Bacon's Rebellion

What’s holding back black Americans? Government, not discrimination

by James A. Bacon

After nearly a half-century of government-led exertion to lift black Americans out of poverty, how are they faring? New data and research tell the story. According to census data, 26 percent of blacks, compared with 10 percent of whites, lived in poverty in 2009. The unemployment rate for blacks is 16.7 percent, more than twice the rate for whites. And a study by the Pew Charitable Trusts Economic Mobility Project finds that black men in the middle class are 37 percent more likely than white men to tumble down into the bottom 30 percent of income earners.

A recent study by the Economic Policy Institute concludes that wealth destruction suffered by Americans during the Great Recession hurt blacks more than others. According to “The State of Working America’s Wealth,” the median net worth of black households slid to $2,200, compared with the median net worth of whites at $97,900. Forty percent of black households had zero or negative net worth.

Liberals, race hustlers and others committed to the idea that America is an unjust society in need of remediation have a ready explanation: Blacks continue to suffer discrimination. Racism may be more subtle than when Bull Connor unleashed the dogs upon civil rights marchers, they say, but it is still pervasive and damaging. Yet that narrative is getting harder and harder to maintain. Indeed, it is dawning upon many that blacks remain mired in poverty precisely because their political leaders have looked to government for salvation. And government – far from rescuing blacks from poverty – has kept them trapped in it.

Uncle Sam still transfers hundreds of billions of dollars yearly to the poor and downtrodden in the form of Medicaid, the Children’s Health Insurance program, nutritional assistance (food stamps), Temporary Assistance for Needy Families, the Earned Income Tax Credit, fuel assistance and a host of narrow-bore programs aimed at ameliorating the hardships of poverty. Social scientists have long warned of the corrosive effect of welfare upon black Americans’ family structure, self-reliance and initiative.

If that’s where government “help” ended, the condition of blacks today might not be as dire. But one reason blacks suffered such devastating financial losses in recent years is that much of their net worth was tied up in real estate. When the housing market imploded and equity values collapsed, much of their net worth evaporated. While people of all races experienced equity losses, black homeowners suffered more than others. A 2010 study by the Center for Responsible Lending found that among recent borrowers, 8 percent of blacks and Hispanics, compared with 4.5 percent of whites, had lost their homes to foreclosures. (Of course, the foreclosure crisis is far from over – those percentages have climbed higher since.)

While the causes of the housing bubble are complex – low interest rates, financial innovations on Wall Street and a general decline in lending standards fed the frenzy – government policy played a supporting role. Under a bipartisan banner of promoting homeownership, government agencies encouraged subprime lending to households that had no business having mortgages. Then, after the crash, Obama administration policy prolonged the financial agonies of homeowners facing foreclosure through a mortgage-modification program that spared some homeowners but caused others to deplete their savings by making payments they couldn’t afford.

The latest canard is the notion that everyone should be entitled to a college education. President Obama has ramped up loans and grants for college students to unprecedented levels. Unfortunately, no one seems to be checking how many are graduating. Many Americans, including blacks in disproportionate numbers, are not academically prepared for college and never make it through. The result is a silent college dropout crisis. States a recent study from the American Institutes for Research: “Much of the cost of dropping out is borne by individual students, who may have accumulated large debts in their unsuccessful pursuit of a career.”

In tacit acknowledgment that there is a big problem, the Obama administration is targeting for-profit colleges, where tuition costs and defaults tend to run higher, for criticism. But the underlying premise, that government should help pay for anyone to get a college education, is as flawed as the premise that everyone should own a house. The result of good intentions gone awry is a generation of college dropouts living in modern-day indentured servitude.

The do-gooders have all the best of intentions, of course. They just don’t pay attention to results. In the name of compassion, they keep blacks hooked on initiative-sapping welfare dependency. In the name of building the American dream, they promote home ownership for people who lack the financial wherewithal to keep up payments. In the name of equal opportunity, they dispense college loans to people who will never graduate. Lord, deliver us from those who would save us.

This column was published originally in the Washington Times.