Americans Struggle to Rebuild Wealth, Savings

Americans have rebuilt only 45 percent of the wealth they lost in the Great Recession, according to the Washington Post and a new report from the Federal Reserve Bank of St. Louis. “After the Fall” documents more than just that, the report takes a deep dive into the status of households across a variety of income and demographic groups and reinforces much of what we’ve thought in the past few years. Vast numbers of families were struggling in the run-up to the crash, over-leveraged and with all their eggs in one basket (their house.) Since the crash, those families that only had wealth in their house have predictably lagged behind the lucky few who have been able to capitalize on the growing investment/stock scene.

This should be a familiar tale at this point, though I fear there’s been so much noise and distraction for so long that it hasn’t sunk in. There’s no recovery for millions. We’re seeing the long-term fortunes of a whole generation being massively downgraded. All those stories about 20-somethings not buying houses and not buying cars and not marrying gloss over the fact that many of them simply can’t afford to do those things. Our friend and founding Director of the Asset Building Program, Ray Boshara, co-wrote the report with William Emmons. Ray sums this dynamic up nicely in the Post’s article:

Wealth accumulation not only impacts families’ current financial status but also their prospects for future economic success. The St. Louis Fed report points to studies that connect savings to the likelihood of attending and completing college and economic mobility.

“Balance sheets matter in ways that income alone does not,” said Ray Boshara, head of the center.

As we’ve argued so many times here, the key going forward is to try and make lemons out of lemonade, support broader efforts to make saving more sustainable for families so that we can avoid the same trap that we found ourselves in during the run up to the crash. Tax reform is one opportunity to do that, but will our policymakers listen to reports like this one and respond appropriately?

Here’s William Emmons on the Newshour on Friday night, describing the report and its implications:

Watch Americans Still Struggling to Recover from the Recession on PBS. See more from PBS NewsHour.