Race in America from the Obama White House

As America’s First Family departs from the White House, we are reminded of comments by President Barak Obama and First Lady Michelle Obama on the topic of race – something they didn’t often discuss.

On America’s history of slavery: “I wake up every morning in a house that was built by slaves—and I watch my daughters—two beautiful, intelligent, black young women—playing with their dogs on the White House lawn.” Michelle Obama at the Democratic National Convention, July 25, 2016. Talking about slavery is painful, but acknowledging that part of our nation’s history is essential to understanding its enduring impacts.

Racial income disparities in King County continue to increase.

On income inequality: “Last year, incomes rose for all races, all age groups, for men and for women.” Barak Obama’s farewell address, Chicago, January 10, 2017. Yes, but…. In King County, 2014 income for Blacks was still below its 2008 high (of $38,847). More significantly, the difference between income for Blacks and those in the highest income group (whites and Asians vied for first place) grew from $20,970 in 1999 to $53,258 in 2015.

On the shooting death of 17-year-old Trayvon Martin, an unarmed black youth: “If I had a son, he’d look like Trayvon.” Barak Obama, White House Rose Garden, March 23, 2012.

On compassion: Quoting from To Kill a Mockingbird, “You never really understand a person until you consider things from his point of view…until you climb into his skin and walk around in it…. For blacks and other minorities, it means tying our own struggles for justice to the challenges that a lot of people in this country face – the refugee, the immigrant, the rural poor, the transgender American, and also the middle-aged white man who from the outside may seem like he’s got all the advantages, but who’s seen his world upended by economic, cultural, and technological change. For white Americans, it means acknowledging that the effects of slavery and Jim Crow didn’t suddenly vanish in the ‘60s; that when minority groups voice discontent, they’re not just engaging in reverse racism or practicing political correctness; that when they wage peaceful protest, they’re not demanding special treatment, but the equal treatment our Founders promised.” Barak Obama’s farewell address, Chicago, January 10, 2017.

For perspectives on economic inequality, see Communities Count data on racial wealth and income disparities, blogs on growing wealth disparities and the unfairness of Washington state and local taxes, and the Home Page Spotlight on the rising fortunes of the top 1%. To learn about the lasting effects of housing discrimination on King County communities, see Communities Count and Public Health blogs.

Wealth Gap Widens

Federal wealth-building policies work well – for the wealthy

A new report by the Institute for Policy Studies grabbed headlines with a bold assertion:  “Without change, African-American and Latino families won’t match white wealth for centuries.”  Centuries!  Less heralded in the media but more relevant to speeding the journey to greater equity was the report’s exploration of federal and federally sanctioned policies that have protected the economic interests of predominantly white Americans and restricted access to wealth for people of color.  [For in-depth comparisons of the top 1% and the bottom 99% in King County, Washington state, and the U.S., see Communities Count’s latest home page Spotlight.]

wealth disparities blog   Communities Count   Tableau Public 2

Why wealth?

Income pays the bills, but wealth is a better indicator of economic security and opportunity.  Wealth provides an economic buffer that, according to the report, “helps families get through lean times and empowers them to climb the economic ladder.  Wealth is money in the bank, a first home, a college degree and retirement security – it’s the countless opportunities afforded by having savings and investments.”

In 2013, mean wealth for white households was 7 times greater than for Black households and 6 times greater than for Latino households.  If current trends continue, wealth disparities in 2043 will be even more extreme – an 11-fold difference between Blacks and whites and a 7-fold difference between Latinos and whites.

wealth disparities blog   Communities Count   Tableau Public

 

The report documents disparities in home ownership, employment, income (and differential returns on income), economic resilience, educational attainment (and returns on education), business ownership (and value of businesses owned), retirement savings (and access to employer-sponsored retirement plans), and exposure to “wealth-stripping products and services.”

Many of these disparities can be traced to past and/or ongoing discrimination.  But the heart of the report is its hard-nosed focus on policy.

Federal wealth-building investments after the Great Depression

The report details the huge investments made by the federal government to help American households recover from the Great Depression and World War II.  And it describes how these investments, by design or accident, could not be accessed equitably by people of color.  For example,

  • Real-estate “redlining” – a widespread discriminatory practice sanctioned by the Federal Housing Administration (FHA) – restricted access to mortgages by racial and ethnic-group minorities, differentially excluding them from “the opportunity to invest in the largest driver of wealth in this country: a home.”  From 1934 until redlining was banned by the Fair Housing Act of 1968, households of color received just 2% of FHA loans. [See Public Health Insider for possible associations between redlining and health outcomes in King County.]
  • The Social Security Act of 1935 excluded farmworkers and domestic workers (primarily people of color) from coverage.
  • The Fair Labor Standards Act of 1938 excluded several tip-based professions (such as shoe shiners, domestic workers, servers, and Pullman porters – all with predominantly Black workers) from the U.S.’s first minimum-wage protections.
  • The benefits of 1944 G.I. Bill – which has provided millions of veterans with access to low-cost home mortgages, low-interest business loans, tuition assistance, unemployment compensation, and support for living expenses while in school – were not distributed fairly.  Biased local administration prevented many veterans of color from getting home loans, business loans, and placement in skilled and semiskilled jobs.

Current wealth-building policies: Is history repeating itself?

Through the federal tax code, the U.S. spends “more than a half trillion dollars annually to help households build wealth,” according to the report.  But many current wealth-building policies “continue to heavily favor households that do not need help building wealth while doing little or nothing for low-wealth households of color.”

Annual taxation-related expenditures to build wealth include programs to support home ownership, increase accessible savings through investments and inheritances, give preferential treatment to retirement plans, and support higher education.  Using educational support as an example, the authors point out that 90% of higher education tax spending is in the form of after-purchase subsidies that can only be used by those who have the resources to front the costs of tuition, books, and other qualified expenses – something that may not be possible for many working families.

Suggestions for the future

After demonstrating the power of past federal policies, the report’s authors propose specific actions to align wealth-building policies with the needs of those who are not already wealthy:

  • Audit federal policies “to understand the role current federal policies play in perpetuating or closing the racial wealth divide.”
  • “Replace the mortgage interest and real estate tax deductions with tax benefits that encourage and support home ownership among low-wealth families and communities of color.”
  • Expand eligibility for the Earned Income Tax Credit (EITC) to low-wealth workers and those without dependents; allow families to save a portion of their EITC as emergency savings.
  • Provide a simple, safe, and affordable retirement savings product to low-wealth families and households of color.
  • At birth, provide every child with a Children’s Savings Account (CSA).
  • Expand existing progressive taxes.
  • Explore a dedicated wealth tax.

The report was jointly produced by the Institute for Policy Studies, the Corporation for Enterprise Development (cfed), and the Racial Wealth Divide Initiative, a cfed program.

See recent Communities Count updates of national median wealth trends, mean wealth trends, race/ethnicity wealth trends, and mean and median race/ethnicity wealth trends by age.  COMING SOON:  Communities Count blog about the impact of state and local tax policies on inequality.

The ever-shrinking middle class

America’s middle class is on the move — but it’s not moving up. According to the Center for American Progress, only 45% of American families qualify as middle class, down from almost 57% in 1979. And research by a U.C. Berkeley economist found that during the “economic recovery” years of 2009 to 2012, the richest 1% of Americans received 95% of all income gains. In King County, economic recovery has been strikingly uneven by race: by 2013, the proportion of Black households with income below the Federal Poverty Threshold was up to 35%, significantly higher than all other race/ethnicity groups except those identifying themselves as “other race.” Communities Count presents data on wealth and income inequality in the Income section.

Income inequality shrinks the American middle class.