Given the country’s changing demographics, the members of the Experts of Color Network would like to ask the Republican and Democratic presidential candidates 10 questions and get responses that include some of the facts and policy recommendations below. The network is part of the Closing the Racial Wealth Gap Initiative, which seeks to build awareness and support for efforts to address racial and ethnic wealth inequalities based on structural factors.
- White households have a median net wealth over 15 times larger than black households and over 13 times that of Latinos ($111,740 vs. $7, 113 and $8,113, respectively). This gap needs to be directly addressed to ensure all American families have the adequate financial resources to prosper for generations to come. What would you do to close it?
Since this country’s earliest days, the United States has perpetuated systemic policies at all levels of government that have kept communities of color from enjoying the same rights and privileges as Anglo-Americans. While the most heinous policies of slavery and appropriation of Native American lands have ended, other exclusionary practices—such as the denial of citizenship to marginalized immigrant populations—still exist. Labor market practices have also had a discriminatory effect on people of color, denying them access to wealth building opportunities. Unjust practices as redlining and educational and occupational segregation continue to this day. Other discriminatory practices, such as predatory lending and blanket credit and criminal background checks, keep qualified individuals from getting jobs and becoming self-sufficient. Only the elimination of all such practices and policies will close the racial and ethnic wealth gap. See A Policy Agenda for Closing the Racial Wealth Gap and Beyond Broke: Why Closing the Racial Wealth Gap is a Priority for National Economic Security for details about the causes of the racial wealth gap and policy recommendations for closing it.
- How would you improve access to housing and strengthen homeownership for communities of color?
Homeownership is the single largest driver of wealth in America and, therefore, the largest driver of racial wealth inequality. Currently, only 44 percent of blacks and 46 percent of Latinos own their own home, as compared to 74 percent of whites. These housing disparities were exacerbated during the last decade, when abuses in mortgage lending saddled families with unsustainable loans, leading to millions of foreclosures and destroying wealth—a crisis that hit communities of color disproportionately. Although new mortgage protections have curbed these practices, overly restrictive credit requirements and unmanageable loan terms are now preventing homeownership for many creditworthy families. Recent Home Mortgage Disclosure Act data show that borrowers of color secured only 13.1 percent of the home purchase loans made in 2014 despite representing over 30 percent of the population. Public policies must increase homeownership rates and address systemic barriers keeping families away from homes and neighborhoods that would advance wealth accumulation. Strict enforcement of housing anti-discrimination laws, greater use of alternatives to FICO credit scores, and reforms that would authorize Freddie Mac and Fannie Mae to allow principal reductions and other loan modifications that result in manageable loans are ways to start reducing such barriers. In addition, we need to regulate harmful mortgage products under the Dodd-Frank legislation and to implement reforms that prioritize broad access to the mortgage market for all qualified borrowers. See A Policy Agenda for Closing the Racial Wealth Gap.
- Despite improvements in the economy since 2008, the Economic Policy Institute estimates that 4 million potential workers have dropped out of the labor market. Many analysts are calling for investments in infrastructure to boost job creation, including the implementation of a federal jobs guarantee. Do you support this strategy?
As of October 2015, the federal unemployment rate is 5.1 percent, the lowest it has been since early 2008. Yet the “economic recovery” has not been experienced equally: for blacks, the unemployment rate is 9.2 percent; for Latinos, 6.4 percent; and for whites, 4.4 percent. Moreover, these numbers do not capture the 3.2 million discouraged workers, disproportionately of color, who have stopped looking for work. Federal investments in the nation’s crumbling infrastructure would provide access to jobs for millions of people left behind by the recovery. Addressing the needs of our deteriorating roads, bridges, and other public infrastructure would create thousands of good paying jobs, which could be linked to incentives for hiring unemployed workers. Another option is a federal jobs guarantee to provide employment opportunities in the infrastructure industry and related services. Such programs must be targeted to those who need help the most, such as the unemployed, underemployed, and ex-offenders, and should include mandated subcontracting opportunities for minority-owned businesses. See A Policy Agenda for Closing the Racial Wealth Gap.
- How would you ensure that people of color are able to become job-creating small-business owners?
Policies and programs need to be developed to help people of color build and grow their own businesses. Research indicates that blacks and Latinos are more likely to use personal wealth to finance their businesses than to take out credit. However, as evidenced by data on the racial wealth gap, people of color often lack sufficient wealth to create businesses and are more likely than whites to be denied credit—thus, business ownership is usually out of their reach. Public policy could be used to increase entrepreneurship within communities of color, for example, by funding and expanding Minority Business Development Centers (MBDCs), providing tax credits to venture capitalists that invest in minority businesses, and expanding access to credit by creating business lending and investment centers through the Community Reinvestment Act. See A Policy Agenda for Closing the Racial Wealth Gap.
- What would you do to ensure that low-income students receive the same high-quality education as wealthier students?
