Everyone Knows There's a Racial Wealth Gap. How Do We Fix It?

This country has always had a wealth gap, and America usually fixes this problem…for white people.

To cure widespread poverty during the Great Depression, the New Deal guaranteed jobs, reformed banking, built infrastructure, reimagined education and literally built entire towns filled with affordable housing…

For white people.

Because of segregation, Jim Crow and the newly developed idea of redlining, African Americans were not given a hand in the New Deal. The federal government created Social Security to undergird white retirees in an era where blacks couldn’t even deposit their money in many white banks. Medicare was created to ensure white people had health care during a time when hospitals and doctors’ offices were still segregated. White-owned farms were mechanized by government programs, and white farmers are still given billions in support by the USDA. These programs created a new group that spanned the gulf between the rich and the poor. They called it the “middle class.”

But according to a new report by the Institute for Policy Studies, there is still a huge disparity in wealth when it comes to the difference between blacks and whites. The report—“Ten Solutions to Bridge the Racial Wealth Divide”—notes that the 400 richest Americans on the Forbes list are wealthier than all of the black households in America combined. The median white family has 41 times more wealth than the median black family. And while a black family is 20 times more likely to be in debt than to have a million dollars in assets, the chances of a white family having a million dollars in assets is exactly the same as them having zero or negative wealth.

The report offers a handful of answers that involve this country investing in non-white communities. Of course, it is expensive. It is big government at its finest. But when people insist that the racial wealth gap can be solved by “pulling up your bootstraps” and not asking for government handouts, remember:

They did it first.

More than income, wealth is critical to the stability of families and households. It can determine whether or not a family can withstand a layoff or a medical emergency. It shapes class, housing and even education.

“Wealth can be simply understood as the sum total of what a family owns minus what they owe,” explains the report. “Sometimes referred to as net worth, household wealth is a measure of total assets minus liabilities, or debt.”

“For far too long we have tolerated the injustice of a violent, extractive and racially exploitive history that generated a wealth divide where the typical black family has only a dime for every dollar held by a typical white family,” said Darrick Hamilton, a co-author of the report and executive director of the Kirwan Institute for the Study of Race and Ethnicity at The Ohio State University.

The authors teamed came up with 10 solutions to bridge the racial wealth gap. They are as follows:

Basically, baby bonds are financial accounts seeded with an amount of money that is inversely proportional to the wealth of the child’s family. Cory Booker has proposed a reparations program based on this idea. In his plan, for every child born in the United States, $1,000 would be put into an investment account that would be managed by the Treasury and money would be added each year based on the household’s tax returns.

Why it won’t work: White Americans hate welfare, even though we essentially do the same thing with the Earned Income Tax Credit, Medicaid, and SNAP assistance, all programs which predominately benefit white people.

Guaranteed employment worked in the New Deal and most Americans favor raising the minimum wage. An analysis by the Brookings Institute says a federal jobs guarantee and raising the minimum wage to $15 per hour would positively impact 50 million Americans and lower the employment rate to 2 to 4%.

Why it won’t work: Republicans argue that small businesses couldn’t afford it. Despite the GOP’s belief in the “trickle-down effect”—the idea that lowering taxes would boost the economy, they don’t agree that working people having more money to spend will boost the economy.

The study notes that “Investing in affordable housing does not mean just the development of new housing, but also shifting the tax incentives that currently prioritize wealthy homeowners over low-income renters and first-time home buyers.” For instance, people who are able to afford a home get a mortgage tax deduction while people who rent do not, which increases the wealth disparity.

Why it won’t work: People might move into “their” neighborhoods.

Ensuring health care for all and eliminating medical debts would go a long way to close the wealth gap. Nonwhite people were 55 percent of the non-elderly uninsured in 2016. The Urban Institute reports that 31 percent of black people have a past due medical debt, compared to 23 percent of whites.

Why it won’t work: Two words: insurance lobbyists.

Black families are disproportionately “unbanked,” leaving them out of the credit market and exposing them to predatory lenders and check-cashers. In 2014, the U.S. Postal Service proposed a plan to offer small loans and banking transactions.

Why it won’t work: You’d have to go to the Post Office.

According to the Bradford Tax Institute, the top earners paid 63 percent in taxes during the Great Depression. In 1944, the tax rate was 95 percent on anything over $200,000 ($2.5 million in today’s dollars). During the 1950s, ’60s and ’70s, the top federal income tax rate never fell below 70 percent.

Why it won’t work: Buzzwords like socialism, redistribution of wealth and punishing success. To be fair, this plan has only been successful in every industrialized country and throughout most of American history.

Also, they’re ultra-wealthy.

Most tax breaks, including investment deductions, state and local tax breaks and reduced corporate rates, benefit the wealthy. Closing these loopholes would give the government more money for programs that could eliminate wealth disparities.

Why it won’t work: Again, they’re wealthy.

You owe us.

Why it won’t work: Come on. You know.

While we know that the racial wealth gap exists, we really don’t know how wide and deep the gulf is. The government has always been reluctant to collect this information. For instance, the Trump administration is reversing policies on employment discrimination data and has removed questions from the U.S. Census.  

Why it won’t work: Someone might say “privilege” or even worse: “white people.”

We need tools to assess how every piece of proposed legislation affects the wealth gap and how our current policies fuel it. Understanding the disparate impact of laws and rules could greatly reduce inequality.

Why it won’t work: It would.

“If the past several decades are to teach us anything about race and wealth, it should be that the racial wealth divide will not be closed without a structural change to the status quo,” said Chuck Collins, co-author of the report and director of the Institute for Policy Studies’ Program on Inequality. “Individual behavioral action is not the answer to address structurally established barriers nor is the patient aspirant idea that this problem will fix itself.”

The problem will not fix itself.

But we’ve done it before.

For white people.