The Racial Wealth Gap Could Become a 2020 Litmus Test
With black votes in the balance in the Democratic primary, would-be candidates are already developing aggressive policies to target inequality.
When Senator Elizabeth Warren announced that she’d formed a presidential exploratory committee, she hit all the populist notes that have become standard in her career, addressing a besieged middle class that’s constantly undermined by powerful corporate and political elites. “In our country, if you work hard and play by the rules, you ought to be able to take care of yourself and the people you love,” the senator said in her video announcement. But the second part of her message stood out for the way she acknowledged how many Americans, namely people of color, are barred from reaching the middle class. “Families of color face a path that is steeper and rockier, a path made even harder by the impact of generations of discrimination,” Warren said.
As the first high-profile politician to announce a presidential run, Warren is the pacesetter for the 2020 Democratic primary. Her prominent mention of the racial wealth gap signals that it could become a defining issue in the race, especially at a time when people of color matter more than ever to the Democratic Party’s chances. With surging black and Latino voting power offering new pathways to victory in 2020, candidates might feel more compelled than in past races to offer bold strategies to fix the enduring economic legacy of white supremacy.
The racial wealth gap is a straightforward issue that almost nobody can agree on how to fix. White people have way more money than everyone else, and it’s not just income: Although there are persistent differences in wage, salary, and benefits between races, much of the wealth gap is attributable to real estate and other individual assets, as well as disparities in familial assets and incomes. As described in a graphic in Warren’s video, and confirmed by recent studies of economic data, the median wealth of white families sits north of $100,000, while black median wealth hovers around $10,000, and for many families in poverty might even be negative.* And while the differences between white and black Americans are the most extreme, other underrepresented minority groups also face vast deficits relative to white families.
The cause of those wealth gaps is relatively straightforward, too: racism. According to Sandy Darity, a Duke University economist and one of the country’s leading researchers on race, wealth inequality, and economic policy, the enduring black-white disparities trace all the way back to slavery. “I would start with the failure to grant the formerly enslaved the 40 acres and a mule that they were promised,” Darity told me. “Had those land grants been made, I think we would be talking about a very different America from the one that we are experiencing now.” To that history, Darity adds the theft of black life and wealth by lynch mobs and perpetrators of more common acts of violence.
He and other economists also point to the racism baked into the policies that built the American middle class over the past century, including the New Deal and the G.I. Bill, and joint public-private ventures in racism, such as school segregation and housing discrimination. All are ways in which people of color were carved out of massive transfers of wealth that their white peers used to buy homes and pass money down to their children, exacerbating disparities over time.
What to do about those disparities? That’s another matter altogether. Legislative proposals include variations on standard progressive-policy ideas, such as universal basic income, cash transfers, housing vouchers, child savings accounts, tax breaks, a federal jobs guarantee, and free college tuition. Many of these policies are updates on ideas found in the Freedom Budget, a sweeping and ambitious set of anti-poverty policies first proposed by Martin Luther King Jr., the black labor leader A. Philip Randolph, and the civil-rights organizer Bayard Rustin in 1966, with the help of dozens of economists.
Warren’s preferred fix during her tenure in the Senate has been increasing universal access to affordable, equitable housing and homeownership, and her introduction in September of the $450 billion American Housing and Economic Mobility Act teed up the issue for her on the campaign trail. As my colleague Madeleine Carlisle has written, that legislation “is perhaps the most far-reaching assault on housing segregation since the 1968 Fair Housing Act.” It would use revenues from higher estate taxes—restored to levels before a dramatic tax cut went into effect in 2010—to fund a massive expansion of federally subsidized housing.
To specifically combat the racial wealth gap, the legislation would provide grants for certain first-time home buyers in low-income neighborhoods that have been marked by redlining, a housing-segregation tactic that was common over the past 50 years. It would also aid homeowners who owe more on their mortgage than the value of their home, a group that a recent report from the left-leaning Center for American Progress indicates is significantly more likely to include families of color than white families. In October, Darrick Hamilton, an economist who collaborates frequently with Darity, and Mehrsa Baradaran, a University of Georgia law professor who wrote The Color of Money, one of the most influential recent works on the racial wealth gap, praised Warren’s plan, saying it “has the potential to lift historically marginalized communities by reversing more than a century of capital exclusion and housing discrimination.”
But Warren’s proposal isn’t the only one circulating among Democratic heavyweights who might soon enter the 2020 field. One policy seems especially popular: a federal jobs guarantee. According to Capitol Hill aides I talked to, Darity and Hamilton’s work on the potential effect of a jobs guarantee on the wealth gap has caught some offices’ attention. New Jersey Senator Cory Booker introduced legislation in April to create a 15-city pilot program for jobs guarantees, a plan that Kirsten Gillibrand of New York, Kamala Harris of California, Jeff Merkley of Oregon, and Warren herself co-sponsored. Vermont Senator Bernie Sanders, too, has talked about proposing a federal jobs guarantee.
Booker in particular has been active in proposing new economic-justice policy in the Senate, and has featured the racial wealth gap prominently in speeches over the past year. In October, he introduced the American Opportunity Accounts Act, which would, like Warren’s housing program, use a restored estate tax as funding. Under the act, all American children would receive a $1,000 deposit in an interest-accruing account upon the occasion of their birth. The account would be untouchable until they reach adulthood, and it would grow by up to $2,000 each year, with the amount dependent on their family’s income.
