Economic Impact
Through the institution and racist enforcement of laws and policies such as The Homestead Act of 1862, the Social Security Act of 1935, the GI Bill of 1944, and the Federal Housing Administration loans - and its related “redlining’’ - of the 1930s-1960s, White Americans were granted advantages and opportunities that African Americans were not. All but 2 percent of the $120bln of government-backed mortgage loans that were awarded were given to whites. This reality undeniably helped create the incredible wealth gap between blacks and whites today. According to the Federal Reserve, the median white household ($171k) has nearly 10 times more wealth than the median black household ($17.6k). A white person without a high school diploma has nearly as much wealth as a household led by a black peson with a bachelor’s or advanced degree. A household led by a white person with a high school diploma has more wealth than a hosehold led by a black person with a bachelor’s or advanced degree.
According to the real estate app Redfin, African American families have lost out on at least $212,000 in personal wealth over the last 40 years because their home was redlined. The results of these policies leave African American families with 10% of the net wealth of white families.
Lingering Costs of Race-Based Policy
According to the real estate app Redfin, African American families have lost out on at least $212,000 in personal wealth over the last 40 years because their home was redlined.Because of these historic wrongs, masses of African Americans need economic revitalization and relief, including though not limited to more home ownership, less debt, better credit and higher incomes.
Any man or woman who wrongs another in any way and so is unfaithful to the Lord is guilty and must confess the sin they have committed. They must make full restitution for the wrong they have done, add a fifth of the value to it and give it all to the person they have wronged." Numbers 5:6 (NIV)
Who Should Receive Restitution?
Our goal is to propose economic strategies and processes to address the concerns of the 40 million living descendants of American slavery. As a group they range between 3-5 generations away from this legalized economic atrocity and are current victims of post civil-rights discrimination such as:What are the Economic Targets?To use a measurable and fair calculation (similar to those suggested above) to address the economic implications of the above infractions and to lead the country to a better and more inclusive economic infrastructure.
- Racial policing and increased costs of court and legal fees
- Credit discrimination and higher costs of interest
- Housing markets discrimination and depressed home values
- Job discrimination and persistent wage gaps
- Mass incarceration and loss of wages
- Subprime mortgage collapse and race-based exploitation
- Student debt disparities that are impacted by race
What are the Economic Targets?
To use a measurable and fair calculation (similar to those suggested above) to address the economic implications of the above infractions and to lead the country to a better and more inclusive economic infrastructure.
Calculation Metrics
Compensation for Lost Wages
Economist Larry Neal calculated the differences between average wage paid to non-black laborers and the expenditures for expenses paid for slaves, such as clothing and housing. This calculated to $1.4trln in 1983, now estimated between $5-8trln with 5% assumed interest.
Compensation for Market Value of Slavery
Confederate senator Judah Benjamin estimated the market value of slaves to be $4bln in 1860. Compounded to 2019, that would equate to $9.3trln with 5% assumed interest.
Freedman's Bank and the Seneca Stone Ring Scandal
Payment to the descendants of the depositors of the Freedman’s Bank due to the fact that the bank leader and noted Republican politician, Henry Cooke, used the former slaves' funds during a financial collapse, and the federal government didn’t insure or support it. The Net Present Value (NPV to account for interest) of the capital was approximated at $65million in 2018 dollars.Recognizing that the GDP of the overall US economy is $20.5trln, we are not suggesting the above amounts be disbursed as a one -time lump sum payment which could adversely affect the American economy and treasury functions, not to mention cause staggering inflation. Instead, the above calculated amounts could be distributed in several forms including annual cash installments over a 10-year period, tax breaks, tax credits, interest-free loans to spur home ownership, and/or funding the additional proposals made below.
Job Market Discrimination Calculation
Between 1929-1969 if you just account for 40% of pay gap due to race-based labor market discrimination, gains accrued to whites were about $1.6trln.
Considerations for Disbursement
Recognizing that the GDP of the overall US economy is $20.5trln, we are not suggesting the above amounts be disbursed as a one -time lump sum payment which could adversely affect the American economy and treasury functions, not to mention cause staggering inflation. Instead, the above calculated amounts could be distributed in several forms including annual cash installments over a 10-year period, tax breaks, tax credits, interest-free loans to spur home ownership, and/or funding the additional proposals made below.
Recommended Tactics for Restitution
- Mandate that descendants of African-American veterans of WWII who where unable to capitalize on the opportunities afforded by the GI Bill of 1944-1956 should receive the NPV of those benefits today calculated at a 5% interest rate
- Start Trust fund for asset-building grants for home ownership, education, business start-up funds, or vouchers for purchase of financial assets along with a governing body to establish rules and protections for proper allocation of capital for long-term development
- Mandate that all American corporations that benefitted financially from slavery start management trainee programs for African-American college graduates, with the goal being to increase the number of blacks in management/executive positions to one of equality with the black population (13%) within a given number of years, and donate a federally- mandated percentage of their profits to black-owned businesses over a predetermined period of time
- Launch a user-friendly national website and app for support in rolling out this plan along with networking, training and educational components
- Create a pension system for purposes of investment and growth where only interest payments are currently accessible (a variation of this was earlier suggested by Callie House and the 1898 Mutual Relief, Bounty, and Pension Association)
- Make a significant capital investment in financial infrastructure, as currently 70% of African-American communities don’t even have a branch or bank of any type and are subject to predatory lending
- Develop a commission and a timeline in which commission will address particular economic infractions over time to bring closure on a case-by-case basis
- Create and support endowments for HBCUs, which still educate the majority of black doctors and engineers
- Create a transparent reporting mechanism for abuses to the restitution program to ensure systems remain efficient and effective, including federal programs such as Economic Opportunity Zones and Community Reinvestment Act (CRA)
- Mandate private equity, pension funds, mutual funds and venture capital firms to divest from privatized prisons and to be accountable for increasing black venture capital allocation from the current 1% to one closer to equality with the black population (13%) within a given number of years
- Mandate corporations to increase the number of blacks in management/executive positions to one closer to equality with the black population (13%) within a given number of years
- Mandate corporations through tax incentives or law to spend a percentage of their profits with black-owned businesses over a predetermined period of time. For Example: If the tech and banking sector were to spend just 2% of their net profits for the next 10 years, that would equate to $25bln and $19.4bln respectively. (Forbes “The 2% Solution Inside Billionaire Robert Smith’s Bold Plan” June 19, 2020)
