The Inclusive Economy
Well-Intended, Well-Resourced Policies Aren’t Enough to Close the Racial Wealth Divide
By Emanuel Nieves on 01/11/2017 @ 09:00 AM
Just 9 days from today, President-elect Donald Trump will take the oath of office. While many questions still remain as to what the new President will do once in office, his actions over the past nine weeks have provided us with more details of what he may prioritize. For example, the deal he cut with Carrier and his recent Twitter messages about other manufacturers sending jobs outside of the country indicate that he may stand by his commitments to focus on keeping jobs in the US. At the same time, through his ‘New Deal for Black America’—his 10-point plan to advance the economic prospects of African-Americans—President-elect Trump has also shown some interest in remedying the economic plight of African-Americans and other communities of color. Given the current state of the racial wealth divide, in which households of color own just a fraction of the wealth ($12,377) of White households ($110,637), it is impossible to ignore the economic realities facing African-American and Latino families.
While we laud and share a common goal of closing the racial wealth divide for African-Americans, the President-elect’s plan falls far short of achieving this goal, and if enacted will very likely widen the racial wealth divide even further. For African-American and Latino families, that’s a prospect they cannot afford. As CFED and the Institute for Policy Studies’ recent report, The Ever-Growing Gap, indicates, that wealth divide is already on track to double over the next 30 years, from an average of $500,000 today to over $1 million by 2043. Although it’s heartening to see that the incoming President is thinking about racial equity issues, addressing this problem is going to require that his administration take consequential action that does not make this situation worse.
To help ensure that future policy decisions close the racial wealth divide, CFED and the Institute for Assets and Social Policy at Brandeis University (IASP) have released a new report, titled Equitable Investments in the Next Generation: Designing Policies to Close the Racial Wealth Gap. The report uses a new framework—The Racial Wealth Audit™, a joint collaboration between IASP and Demos—to help policymakers and advocates design economic policies that close, not exacerbate, the racial wealth divide.
As part of its findings, Equitable Investments highlights how even well-meaning policies can increase the racial wealth divide if those policies are not targeted to provide the most support to those who need it most. For example, the report highlights how universal policies to eliminate student debt could actually increase the racial wealth divide among young adults by nearly 10%, while targeted policies such as providing relief to households making $50,000 (roughly the U.S. median income) or less could reduce the racial wealth divide by seven percent.
To avoid repeating mistakes of the past, President-elect Trump should take a closer look at the policies in the ‘New Deal for Black America.’ For example, while it is true that African Americans are in need of expanded access to affordable credit, it should not be done through abusive, predatory products and services that offer triple-digit interest rates and place people in a perpetual cycle of debt (such as payday, car title and pawn shop loans). Also, we should not further tilt our already upside-down tax code to further provide disproportionate benefits to the wealthy at the expense of working families.
Again, it is our hope that President-elect Trump will diligently work to ensure that it does not take 228 years for the average African-American family and 84 years for average Latino family to amass the wealth White households enjoy today. Unfortunately, if enacted as proposed, the President-elect’s ‘New Deal for Black America’ will likely widen the ever-growing racial wealth divide even further.