The simplest way to close the racial wealth gap? Direct cash payments
In order to provide economic security for the formerly enslaved after the civil war, the Union memorably promised African Americans 40 acres and a mule. They never got it. Today, African Americans collectively own just 4% of the nation’s total wealth. For the median Black family, that comes out to just 2% of what the median white family owns. For African Americans to own a share of the wealth proportionate to their 13% of the population, they would require another $10tn.
Never mind the mule.
The simplest way to build that equity isn’t education – black people with college degrees often earn less and have less wealth than whites without them. Nor can it be to continue on as if things will get better with time. Between 1983 and 2016, the median Black family saw their wealth drop by more than half after adjusting for inflation, while median white families saw their wealth increase by a third.
The Black-white racial wealth divide is growing over time, not shrinking.
Instead, there’s a growing consensus that a direct cash infusion is required to bridge the racial wealth divide that began in slavery. The first African American billionaire, Robert L Johnson, recently called for a $14tn transfer to Black Americans for that very reason.
Long-term and consistent cash infusion could make a world of difference for wealth development, particularly for a community whose median household income is only $40,000.
One idea? A 20-year injection of $20,000 annually to every African American who can identify an enslaved ancestor in the United States. For those under the age of 25, their $20,000 a year could be placed in an individual development account.
A back-of-the-napkin estimate puts the cost at $16.5tn over 20 years. In this age of trillion-dollar economic bailouts, this cost is not a serious obstacle. And, as modern monetary theory is persuasively arguing, deficit spending that strengthens the economy more than pays for itself.
As we work to reverse inequality by lifting up the bottom, we should also put some pressure on the very top, where an astounding share of resources are concentrated. Reparations should be linked to a fundamental repair of the toxic inequality in the broader US economy, which affects Americans of all races.
In fact, reparations could be significantly funded by breaking up this concentrated wealth.
As a new report I co-authored highlights, hundreds of billions a year can be generated through a small wealth tax on multimillionaires, financial transaction taxes on Wall Street trades, and other mechanisms. These funds could be used not only for reparations, but a broad array of progressive programs – from Medicare for All to a universal jobs guarantee.
To develop sustained economic security, the country’s economic system must be turned right side up. Economic growth can no longer be allowed to leave most of the American population behind. Universal healthcare, guaranteed incomes and jobs, and expanded homeownership opportunities would ensure that all Americans have a much better chance at economic stability.
The hard truth is that the United States – and its economy – is based on a white supremacist concentration of wealth and resources. To end this disparity, which rears its head in everything from the racial wealth divide to police brutality and mass incarceration, a massive redistribution of wealth and resources is required.
That means an expansion of universal programs as well as targeted programs like reparations for groups such as African Americans and Native Americans, who have also suffered tremendously from this white supremacist system.
As Martin Luther King noted during his 1964 Nobel peace prize address: “There is nothing new about poverty. What is new, however, is that we have the resources to get rid of it.” That’s even truer now in the 21st century, but the question now is the same as it was then: does our nation have the will to do it?
Dedrick Asante-Muhammad is the chief of race, wealth, and community at the National Community Reinvestment Coalition and an associate fellow of the Institute for Policy Studies. He is a coauthor of the report White Supremacy Is the Pre-existing Condition
Economic growth can no longer be allowed to leave most of the American population behind