Can the Racial Wealth Gap Be Closed Without Speaking of Race?
Elizabeth Warren wants to offer down-payment assistance to home buyers in formerly “redlined” neighborhoods where the federal government once denied access to mortgages. Cory Booker would like to create “baby bonds” that would be worth more to children in poorer families, helping them one day to buy houses or other assets.
Both presidential candidates say their proposals would aid in narrowing the enduring black-white wealth gap in America. But neither policy attempts to do that in the most direct way possible — by steering benefits to African-Americans.
Their ideas, along with several others that scholars advocate, are facing a tricky problem today. There’s growing momentum on the left to address the racial wealth gap. But the prospects for race-based policies before the Supreme Court are unpromising, and that’s unlikely to change with five conservative justices.
“The court is functionally not now going to be an ally in anything here, so you do have to be careful,” said Mehrsa Baradaran, a law professor at the University of Georgia who has written about the racial wealth gap.
The court is unlikely to uphold baby bonds or housing programs explicitly for African-Americans, even to remedy disparities created when many government benefits were explicitly for whites. Affirmative action and government contracting programs have similarly struggled to meet or skirt the court’s strict scrutiny for applying benefits by race.
Proponents concerned about the wealth gap instead must come up with policies that have the effect of disproportionately building wealth for African-Americans, without singling them out.
“There are ways that you can craft legislation that essentially gets at this effect,” Ms. Baradaran said. “Look at how much legislation we have that gets at the opposite effect.”
Policies like the mortgage interest deduction, for example, disproportionately benefit white families, who are more likely to own homes. So do tax advantages for the rich, who are more likely to be white. Even federal investments in seemingly race-neutral infrastructure like the Interstate Highway System had this effect by enabling the development of all-white suburbs in an era of legal discrimination.
Wealth-building proposals today are trying to engineer a similar if opposite outcome. That makes the details thorny.
“The first and most efficient approach is targeting relief to the people who were targeted with discrimination,” said Dorothy Brown, a law professor at Emory University. “If we can’t get there, then we have to go to next best.”
Ms. Warren’s strategy, she said, is a clever workaround. Rather than specifying African-Americans, Ms. Warren’s bill would target specific neighborhoods where African-Americans harmed by the legacy of lending discrimination are likely to live.
Other researchers argue that a program based on neighborhoods redlined in the 1930s would be too narrow; most African-Americans who buy homes aren’t purchasing in such neighborhoods today (and in some cities, middle-income whites are).
But the kind of neighborhood criteria Ms. Warren has in mind could be one model. Ms. Brown proposes identifying neighborhoods with the least household wealth and allowing tax breaks associated with homeownership, like the mortgage deduction, only to people who live there.
Ms. Baradaran proposes a “21st Century Homestead Act” that would focus on neighborhoods with many vacant properties. She proposes using government funds to purchase, restore and transfer properties to residents, then to help them build wealth by revitalizing their neighborhoods.
Mr. Booker’s proposal would give $1,000 in a government savings fund to every newborn in America, for use later in adulthood. But the government would seed more money into that fund each year according to a family’s income, giving the most to children in the poorest families. That money could then be spent in adulthood on education, buying a home or starting a business.
It isn’t meant to be an income supplement, but rather a means to buildassets.
“Ultimately, assets give people agency in their lives,” said Darrick Hamilton, director of the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University. His work on the baby bonds concept informed Mr. Booker’s proposal. “Assets give people the ability to make decisions,” he said, “to have choice and have freedom and self-determination.”
The point is not just to equalize wealth in America, Mr. Hamilton said, but to equalize those choices.
Mr. Booker’s proposal could benefit African-Americans in particular by giving more to the families with the lowest incomes. But Mr. Hamilton’s original idea would steer the greatest benefits to families with the least wealth. Wealth, which takes into account the value of assets like a home or a stock portfolio, is harder for the government to track than income. But it is a clearer proxy for race in economic data.
Research shows that black people with higher-paying jobs still hold less wealth than white people with lower incomes, who may benefit from generations of accumulated wealth. Even black people with college degrees are likely to have less wealth than white people who didn’t complete high school.
While the federal government might have trouble tracking wealth for allocating baby bonds, it would be feasible with homeownership programs, said Dan Immergluck, a professor at Georgia State University. Loan officers already assess wealth when deciding whether to give people mortgages.
Mr. Immergluck favors an idea that would grant down-payment assistance, as Ms. Warren proposes, but that would target households with low family wealth. Ideally, he said, such a program would count parental wealth, too, given that whites are far more likely than African-Americans to receive down payment assistance (or any kind of financial help) from their parents.
Much more sophisticated data is available now than in the past, said Andre Perry, a fellow at the Brookings Institution, and it could be used to devise these policies — to identify neighborhoods with depressed property values, or to trace back the people helped or harmed today by past government policies.
There are ways, in other words, to sidestep race itself.
But in the end, that may close the racial wealth gap only so much. Today, African-Americans make up about 13 percent of the population, but hold only 2.6 percent of the country’s wealth, said William Darity, a professor at Duke who has also worked on the baby bonds proposal. He wants to see those numbers equalized.
“That’s an objective that is not achieved by any of the existing policies on the table now,” Mr. Darity said. “Ultimately, you need a person-based program if you’re really concerned about the racial wealth gap. And it not only has to be person-based, but it has to be race-specific.”
That would look, he said, like another idea that has gotten attention — albeit with far fewer details — on the campaign trail: a comprehensive reparations program.
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