The Past Isn’t Past: The Economic Case for Reparations

“The past is in the past; it’s time to move on.”

That’s a common response to Ta-Nehisi Coates’ eloquent essay in The Atlantic, “The Case for Reparations,” and his recent discussion with Bill Moyers.

But that sentiment betrays a fundamental lack of understanding of how the legacy of hundreds of years of slavery and the American-style apartheid known as Jim Crow continue to hurt the economic prospects of African-American babies born today.

“The average black family has about one-tenth of the wealth of the typical white family — that’s ten cents on the dollar,” says NYU sociologist Dalton Conley, author of Being Black, Living in the Red: Race, Wealth and Social Class in America. “Income doesn’t explain the gap,” he adds. “African-Americans make about 77 cents on the white dollar, on average — the gap in income is much smaller than the gap in net worth.”

Even poor white households — those hovering around the poverty line — have $10,000 or $15,000 in accumulated wealth, according to Conley. But “the typical black family at that income level will have zero net worth, or even negative net worth, which means they’re paying interest on top of all their other bills.”

Conley studied how differences in household wealth impact the next generation’s economic prospects. While much of the discussion of black outcomes has centered around family structure, Conley’s research shows that only two family background measures really have an impact in terms of kids’ performance in school and future placement in the job market: the parents’ levels of education and wealth. “Nothing else seems to matter,” he says.

While the rate of African-Americans who complete college has increased dramatically since the Civil Rights era, the children of whites who are of college age today are around 50 percent more likely to have parents with at least a bachelor’s degree than blacks.

This is the reality that often gets lost in our heated debate over whether America has truly moved beyond its racist past — the argument over whether or not we live today in a “post-racial society.” For most of our history, blacks have been deprived of the opportunity to build wealth — through both legal and illegal means, and often with a lot of violence. It wasn’t until the mid-1960s that African-Americans became full citizens of the United States.

“Wealth,” says Conley, “more than any other socio-economic measure picks up long-term historical legacies that are being passed on from generation to generation. Given this large wealth disparity between whites and blacks, there really is an unequal playing field.”

Wealth Matters

Having some net worth impacts families in several important ways.

Wealth provides a cushion against economic shocks. “It’s a risky economy, and everybody needs a buffer,” says Rachel Black, an expert in asset-building at the New America Foundation. “That’s especially true for those living on the financial margins, where a small dip in their income or an unexpected expense could leave them either making material sacrifices — like skipping meals — or not being able to repair the car that they need to get to work.”

About one-third of all welfare recipients are African-Americans, a fact that helps perpetuate vicious and bigoted stereotypes about blacks being lazy and “dependent.” But the reality is that hundreds of years of structural discrimination have left black families without the same cushion that even poor white households tend to have, so when things go wrong they’re less likely to be able to get by without turning to public assistance.

But the most important way that a family’s wealth affects kids’ chances of getting ahead is through what’s known as “intergenerational assistance.”

“Wealth matters in terms of passing on a family business or helping your offspring with a down payment on a home or financing a job search,” says Dalton Conley. “Simply paying for college is a big part of it — if you have a buffer and don’t have to work two jobs to pay for college, you’re much more likely to graduate in four years.”

Because chances for young African-Americans to get their degrees diminish without such a buffer, most of today’s proposals for reparations include some sort of college fund to give young blacks the same opportunity to get an education that many white people take for granted.

Place Matters

The wealth gap holds down entire neighborhoods. Ta-Nehisi Coates told Bill Moyers that a black family “that has an income of $100,000 a year, on average, actually lives in a neighborhood that’s comparable to a white family that makes $30,000 a year.”

That’s another manifestation of the black-white wealth gap. Even after the crash in the housing market, most American families hold the lion’s share of their wealth in housing.

What’s more, home values are a good indicator of the quality of the local schools. That’s a result of a virtuous cycle — neighborhoods with more expensive real estate have healthier tax bases to fund their schools. Excellent schools then attract buyers and drive up home values.

The fact that poorer neighborhoods tend to have worse schools is yet another way that the black-white wealth gap creates an uneven playing field. A modern reparations scheme could help level it.

Coates makes an historical and moral case for reparations. The wealth gap is the basis for a practical, unsentimental one. ”Even if you could wave a magic wand and make all other forms of inequality disappear today,” says Conley, “it would take a very long time for that wealth inequality to naturally dissolve.”

Forty Acres and a Mule

But what would a modern program of reparations really entail? It wouldn’t consist of the 40 acres and a mule many blacks expected to receive at the end of the Civil War. Fortunately, we have more recent models to look at.

After World War II, the US invested a huge number of dollars to build a (largely white) middle class with the GI Bill. Veterans returning from the war were eligible to purchase homes with low-interest loans and no down payments, get cheap loans to start businesses and have their tuition and expenses covered if they decided to get an education.