A Booker aide, who spoke on the condition of anonymity to discuss the office’s internal policy agenda, told me that this program would target the racial wealth gap by targeting poverty. Because black and Latino children are considerably more likely to be poor, or near-poor, than their white counterparts, they would, on average, receive more money. According to the aide, the Booker team estimates that the average amount white children would earn by their 18th birthday would be roughly $14,000 to $15,000. For black children, that amount would be about $28,000, and for Latino children, about $26,000.
It is still unclear whether the Democrats’ policies would do enough to fix the underlying gap. Darity noted, for example, that Warren’s plan to provide housing grants could help the wrong people: Development in the designated areas could actually lead to gentrifiers receiving grants, instead of families who felt the effects of redlining. “You will not necessarily provide the benefit to those who were victimized by the process by going this route,” Darity told me.
Reparations is perhaps the one big policy idea for closing the racial wealth gap that hasn’t gotten traction somewhere in the 2020 Democratic primary field, and it’s the main policy that its supporters say would provide direct benefit to people based on victimization. “I have to say that the policies that have received the [most enthusiastic] reception are those that I might describe as universal policies that are not race-specific, but they are race-conscious,” Darity said, including both Warren’s housing grants and Booker’s baby bonds in his assessment. “What we haven’t gotten to is the point at which the most significant race-specific policy has become an object of legislative design, which is a program of reparations for black Americans.”
The only real champion of reparations in Congress was former Representative John Conyers of Michigan, who left Capitol Hill amid sexual-harassment allegations in late 2017. But Darity thinks the spread and acceptance of racial-equity language, such as Warren’s and Booker’s, even in universal policy could begin warming Americans up to the idea of reparations as they think of ways to fix or advance affirmative action, a policy that’s been under attack by several federal lawsuits over the past five years. Of course, that retreat could also mean the opposite: that the door is closing on public and political will to specifically address the ways government and private actors victimize people of color.
Voters seem to be driving the shifts in the Democratic Party’s thinking on economic- and racial-justice issues. It wasn’t so long ago that former President Bill Clinton led a New Democrat movement that slashed the safety net and expanded mass incarceration. That movement responded to racist tropes about black people on welfare and relied on a fundamentally conservative argument that individuals’ choices influenced most of the wealth gap. President Barack Obama’s two terms in office differed in many ways from Clinton’s; his reversals of some welfare work requirements and his passage of the Affordable Care Act certainly acted as racially conscious economic stimuli. But much of his administration’s proactive policy on the wealth gap focused on individual financial literacy and capability. Many of the policies seriously being considered right now would have been regarded as farce during his presidency.
But the landscape has shifted in the past two years, in part because of the growing political power of black and Latino voters. This change was illustrated most vividly in the 2018 midterms. “We knew that there were going to be some candidates that would think about [the racial wealth gap] and, depending on their beliefs or personal backgrounds, they may include race as part of their overall economic message,” says Akunna Cook, the founding executive director of the Black Economic Alliance, a political action committee that funds candidates who pledge to make narrowing the racial wealth gap part of their platform. But economic justice was brought “to the forefront.”
In what Cook describes as a surprise even to her group, a large cohort of Democrats in 2018 made the racial wealth gap part of their message, including Stacey Abrams and Andrew Gillum in the Georgia and Florida gubernatorial races, Beto O’Rourke and Mike Espy in the Texas and Mississippi Senate races, and Antonio Delgado, Lauren Underwood, and Joe Cunningham in their House races. With record-breaking black turnout in 2018, the election, in part, showed that platforms emphasizing the racial wealth gap could motivate voters.
That’s perhaps especially true in red states—including Georgia and Mississippi—where Democrats’ better-than-usual performances were based on a new strategy of mobilizing black voters and unlikely voters. Those successes have given the Democratic presidential nominee new pathways to 270 electors in 2020. “That opened a lot of people’s eyes to the fact that we have a lot of states and districts that have been ignored for a long time, and the black vote could be impactful,” Cook told me.
A strategy that’s centered on economic and racial justice and aimed at disengaged voters could pay even more dividends in a presidential primary than a general election. In the Democratic primary, the electorate is blacker and more progressive than the broader electorate, and is heavily focused in the South.
The genuine movement in this policy area won't automatically translate to a reduction of the wealth gap. Proposed policies and campaign promises are not the same as actual governing, and the Democratic nominee will need to first beat Donald Trump and then persuade Congress to execute their agenda—difficult tasks, to say the least. There’s also an alternative path the Democratic Party could still take: targeting older white swing voters without taking up racial justice as a serious mandate.
Economists and politicians still have plenty of arguing left to do about which policies would be most efficient at boosting minority wealth (and, among some, arguments about whether it’s even the government’s business). There will always be opportunities for discrimination and adverse implementation of universal policies, too. And, as of yet, nothing en vogue targets the sin of white supremacy head on.
But, as Warren said in a 2015 address, there is plenty of agitation, among voters and politicians alike, for “less talk and more action about reducing unemployment, ending wage stagnation, and closing the income gap between white and nonwhite workers.” After 400 years of heading in the wrong direction, any movement the other way would be big news.
*This article originally misstated the median wealth of black families. We regret the error.