Opinion Narrowing the U.S. wealth gap is important. Narrowing the racial wealth gap is urgent.

(Rob Dobi for The Washington Post)
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The Federal Housing Act. The Social Security Act. The G.I. Bill. To list these landmark 20th-century laws is to understand how important government support was to building a broad middle class, endowed with a modest but meaningful “piece of the rock,” in the United States. It is also to acknowledge that this historic effort mostly bypassed people of African descent — who were deliberately, if often implicitly, denied the benefits. Of the $120 billion worth of housing built with federal backing between 1934 and 1962, only 2 percent was available to Black people due to “redlining” and other obstacles. Because agricultural and domestic workers — disproportionately Black at the time — were not covered by Social Security in 1935, Black Americans made up 23 percent of those initially left out of the program, twice their share of the total labor force. Benefits for World War II veterans were administered on a discriminatory basis. Not until the late 1960s were these disparities corrected, at least on paper, but the damage had been done.

Sharing the Wealth

Thus was the dispossession of Black people, which began with enslavement and continued through the Jim Crow era, compounded and perpetuated within living memory. The effects on household wealth persist to this day. The median White household had a net worth of $188,200 in 2019, of which residential real estate composed a major share, whereas the median Black family had $24,100 — about one-eighth as much — according to the Federal Reserve. If Black household wealth were proportionate to the Black share of the U.S. population, it would amount to $12.68 trillion, or about 13 percent of the total, rather than the actual $2.54 trillion, according to a recent Brookings Institution analysis.

Narrowing the U.S. wealth gap in general is important; narrowing the racial wealth gap is urgent. It is not the outcome of impersonal market forces but the legacy of oppressive policy. As a country we have already wasted too many opportunities to tackle it head-on.

It won’t be easy, in part because Supreme Court rulings have limited government’s authority to use overtly race-conscious remedies to address Black economic disadvantage. The court has held, essentially, that such measures can amount to racial discrimination against people who are not Black. This is a bitter irony given that many race-conscious policies that disadvantaged Black people were either not challenged or deemed consistent with the U.S. Constitution over the decades. Still, it is a reality that could preclude measures explicitly for the benefit of Black people.

Wealth inequality and race

Median net worth

$250 thousand (2019)

White

200

150

100

Other

50

Black

Hispanic

0

1989

2021

Homeownership rate

80%

White

National rate

60

40

Black

20

0

1994

2021

Poverty rate

35%

Black

30

25

20

National rate

15

10

White

5

0

1989

2021

Note: The distinct lines in the poverty chart indicate changes in the Census’ questions and survey processing system.

 

Sources: Board of Governors of the Federal Reserve System, Survey of Consumer Finance (net worth); U.S. Census Bureau (homeownership and poverty).

Wealth inequality and race

Median net worth

$250 thousand (2019)

200

White

150

100

Other

50

Black

Hispanic

0

1989

2021

Homeownership rate

80%

White

60

National rate

40

Black

20

0

1994

2021

Poverty rate

35%

30

Black

25

20

National rate

15

10

White

5

0

1989

2021

Note: The distinct lines in the poverty chart indicate changes in the Census’ questions and survey processing system.

 

Sources: Board of Governors of the Federal Reserve System, Survey of Consumer Finance (net worth); U.S. Census Bureau (homeownership and poverty).

Wealth inequality and race

Median net worth

Homeownership rate

Poverty rate

35%

80%

$250 thousand (2019)

White

Black

70

30

White

200

National rate

60

25

50

150

20

40

National rate

Black

15

100

30

Other

10

20

White

50

Black

5

10

Hispanic

0

0

0

1989

2021

1994

2021

1989

2021

Note: The distinct lines in the poverty chart indicate changes in the Census’ questions and survey processing system.

 

Sources: Board of Governors of the Federal Reserve System, Survey of Consumer Finance (net worth); U.S. Census Bureau (homeownership and poverty).

That includes reparations, which nevertheless merit a study such as the one called for in a pending bill, H.R. 40. Even if general compensation for slavery and segregation could not be feasible, or pass muster under current constitutional law, financial restitution may be available for identifiable victims of specific contemporary injustices, analogous to payments the United States made to those of Japanese ancestry interned during World War II. There needs to be focused attention on such quietly devastating barriers to wealth-building as the prevalence of informal land title among rural Southern Black families, which The Post’s Hannah Dreier and Andrew Ba Tran documented in a recent report. This legacy of Jim Crow has cost many families government disaster relief, and sometimes their property itself.

Meanwhile, the racial wealth gap can and should be addressed through measures that are race-neutral but foreseeably bestow disproportionate benefits on people of color — thus flipping the script on past policies that were officially colorblind but favored Whites. We have mentioned some in previous editorials: direct support for first-time home buyers and for retirement savings, in place of current tax incentives that tilt toward the upper middle class; grants for college tuition in place of loans.

Each low-income child born in the United States could be staked to a federally funded $1,000 “baby bond,” with annual payments, varying by family income, added until age 18, as Sen. Cory Booker (D-N.J.) and others have advocated. Invested in safe government bonds, the money would accumulate tax-free. It could only be withdrawn for investment in further wealth-building purposes such as education, entrepreneurship or homebuying. An analysis by the financial research firm Morningstar suggests that “baby bonds” could cut the racial wealth gap in half in terms of resources available per child at age 18.

Reform of the country’s current equivalent of a wealth tax — state and local property taxes — could also foster racial equity. Recent research by finance professors Carlos Avenancio-Leon of Indiana University and Troup Howard of the University of Utah has shown that existing systems result in higher property assessment growth rates for homeowners of color relative to similarly situated White homeowners.

Unjustifiably wide though it still is, the Black-White wealth gap is narrower than it was three decades ago: Median Black household wealth was 12 percent of White in 2019, but an even lower 6 percent in 1989. The lesson is that the United States has proved capable of reducing racial wealth inequality — even during a time when it was not consciously trying to do so and, in some respects, was raising new obstacles. Think how much more progress can be achieved if the country actively pursues it.

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