Earlier this month, the Federal Reserve released an immense report detailing evidence of the nation’s ongoing economic recovery. The collective net worth of American households and non-profits rose $6.3 trillion since the first quarter of 2009 (generally considered the low point of the Great Recession). And the value of household real-estate grew by well over $800 billion. But we are still billions of dollars down from where we were when the economy collapsed in late 2007. And for many Americans, the recovery has not yet begun—least of all for poor communities of color.
No one would be surprised to hear that blacks and Latinos are worse off than non-Hispanic whites. But the gap is growing apace. Thomas Shapiro, director of the director of the Institute on Assets and Social Policy at Brandeis University, finds that worrisome.
Earlier this year, Shapiro and his Institute colleagues released a study showing the wealth gap had more than quadrupled in one generation. The gap between the accumulated wealth of white and black Americans (excluding home equity) stood at $20,000 in 1984; by 2007 it had grown to $95,000. “The growth of the racial wealth gap significantly affects the economic future of American families. For example, the racial wealth gap in 1984 amounted to less than three years tuition payment for one child at a public university. By 2007, the dollar amount of the gap is enough to pay full tuition at a four year public university for two children, plus tuition at a public medical school,” the researchers wrote.
Even high income African Americans were doing poorly relative to whites: “Middle income white households had greater gains in financial assets than high income African Americans. By 2007, they had accumulated $74,000 whereas the average high income African American family owned only $18,000.” The study analyzed data compiled before the economic crash. But since then, believes Shapiro, things have gotten worse. From 2007 to the end of the first quarter of 2009, low-income black families (those with an annual income of $40,000 or less) found their “asset securities… reduced from about a thousand dollars to about 200 bucks,” he said, during an interview. In other words, if they suddenly lost their income and had to rely on savings, their financial reserves would run out in less than a week.
The situation for elderly persons of color is particularly dire. Over 90% of Latino and black seniors lack “sufficient economic security to sustain themselves through their projected lives. Among Latino single seniors, only four percent are financially secure,” concluded a study jointly conducted by the Institute and Demos, a New York-based research and advocacy organization.
For Shapiro, such findings raise the question of whether America’s racial progress will collapse under the weight of financial insecurity. It also makes him question whether public policy has been effectively employed. In the aftermath of Katrina, he argues, there was an opportunity to undo the effect of generations of extreme residential segregation. That opportunity, he says, was lost, as New Orleans recreated the segregation the hurricane had destroyed. Now, he believes, we have another opportunity: to use tax and fiscal policy to create a more egalitarian society.
The wrinkle, I point out, during our conversation, is that many Americans don’t see economic egalitarianism as a particular priority—or even as a desirable goal. At a time when so many are struggling, the idea of targeting minorities for special help seems a difficult notion to sell. Indeed, if the goings on in Arizona are any indication, many Americans are fed up with minorities period. In that great state, one legislator is so worried about the Latino invasion that he is prepared to reject the Constitution in order to deny citizenship to children born to undocumented immigrants, Other outspoken citizens are angry that a school mural depicts (too prominently , they say) a boy with a dark complexion.
Shapiro concedes the point, but makes another—which is that the issue, at base, is less about race than about what makes economic sense. The racial dimension simply illuminates policies that don’t work well for most Americans. By his estimate, at least $369 billion of public money annually is invested in individual and family wealth-building: “mostly through subsidies for homeowners, subsidies for retirement, and subsidies for health care.” Those resources, he argues, are not well spent. “Whether intended or not, the consequences are highly targeted, such that the top 1 percent receives 45 percent of the benefits. The bottom 60 percent receive three percent. Let’s ask if we can have a more effective return on that investment.”
His is clearly the right question. What is unclear is whether we will ever have the appetite to act on the answer