CARES Act 2: The Line Between Rich & Poor in America


How much money do you need to be rich in America? How little must you have to be poor?

Short answer: enough to buy pretty much whatever you want without worrying about the price tag, or not enough to afford essential food, shelter, clothing and health care. In the U.S., there are many more people in the latter category than the former.

These are not abstract questions. In the midst of the worst recession since the Great Depression, “Who qualifies for aid, how much should they get, and for how long?” is being debated in the second version of the CARES Act.1 Extended unemployment benefits, and moratoriums on foreclosures or evictions both lapsed this past weekend,2 courtesy of a 120-day sunset provision in the original legislation. That was because the White House and Congressional leaders assumed the Covid-19 pandemic would be under control by now.

It is not.

The U.S. just passed 4.3 million confirmed infections while deaths have reached 150,000, giving the country the humiliating distinction of having the most infections and deaths of any country in the world. Expectations of how soon we would get the virus under control were wildly overoptimistic.

It is against this backdrop and amid perceptions of who is poor and who is rich that Congress will craft a new assistance package — assuming this dysfunctional body can even reach a new agreement.

To better understand the role that perceptions play, consider a survey put together by brokerage firm Charles Schwab in January and June of this year. This is a particularly useful exercise due to the pandemic in between the two surveys, which created a natural experiment about how Covid-19 shifted Americans’ views on wealth.

The survey found that the net worth people believed they needed to be “comfortable” was down almost 30 percent, from $934,000 in January to $655,000 in June. An average net worth of $2 million was thought of as wealthy in June, down 23% from $2.6 million in January. The conclusion seems obvious: Those who are reasonably well off are more aware of their good fortune in times like these.

There is less clarity about who is rich or poor when using income instead of assets. YouGov polls found a majority of people believed someone was rich when they earned $100,000 a year. That’s almost double the $52,104 median income of a full time worker, and almost a third more than the national median family income of $78,500. Using federal tax brackets instead, a majority of Americans surveyed see wealth once they earned $157,501 — the lowest annual salary in the 32% bracket.3

Self-evaluations often lead to questionable results; people are as dishonest with pollsters as they are with themselves.4  Based on income, about 25% of the U.S. population considers itself to be poor, but only 5% consider themselves to be rich. Most Americans (69%) say they are “neither rich nor poor” (64%) or “don’t know” (5%). People on both ends of the income distribution spectrum think of themselves as middle class. Of those earning $40,000 to $60,000, 93% do not consider themselves “rich.”

That $40,000 level is significant: It’s the cap Senate Majority Leader Mitch McConnell has proposed for payments under a second pandemic relief act. That is a big decrease from the first round of support, which offered payments of $1,200 per adult for individuals whose income was less than $99,000 (or $198,000 for joint filers). 96% of those earning $60,000 to $90,000 don’t consider themselves wealthy. The pandemic has placed many of those in this income strata under a great deal of economic distress.

Under the McConnell plan, that $600 Federal stimulus check will get cut down to $200, despite no evidence showing that it discourages workers from returning to their jobs. According to a recent study from Yale economists:

“We find that the workers who experienced larger increases in UI generosity did not experience larger declines in employment when the benefits expansion went into effect. Additionally, we find that workers facing larger expansions in UI benefits have returned to their previous jobs over time at similar rates as others. We find no evidence that more generous benefits disincentivized work either at the onset of the expansion or as firms looked to return to business over time.”

Ideology is in the way. Of course, if we pay those lazy poors, they won’t return to work (so long as you ignore the data showing otherwise).

Again, so much of what makes one rich or poor is tied up in perception. We regularly misperceive other people’s wealth. We see our neighbors’ spending — big house, fancy car, expensive vacations — but not the other side of the ledger showing debts and net worth. We imagine paying high unemployment insurance or stimulus checks will discourage working.

These misperceptions of wealth have real world consequences. Bruce Bartlett, who served in both the Ronald Reagan and George H. W. Bush administrations, observed, “Many wealthy Americans insist they aren’t rich, and that has profound implications in electoral politics as well as economic policy.”

Congress is wrestling with where to draw the line that determines who qualifies for economic assistance. How wealth is distributed, and who is poor or rich is not well understood – either by Congress or the rest of the country. With eviction and foreclosure moratoriums now lapsed, they better figure it out quickly.




Wealth Distribution in America (April 11, 2019)

Wealth Disparity Expands Further (November 13, 2019)

What is wealth? (May 22, 2004)

Understanding Wealth Comparisons

Wages in America



1. The CARES Act is a 2.2 trillion rescue plan passed in March of this year

2.  Since March, monthly payments of both principle and interest have been suspended for the 43 million Americans with student loans; this benefit expires September 30th.

3. It is not just the pandemic that makes these results relative, but geography: Salaries and living expenses vary dramatically by city. That $100,000 goes much further in say Virginia Beach or Kansas City than it would in San Francisco or New York.

4. These surveys also have an issue with trolls: Who are the 4% of respondents that believe someone making the minimum wage of $15,080 in America is rich? By the same token, who can think that someone making $500,000 a year isn’t well off?


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