At the same time, overseas, the US implemented the Marshall Plan, investing billions to bring Europe out of the ruins. ”We might consider the equivalent of a Marshall Plan to uplift black America in the same way the European countries were rejuvenated in the aftermath of World War II,” says William Darity, Jr., a professor of African-American studies and economics at Duke University.

“I’ve talked about a portfolio of reparations, where four or five different components co-exist, and these could include what people classically think about when they hear the word ‘reparations’ — direct payments to eligible recipients. But they could also include college scholarships and funds that would allow people to start small businesses. They could include some form of long-term financial assets. There are a variety of things that could be done to address these huge racial wealth disparities.”

But Harvard legal scholar Charles Ogletree asks, “Where do you start? It’s hard to figure out.” He thinks the issue has to be resolved with a worldwide reparations scheme.

Ogletree opposes paying restitution to individuals. He would dedicate a pool of money to the basics: health care, housing and jobs. He says, “There has to be, at a minimum, a [universal] program of education — to make sure that the newborn children of people of African descent have access to a high-quality education.”

“If you look at the state of people of African descent centuries after slavery, you still see a high number of African-Americans who are willing to work but are unemployed, who are looking for housing but can’t afford it because of gentrification and other factors, who want their children to get a better education than they had, but can’t do it if they live in communities with poor school systems.”

Ogletree points out that the federal government issued an apology to Japanese-Americans interned during World War II — and paid reparations to the survivors (even if it was a small sum paid out more than 40 years after the war was over). But as William Darity notes, “no such apology ever has been made by an official entity of the US federal government either for slavery or for the Jim Crow practices that followed slavery.”

There are other questions: Who would be eligible for a reparations program? What about someone of mixed race — with a black parent whose family suffered the harms of white supremacy and a white parent whose family profited from it?

“We’re not going to count people’s fractions,” says Darity. “That’s a ridiculous exercise.” Rather, he would use two criteria for eligibility: tracing an ancestor who was enslaved in the US, and having self-identified as “black, colored, negro or African-American” on official documents at some point during the ten years prior to the establishment of a reparations program.

Darity acknowledges that it may be difficult for some people to demonstrate that they had an enslaved ancestor 200 years ago. “This would give a lot of business to the genealogists,” he says. But there is a more subtle way. “If an individual’s family appears in the 1870 census, but didn’t appear in the 1850 or 1860 census, and they were negro, then it is very likely that they had an enslaved ancestor.”

Helping Black America by Closing the Wealth-Gap

These ideas face a significant obstacle. Sixty years of public opinion research reveals an obvious if uncomfortable truth: Most Americans are highly supportive of anti-poverty programs in the abstract, but they take a dim view of those they perceive as helping blacks. (For more on that, see BillMoyers.com’s interview with Martin Gilens, author of Why Americans Hate Welfare.)

But there’s a way to pay our bills that might be an easier lift politically: Closing the wealth gap between the haves and the have-nots. After all, people of color make up a disproportionate share of the have-nots.

Right now, American public policy runs in the opposite direction. “I think that one thing a lot of people don’t understand is the extent to which we subsidize savings for families that are already wealthy,” says the New America Foundation’s Rachel Black. “We spend about half a trillion dollars a year subsidizing the wealth of people who already have it rather than creating new wealth for families that don’t.” Black says that mismatch is “one of the major drivers of the wealth gap.”

The biggest asset subsidy in the US is the home mortgage deduction, 77 percent of which is captured by upper-middle-class households making between $75,000 and $500,000 per year, according to the National Priorities Project. “Rather than helping more families purchase homes,” says Black, the credit only “ends up inflating the size of homes that people buy and inflating the cost of homes, which makes them even less accessible for low-income families.”

After housing, we spend the most subsidizing people’s retirement savings, and the top 20 percent of earners capture two-thirds of that money. As Black notes, “The people who need this kind of investment — and the ones who benefit the most — are almost entirely left out. This is the exact opposite of effective policy-making.”

We could rationalize these policies. A number of ideas for helping poorer people build wealth have been around for years. We could offer universal 401(K)s to everyone, with the government subsidizing the savings of low-wage workerswith two dollars for every dollar taken out of their paychecks.

Black points to the ASPIRE Act, which would give every baby born in the US a savings account with $500. That number would be doubled for poorer kids, and the government would then match whatever a low-income family socked away dollar-for-dollar. The fund would then be restricted to paying for college, a first home, a business, or retirement. They’ve had a similar scheme in the UK for years, and it’s considered a huge success.

“There’s been some compelling research showing that just having a savings account in a child’s own name, regardless of how much money is in it, can increase the likelihood that the child will attend college by about six times,” says Black.

Whether we focus on the wealth-gap between rich and poor or whites and blacks, we have to acknowledge that, as Ta-Nehisi Coates writes in The Atlantic, “Plunder in the past made plunder in the present efficient,” and that these huge disparities in net worth make it impossible to achieve an even playing field on which Americans are limited only by their innate skills and appetite for hard work. Without that, the historic inequities that plague our economy will only persist.