There is currently a large difference in college graduation rates, with only 20 percent of blacks and 13 percent of Latinos graduating compared to 34 percent of whites. This gap must be addressed, but the problem is even larger: families of black and Latino college graduates hold only $4,846 and $4,191 in wealth, respectively, compared to $55,869 for families of white graduates. If the college graduation rate were to be equalized, the wealth gap would decrease by only 1 percent between blacks and whites, and by only 3 percent between Latinos and whites. Thus, communities of color do not just need more education; they need more access to higher quality and affordable education from early childhood through post-secondary school. The provision of universal pre-kindergarten, financial education within the K-12 public school system, equitable school financing models, and equitable educational quality, particularly in the STEM fields, would help students of color achieve economic outcomes similar to those of white students. Additionally, curbing tuition increases and providing qualifying students with debt forgiveness would help low-income students access the education they need to thrive. See A Policy Agenda for Closing the Racial Wealth Gap.
- How will you improve our tax code so that it helps those in the bottom half of the income distribution?
Currently, the U.S. tax code is “upside down” because most tax expenditures do not go to the families that need the most support. In fact, almost half of the federal government’s $540 billion spent in tax programs goes to households in the top 20 percent of income. More astounding is the fact that only 12 percent of these benefits go to the bottom 60 percent of working American families. Our tax code could be made more equitable by expanding programs that have proved to be successful at lifting people from poverty (the Earned Income Tax Credit, the Child Tax Credit, etc.) and by reforming programs that have only served to help those who are already economically secure (the mortgage interest deduction, the home sales exclusion). Other tax policy proposals that could directly benefit those families that need the most assistance, particularly low-income families and communities of color, include re-implementing a first-time homeowner tax credit; reforming the savers tax credit to be universal, refundable, and inclusive of a match component; and increasing the tax rate on capital gains and the estate tax. See A Policy Agenda for Closing the Racial Wealth Gap.
- How would you ensure that Social Security remains financially solvent and also adequate to meet the needs of economically insecure Americans?
Social Security is the bedrock of retirement security for millions of American families. It is even more important for communities of color. Almost 75 percent of black people have less than $10,000 in retirement savings—nowhere near enough to sustain them when they are no longer able to work. In fact, 46 percent of black seniors over the age of 65 depend on Social Security for 90 percent or more of their income. As the most effective federal program for lifting people out of poverty, Social Security is instrumental to keeping vulnerable people of all races and ethnicities economically secure. Although it faces a solvency crisis that must be addressed, Social Security does not need to be fundamentally reformed. Rather, this vital program can be strengthened and expanded. Proposals for doing this include removing the cap on the payroll tax so that high-wage earners can contribute more, gradually increasing the payroll tax over the next 20 years by 1.15 percentage points, and increasing benefits by 5 percent of the average benefit. To learn more about how to improve the program through common-sense policy reforms, see the Commission to Modernize Social Security’s report, Plan for a New Future: The Impact of Social Security on People of Color.
- High-cost, abusive loan products that target vulnerable borrowers (families of color, military service members, low-income people, and women) often trap them in long-term debt. How would you address predatory lending practices like payday lending?
Payday loans are marketed as quick solutions to a financial emergency, but in fact they often make financial problems worse. The very structure of a payday or car-title loan—no underwriting for affordability, high fees, and a short-term due date—means that borrowers who use these products are likely to end up in a cycle of repeat borrowing and debt. Such lenders often target borrowers of color; hence, they drain millions of dollars from these communities. The Consumer Financial Protection Bureau (CFPB) has already begun the process of issuing rules that require lenders to evaluate a borrower’s ability to repay a payday loan without re-borrowing, and many states have gone further, enacting a 36 percent annual percentage rate (APR) limit for all borrowers in that state. Such state laws should be protected and enforced, and the CFPB should finalize a strong national rule that curbs this abusive practice. Other federal and state regulators should act to control efforts by payday and other lenders to circumvent laws that address abusive financial practices. See A Policy Agenda for Closing the Racial Wealth Gap.
- How would you improve access to secure savings vehicles, such as retirement accounts and college savings accounts?
Many people of color lack sufficient income to be able to set some aside for savings, but even if they could, most people of color are not offered the same access to savings accounts and other vehicles for wealth accumulation as whites. For example, only 54 of black and Asian employees and 38 percent of Latino employees work for an employer that sponsors a retirement plan, as compared to 62 percent of white employees. Encouraging people to save and invest in wealth-building assets is important to closing the racial wealth gap. One proposal that would significantly improve access to savings vehicles in communities of color is the automatic Individual Retirement Account (IRA). This would automatically enroll workers in a workplace pension plan and require that all employers provide workers with a direct-deposit IRA. Another option is a baby bonds trust program, which would provide all children born in households in the lowest wealth quartile with an endowed trust that could be accessed for asset-building investments, such as a home or a business. See A Policy Agenda for Closing the Racial Wealth Gap.
- How would you ensure that all your policies address the specific needs of people of color?
Public policies must be designed and implemented with the understanding that they affect demographic groups differently. Universal public policies that disregard the current social and economic circumstances of those who have been historically disadvantaged are unlikely to address the needs of certain segments of the population, particularly communities of color. Unlike policies that assume a single solution will work for all populations, targeted universalism attempts to address the specific requirements of those who need help most while also expanding the solution to as many people as possible. One example of a policy proposal that employs targeted universalism is the 10-20-30 plan. This plan is an effort to significantly reduce poverty by designating at least 10 percent of federal funding toward communities where 20 percent or more of the population has lived below the poverty line for the last 30 years. See A Policy Agenda for Closing the Racial Wealth Gap.