No Silver Bullet to Closing the Racial Wealth Divide
EDITOR’S NOTE: This content originally appeared in Roll Call.
How do we continue to fall into this trap? We habitually attempt to solve complex social and economic issues by trying to find the iconic “silver bullet” solution. Now an important new study on college education and the racial wealth divide has sparked debate over whether one of those “silver bullet” solutions is a high-priced lemon.
The report, released last month by the St. Louis Federal Reserve, found that from 1992 to 2013 college-educated blacks and Latinos lost more wealth than blacks and Latinos without college degrees. (One reason identified by the authors is that households of color without college degrees had little wealth to lose in the first place.) By contrast, white households experienced large increases in wealth tied to their educational attainment.
Our country has long understood that wealth creation is the product of a constellation of economic and social factors, and that our public policy must reflect that. An example is the GI Bill. While saddled by a mixed history of success due to the discriminatory nature of its implementation (much of its benefits were withheld from veterans of color), the GI Bill occupies a seminal place in the history of our country’s economic and social structure.
The GI Bill was designed to ease the reintegration of veterans of World War II into American society. Benefits of the GI Bill included low-cost home mortgages, low-interest business loans, tuition assistance, unemployment compensation, and support for living expenses to attend college, high school or vocational programs. Despite reinforcing racial wealth divisions, the GI Bill successfully extended wealth building opportunities to millions of largely low-income returning veterans.
To close the racial wealth divide we must move away from silver bullet thinking towards comprehensive asset and wealth-building solutions like the GI Bill. That means providing low- and moderate-income families, particularly households of colors, with the opportunities they need to achieve financial security.
We cannot approach this problem as if our choices are confined to a small group of “either/or” propositions, such as access to homeownership or access to higher education. Rather, we should be guided by a far more productive set of “and” possibilities — access to homeownership and education and retirement and small business capital and employment and so on.
The political mood of the country and Congress might seem to preclude such a sweeping approach, but many of the most promising and potentially bi-partisan solutions are buried in the deep weeds of policy debate. They just need to see the light of day.
They include initiatives such as Children’s Savings Accounts, which are established for kids as early as birth and are most often used for post-secondary education. For example, Rep. Joseph Crowley’s, D-N.Y., USAccounts Act would create a matched savings account for every child born in the U.S., seeded with a $500 deposit. Research indicates that low-income children with college savings of just $500 or less are three times more likely to enroll in college and four times more likely to graduate.
We also need to better support aspiring homebuyers by enhancing their ability to save and access affordable credit to purchase a first home. When Congress finally passes comprehensive housing finance reform it should include provisions that help first-time homebuyers by keeping minimum downpayments low, expanding support for downpayment savings through tax incentives and matched savings, and expanding downpayment assistance funds.
Finally, as Congress and the presidential candidates debate tax reform, they must confront the reality of our upside-down tax code, which provides an array of benefits that help the wealthiest households build more wealth while denying the same benefits to those further down the economic ladder.
Our nation’s racial wealth divide is far too big and complex a problem to think it could ever be cured by one silver bullet. There are no simple solutions – but there are plenty of excellent options.
Jeremie Greer is vice president of policy and research for the Corporation for Enterprise Development (CFED).