June/Early July 2021 — Northwood University McNair Center for the Advancement of Free-Enterprise and Entrepreneurship

Introduction

Just over 607,000 Americans have died of the COVID-19 virus with roughly 33.85 million Americans testing positive since inception in late 2019. The current U.S. COVID-19 mortality rate of 1.793 percent has been fairly steady with a strong downward trend over the last few months.

Key June / Early July Data

Positive and Negative Signs

The S&P 500, Wilshire 5000, Dow Jones Industrial Average and NASDAQ have all reached and / or hovered around record levels over the last month. Many economists have been confused by the recent decline in the 10-Year U.S. Treasury Bond Yield which recently dipped below 1.3 percent before closing this past Friday at 1.3560, up 5.28 percent for the day. The confusion over the 10-Year U.S. Treasury Bond Yield comes from the fact that inflation in many areas of the U.S. economy is growing rapidly and the 10-Year U.S. Treasury Bond Yield (a bellwether measure for inflation) had been declining recently rather than increasing. The same can be said relative to the price of gold which closed at $1,808.60 last Friday, also signaling that inflation was under control, yet the U.S. inflation rate year over year from May 2020 to May 2021 was up 5 percent with new vehicle prices up 3.3 percent, energy prices up 28.5 percent, apparel up 5.6 percent and food up 2.2 percent, according to the U.S. Bureau of Labor Statistics.

Finally, more than 490 million tests for COVID-19 have been administered in the United States, with more than 387 million vaccine doses distributed and almost 334 million doses administered. As of last weekend, 159 million Americans or 47.9 percent of the U.S. population has been fully vaccinated, while 55.4 percent of the population has received one or more dosages.

Current Issues

Overall U.S. household wealth increased by $13.5 trillion dollars in 2020, a year that was greatly hindered by the COVID-19 virus. According to a recently released U.S. Federal Reserve Bank study, most Americans became richer during the pandemic of 2020. Because the COVID-19 crisis curtailed much of the average Americans daily, weekly and monthly travel and leisure activities over the last year, and the fact that the vast majority of Americans did not lose their job during the pandemic, a dramatic increase in the average American personal savings rate resulted from 7.6 percent in 2019 to 13.7 percent in 2020, according to Statista. Americans also refinanced loans ranging from home mortgages, car loans and credit card debt, or simply paid them off with new-found savings. Massive government spending programs certainly added to the average American’s income and savings rate in 2020 as well, with many of said dollars being used to boost all major stock indices to record levels in 2020. When analyzing the change in U.S. wealth by income earners for 2020, the Federal Reserve report broke down the $13.54 trillion dollars by income quintiles. The top 20 percent of American income earners saw their wealth increase by $9.84 trillion dollars, while the bottom 20 percent saw their overall wealth increase by $50 billion dollars, and the middle 60 percent of American income earners saw their overall wealth increase by $3.65 trillion dollars. Many economists find it to be nothing short of amazing that all five income quintiles of the American economy realized an increase in net wealth during a year that saw two of the worst back-to-back quarterly GDP declines in U.S. history.
Despite the fact the U.S National Debt currently stands at almost $28.51 trillion dollars, President Biden has been debating a “dual-track” approach to passing his budget over the last few months – at one point asking that his $3-6 trillion dollar reconciliation proposal be submitted to him in tandem with a $1.2 trillion dollar infrastructure agreement. If this “tandem approach” is achieved in the weeks or months ahead, we believe it would be disastrous to the current state of our national debt, which is nearly 130 percent of U.S. GDP. President Biden is proposing numerous ways to pay for dramatic increases in government spending, such as: a) higher customs fees, b) reinstating superfund fees on chemical companies, c) reducing the IRS tax gap, d) selling oil in the strategic petroleum reserve, e) issuing a series of new bonds, f) increasing the corporate income tax rate, g) increasing the inheritance tax rate, and, h) increasing the U.S. personal income tax rate for households making $400,000 per year or more. We believe President Biden’s infrastructure bill will increase the average U.S. corporate income tax rate to 32.34 percent, curtailing economic growth and making it the highest rate among all OECD and G7 countries, as well as other major competitors, most notably China.
Police officer fatalities for 2020 totaled 38. The number of police fatalities so far in 2021 stood at 27 as of June 18, 2021. Overall police officer fatalities are up 41 percent, relative to the same time last year. Additionally, according to a Special Series Criminal Justice Collaborative reported by NPR on June 24, 2021, in many places police morale has plunged and retirements and resignations have soared. A June survey of nearly 200 departments by the Police Executive Research Forum (PERF), a non-profit think tank, shows a startling 45% increase in the retirement rate and a nearly 20% increase in resignations in 2020-21, compared to the previous year.
At the recent annual meeting and representative assembly of the National Education Association, new business item 39 was adopted. We are particularly concerned that it reads “Provide an already-created, in-depth study that critiques capitalism and other forms of power and oppression at the intersection of our society.”

Conclusion

We believe that capitalism has been and is the wellspring of human progress in the United States and has led to the greatest standard of living for Americans of any people in the history of the world. With all of our historic imperfections, it has been the American competitive free enterprise system that has allowed us to overcome many of our problems and afforded our nation the wealth and means to make America a better place where continual progress is demanded – and possible. The American capitalist system was the arsenal of democracy and led the allied troops to victory in World War II. American capitalism provided economic pressure and much of the intellectual capital that brought the demise of the Berlin Wall in 1989 and the economic reforms in Asia that followed. Today it is that same American capitalist system that allowed us to come together and produce needed items from ventilators to vaccines in order to defeat a once-in-a-lifetime Black Swan event, like COVID-19.