One day during the summer of 2008, I was in the checkout line of a grocery store in Atlanta. I was clearly thinking about something pressing because after paying the cashier I started to leave without one of my bags. After getting my attention, the cashier, a brother from the Motherland, smiles and says to me, “What’s the matter? Is George Bush getting to you?” I replied that no president has that kind of impact on me.
The exchange provided food for thought. All presidents take the blame for the economy when it is bad; the glory when the economy does well. Although Mr. Bush was not running in 2008, rising unemployment, restricted access to credit markets and a declining stock market would stain the presidential campaign of John McCain that September and lead to the Arizona senator’s loss two months later.
When African Americans elected Barack Obama in 2008, they voted not only for a change in the White House, but for a change in their economic circumstance. So what was the African American economic circumstance at the end of 2008?
According to the U.S. Department of Labor, the December 2008 unemployment rate for blacks was 12.1% and climbed to 16.2% in December 2009. Last week the Labor Department reported the December 2010 rate as 15.8%. By my projection, the rate should remain the same in January 2011.
The African American outlook on employment opportunity has not been particularly positive as the proportion of blacks participating in the labor force has fallen over the past two years. Again according to the Labor Department, 63.5 % of blacks 16 to 64 participated in the labor force by either working or looking for work. This percentage fell to 61.9% in December 2009 and has been relatively flat, registering currently at 62.1%. Again, by estimate, I expect a slight up tick in the rate to 62.5% for January.
But even more telling of the African American economy has been the failure of the African American community to accumulate income generating wealth. For example, in May 2010, the Institute on Assets and Social Policy at Brandeis University released the results of survey documenting the increase in the wealth gap between black and white Americans during the period 1984 to 2007. The survey concluded that the average high-income earning black family had accumulated only $18,000 in financial assets in 2007 while middle-income earning white families had accumulated $74,000 in financial assets.
Bear in mind that financial assets excludes the equity in a home. The wealth we are talking about here is wealth that can be relied on to tide households over during an economic downturn. Wealth that can be reinvested into additional education or, better yet, purchasing an entrepreneurial opportunity that can replace lost income. Wealth, that according to the Brandeis survey, 25% of African American families did not have to fall back on.
Unfortunately African Americans, like most other Americans, fell for the notion that owning a home was the primary path to building wealth. The current foreclosure crisis should put that notion to rest.
But given that the drive to home ownership was partially derived from policies espoused by the Clinton and Bush administrations, and that policy has failed miserably, what actions should our national government pursue that can get Americans on a whole and African Americans in particular on a path to wealth creation?
First, our national government can incentivize a change in mindset regarding production versus consumption. There is no excuse for high-income earning African Americans to accumulate nest eggs that are significantly smaller than the bundle of financial assets accumulated by middle-income earners. A national sales or consumption tax may be in order to discourage unnecessary spending and to steer more disposable income into the bond, stock, and commodities markets.
Second, get rid of the mortgage interest deduction and discourage the writing off of any homestead exemptions. The only thing that the mortgage interest deduction does, in addition to driving up the deficit, is encourage consumers to enter the credit markets in order to purchase money that is then used to purchase a non-financial asset that puts no money in the hands of consumers at the end of the month.
Politics, it’s said, is about getting what you want, when you want, from who you want. If this is the case, then it’s time for the politics of the black economy to help get us wealth, right now, generated by us for us.