How Biden Era Policies Have Fueled Billionaire Wealth Amid Rising Income Inequality

The wealth of the nation’s richest residents has surged significantly since the onset of the COVID-19 pandemic. Economic experts attribute this growth to policies enacted by the Federal Reserve, which have exacerbated the existing income inequality gap.

Peter St. Onge, an economist, discussed the dynamics of these policies in an exclusive interview. He asserted that while federal regulations and taxes have become less accommodating for affluent individuals, the Federal Reserve has played a pivotal role in increasing income inequality.

St. Onge voiced concerns regarding government intervention in the monetary system. He emphasized that it’s crucial to openly address the causes of income inequality rather than dismissing them. Many in the free-market community, including Republicans, may have previously overlooked this issue. However, St. Onge believes it deserves significant attention.

Recent data reported by Johns Hopkins University indicates a growing disparity: billionaires’ share of the Gross Domestic Product (GDP) has risen from 14.1% in 2020 to an anticipated 21.1% by 2025. This shift highlights how wealth accumulation has increasingly favored the elite during recent years.

Billionaire Count on the Rise

According to estimates from JPMorgan Chase’s private bank, the number of billionaires in the United States climbed from about 1,400 in 2021 to nearly 2,000 by 2024. This increase underscores a troubling trend in wealth concentration among the nation’s richest individuals.

The Federal Reserve, as the central bank of the United States, plays a critical role in setting monetary policies and regulating financial institutions without requiring the approval of Congress or the President. This independent authority allows the Fed to adjust policies swiftly in response to economic conditions.

Debt as a Hedge for the Wealthy

St. Onge elaborated on the nature of debt in the current economic climate. He referred to debt as a game predominantly favored by the wealthy, explaining how billionaires have capitalized on the Fed’s manipulation of interest rates. Low-interest rates have made borrowing exceptionally favorable, which has indirectly subsidized loans, allowing the affluent to leverage their wealth further.

For instance, during the pandemic, homeowners could secure mortgages at interest rates as low as 3% or 3.5%, even as inflation surged above those rates. St. Onge noted that this scenario essentially allowed wealthy individuals to borrow money at a profit, contradicting free market principles.

The Disparity in Debt

St. Onge provided striking statistics concerning debt disparities. The average debt for the top 5% of American households hovers around $600,000, while the average debt for the majority of Americans sits at approximately $74,000. This stark contrast reflects an astonishing nine-fold difference in borrowing, highlighting an essential aspect of income inequality.

Furthermore, asset distribution is even more lopsided. St. Onge mentioned that the top 5% of Americans own about $7.8 million in assets, compared to the average American’s $62,000. This indicates a 130-fold difference, illustrating the widening gulf between the affluent and the average population.

Impacts of Low Interest Rates

According to St. Onge, the value of stocks and real estate is intrinsically linked to future income potential, which is discounted by prevailing interest rates. Consequently, when long-term interest rates are significantly lowered, the result is a dramatic increase in asset values.

He referenced historical economic trends from the 1970s through the early 2000s that demonstrated how aggressive interest rate reductions by the Fed led to skyrocketing asset prices, primarily benefiting wealthier individuals. As St. Onge articulated, favorable borrowing conditions disproportionately favor the affluent, ultimately culminated in deepening economic inequality.

Economic Commentary from Experts

At a recent conference held by the Mises Institute, economist Steve Hanke further illuminated how the Fed’s policies have contributed to rising income inequality. He pointed out that the share of GDP owned by billionaires increased substantially as the Federal Reserve pursued aggressive monetary expansion during the pandemic.

In his analysis, Hanke noted that the Fed’s actions during the pandemic, including extensive money printing, have had profound and lasting impacts on wealth distribution. Rapid alterations in the money supply have historically corresponded with changes in asset values, suggesting that the wealth accumulation by billionaires stems directly from the Fed’s policies.

The Onset of Skyrocketing Wealth Inequality

Hanke explained that the Fed’s actions, which began with pandemic-related monetary stimulus, led to an annual growth rate for the broad money supply that peaked at 18.1% in May 2021. The resulting changes in asset prices created a favorable environment for wealthy individuals, allowing them to expand their share of the economy.

The increase in wealth inequality, characterized by billionaires amplifying their GDP share by 7.6 percentage points in just four years, cannot be ignored. St. Onge articulated that the Fed’s policies, often perceived as politically motivated, have had significant and discernible impacts on socioeconomic dynamics across the nation.

Political Perspectives on Income Inequality

Commentators on both sides of the political spectrum have voiced their concerns regarding income inequality. St. Onge welcomed discussions around this topic from all political factions, including Democrats, who have traditionally criticized wealth concentration. He expressed hope that those advocating for income equality might also recognize the need to reconsider Federal Reserve practices.

On the other hand, political figures, including Vice President JD Vance, have spotlighted how current policies have adversely affected the working class. Vance has criticized the Biden administration and financial elites for perpetuating economic conditions that harm everyday citizens.

During a recent speech, he described the affordability crisis facing many Americans and blamed a combination of poor economic management and immigration policies for escalating challenges in the housing market. He painted a picture of an economy where working-class citizens struggle to thrive amid rising costs.

A Call for Change

As discussions of income inequality continue to emerge in public discourse, the narrative surrounding the Federal Reserve’s influence remains crucial. The correlation between its monetary policies and the growing wealth divide deserves serious scrutiny. Understanding these dynamics is essential for crafting informed economic policies moving forward.

The Federal Reserve Board has not commented on the recent remarks made by both St. Onge and Hanke. Yet this enduring issue of income inequality suggests that the road ahead requires a concerted effort to reevaluate current monetary and economic practices in pursuit of a more equitable system.