to buy votes at all levels of society, with money the government doesn’t have.

Everyone likes to get a check, but when deficits, interest rates and inflation soar, we’ll see the true costs.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.


Marketmail Survey #7 is now closed.

Also In This Issue

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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