The Washington PostDemocracy Dies in Darkness

Baby bonds? Reparations? There’s no quick fix for racial wealth gap

7 min

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You learn a lot writing a book, as I did with my latest effort: “Fixing the Racial Wealth Gap: Racism & Discrimination Put Us Here, But This Is How We Can Save Future Generations.” I researched the history of the economic racism that is responsible for the racial wealth gap and the graphic results of that disparity, and I offer possible solutions.

The history of racism, discrimination and violence runs deep. Every time Black Americans made progress, it was taken away either legally, such as when the Manhattan Beach, Calif., City Council used eminent domain in the 1920s to take Bruce’s Beach away from a Black couple that operated a resort catering to Black people, or violently, as when the middle-class community in Tulsa and dozens of other Black communities across the country were burned to the ground by White mobs. The result is that Black Americans are far behind White Americans in every economic statistic.

The median White family has 10 times the wealth of the median Black family, according to a report, “The economic impact of closing the wealth gap,” by McKinsey & Co., a management consultant. And Black Americans can expect to earn $1 million less than White Americans in their lifetime. Prosperity Now, a nonprofit advocacy group, said in a report that the median net worth of Black families will be zero in 2053 if nothing is done.

One of the surprises for me, though, is that there are tried and true solutions, but they are not likely to be applied to Black America in numbers large enough to solve the issue. And no one of those solutions is likely to solve the problems in itself.

Let’s discuss the pros and cons of improving financial literacy in the Black community: the “Baby Bonds” proposal that has been introduced in Congress, housing programs that would reduce the gap between Black and White homeownership and guaranteed income programs that have proven to be hugely successful. And, probably the most controversial of them all, reparations.

Financial literacy

Many people, including economists, financial planners and educators, both Black and White, believe financial literacy is one tool to help close the wealth gap. It is critically important that we increase the level of financial knowledge in the Black community.

Students who take financial literacy at a young age were less likely to take on high-interest loans, like payday loans and less likely to depend on high-interest credit cards, according to the National Endowment for Financial Education.

But economist Andre Perry, a senior fellow at Brookings Institution, said in a column: “Financial literacy courses won’t solve the racial wealth gap: Stop blaming Black people for the exploitation that has stolen away their wealth for generations.”

He continued: “While teaching high-schoolers good financial habits is wonderful, it is absurd to maintain that doing so will close the racial wealth gap. Black people can save every discretionary cent for the next 250 years and it would still not close the racial wealth gap in this country.”

There are many who agree with Perry. But many financial experts still think financial literacy is a key part of any larger plan.

Baby bonds

The idea was first proposed by economists William A. Darity Jr. at Duke University and Darrick Hamilton at the New School for Social Justice. Sen. Cory Booker (D-N.J.) has proposed legislation that would create a federally funded savings plan for every child born in the United States. The accounts would begin with $1,000 with an additional deposit of up to $2,000 annually until the child turns 18, depending on the family’s income. The child would then gain access to the money to buy a home or pay college tuition. An analysis by the Morningstar financial services firm concluded that baby bonds would cut America’s racial wealth gap in half after the first children reach their 18th birthday.

But despite having a dozen co-sponsors in the Senate, including Senate Majority Leader Charles E. Schumer (D-N.Y.), and nearly as many co-sponsors in the House, the legislation has not advanced. It has no support from Republicans.

A historic all-Black town wants reparations to rebuild as a ‘safe haven’

Guaranteed Income

California has budgeted a pilot program that would provide grants to organizations to provide guaranteed incomes to participants to reduce poverty.

Stockton, Calif., started a pilot in program in 2019 under former mayor Michael B. Tubbs in which the city gave $500 a month to 125 residents of the city’s low-income neighborhoods for two years. After the first year, a study conducted by independent researchers found that full-time employment rose among those who received the guaranteed income and that their financial, physical and emotional health improved.

Mayors for a Guaranteed Income, a group founded by Tubbs, says pilot programs have been started in a number of cities and counties across the nation.

Housing Assistance

According to the Urban Institute, the Black homeownership rate is 42.3 percent compared to the homeownership rate among Whites of 72.2 percent. Left unaddressed, the organization said, the Black homeownership rate will fall even further by 2040.

A group of housing and civil rights leaders last year announced an initiative to significantly increase the nation’s Black homeownership rate. The Black Homeownership Collaborative, a coalition of more than 100 organizations and individuals, wants to bring Black ownership up to the level of White homeownership, which would require 5 million additional Black homeowners, or an increase of 72 percent.

The group wants to create 3 million new Black homeowners by 2030 through a 7-point plan to achieve its goal within nine years: homeownership counseling; down payment assistance; housing production; credit and lending; civil and consumer rights; homeownership sustainability, and marketing and outreach.

The group also called for increased funding for housing counseling services, and a targeted down-payment assistance program.


Darity and Kristen Mullen in their book “From Here to Equality” say the total amount of reparations should be dictated by the amount necessary to eliminate the wealth disparities between Black and White Americans. That would require an expenditure of $10 to $12 trillion, or $200,000 to $250,000 per eligible recipient annually over 10 years. That would, they say, bring wealth in Black families in line with the wealth of White families.

And the House Judiciary Committee voted HR 40, a reparations bill, out of committee in early 2021. That bill was originally introduced by the late Rep. John Conyers Jr. (D-Mich.) in 1989. There are now nearly 200 House co-sponsors and over 20 Senate co-sponsors for a national reparations law.

Supporters say they have the votes in the House to pass a reparations bill after years of lobbying

Passage is unlikely, however. The legislation is strongly opposed by Senate Republicans. A nationwide poll from the University of Massachusetts Amherst and WCVB found that 62 percent of respondents opposed reparations to descendants of enslaved people. A Reuters poll found that only 20 percent of the respondents supported reparations.

My hope is that we will see parts of each program enacted during in the next few years. There is much more happening with reparations on the local level. We saw communities such as Asheville, N.C., and Evanston, Ill., pass reparations bills during the height of the social justice movement during the pandemic. And 11 U.S. mayors, including the mayors of Los Angeles and Denver, agreed to pay reparations to small groups of Black residents in their cities. The programs would be to compensate for past wrongs, but the mayors did not offer details on how much the programs will cost or how recipients will be chosen.

Roger Ferguson, former CEO of TIAA, the giant financial services firm, probably said it best: “None of those things is a silver bullet or a magic wand. And the reason I think there’s no silver bullet is it’s taken us literally hundreds of years to get to this place, and hopefully I don’t think it will take 100 years to fix it, but I think it will take some time to undo three centuries of damage.”