There’s a Big Difference Between a Rally and a Recovery

Source: http://www.flickr.com/photos/teegardin/

Source: http://www.flickr.com/photos/teegardin/

There’s simply no room for the chaos and vagaries of the U.S. stock market in the lives of many Americans. Despite the solicitations of penny stock brokers and get-rich schemers everywhere, investing is generally a game played by those who are wealthy — and most Americans are not.

According to the Federal Reserve’s 2010 survey of consumer finances, only 15.1 percent of American families were directly invested in the stock market, while just over 50 percent were invested through some sort of retirement account. Perhaps unsurprisingly, the distribution of ownership of stocks and retirement accounts was unequal, with higher-income families more often owning equity than lower-income families. According to the survey, just 3.8 percent of families in the lowest 20 percent of the income band owned stocks directly, and only 11.2 percent had a retirement account. At the other end of the spectrum, 47.8 percent of those in the top 10 percent of income were invested directly in the stock market, and 90.1 percent had a retirement account.

This unequal distribution is hardly news, but the data are particularly relevant in the post-crisis period. Over the past five years, since the stock market hit bottom in March 2009, the S&P 500 index has climbed about 176 percent. This has created an enormous amount of paper wealth that is entirely outside the experience of most of the country — and Americans know this.

According to a Bloomberg national poll, 77 percent of Americans say that the rally has had “little to no effect” on them, while 21 percent report that it’s made them feel “more financially secure.” Moreover, Americans generally feel like the policies pursued in the wake of the crisis — such as the massive bailout of the financial system and the Fed’s program of quantitative easing — have pandered to the wealthy while leaving Main Street in the lurch. Most Americans (65 percent) would rather see tax breaks and stimulus for the middle class than for higher-income earners and corporations (25 percent), according to the Bloomberg poll.

Consistent with this idea is a tremendous amount of support for an increase in the minimum wage and a slim majority support for an extension of unemployment benefits. The poll found that 69 percent of Americans favor raising the minimum wage to $10.10 per hour and that 52 percent favor extending unemployment benefits beyond 26 weeks. However, even though a majority of Americans support an increase in the federal minimum wage, just 26 percent report that it will be a major factor influencing their decision on who to vote for in the 2014 midterms, and 23 percent say it will be a minor factor, while 46 percent say it won’t be a factor at all.

Further complicating the issue is a recent report from the Congressional Budget Office, which estimates that the proposed minimum wage hike would positively affect 16.5 million people but could eliminate 500,000 jobs. When asked whether this trade off would be worth it, most Americans (57 percent) said no.

Perhaps the most meaningful question (divisive, at least) asked by the Bloomberg poll addressed one of the fundamental points of contention in the U.S. right now. Bloomberg asked whether it was better for the government to implement policies designed to shrink the growing wealth gap in America, or if it was best to leave the solution up to the free market.

Americans were nearly split even on the question: 45 percent said it was better for the government to design and implement policies to shrink the wealth gap; 43 percent said it was better for government to stand aside and let the free market work its magic; and 12 percent said they were unsure what the right answer is.

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