States can pave the way on closing the racial wealth gap

UNITED STATES - JULY 27: Black Lives Matter Plaza on 16th NW, is pictured before the procession for the late Rep. John Lewis, D-Ga., passed by en route to the U.S. Capitol Building for his memorial service on Monday, July 27, 2020. Mayor Muriel Bowser conducted a brief ceremony on the plaza at 16th and I Streets, NW. (Photo By Tom Williams/CQ Roll Call/Sipa USA)No Use UK. No Use Germany.

Racial inequality, be that in housing, education, jobs, or our justice system, is holding back our economy and limiting the realization of the American Dream. Too often, gridlock on Capitol Hill does not address these challenges head-on, allowing them to grow into more significant problems. State governments, our laboratories of democracies, have a much-needed role in leading the way. As we have seen, the pandemic affects everyone; however, it does not affect everyone to the same degree. As reported by the University of California at Santa Cruz, over 41% of business closures since the start of the pandemic have been by black-owned businesses, despite black companies making up less than 3% of total companies in the nation. Over the same period, just 17% of white-owned businesses closed. Wealth, a critical measure of success, aids families in weathering unforeseen circumstances and crises, and not having it can have dire consequences for families, but also our economy as a whole. As stated in a report recently released by Citi, racial inequality, specifically as it relates to Black Americans, has cost our economy over $16 trillion over the last 20 years. The nation wasn’t doing well on addressing gaps in racial inequality before the pandemic. Now it is getting worse.

How did we get here?

We got here by public policy. From our nation’s original sin of slavery to racial discrimination in the years since, our economy has missed out on minorities achieving their wage potential and all the growth that would have come with that. For example, the Social Security Act of 1935, hailed as a great innovation in aiding everyday Americans, prevented farmworkers and domestic workers such as nannies and house cleaners from receiving benefits. Farmworkers and nannies were occupations oversaturated with low-income black workers. The G.I. Bill covered the college education cost for soldiers returning from WWII and paid the down payment cost for a home. However, due to local zoning ordinances, minorities could not actualize these benefits and, until Brown vs. Board of Education and the preceding cases building up to it, Blacks could not enter many of the top schools in the nation either.

Today, policies allow corporations to dislodge debt and file for bankruptcy while those burdened by student loan debt face steep barriers to doing the same thing. In 1989, student loan debt was more comparable between white and nonwhite families. At present, Blacks outpace white families in student loan amounts and the total share of total student loan dollars owed. Blacks and Latinos homeownership rates lag behind whites for many reasons already shared. Limited income and inherited wealth limit the ability to save for a down payment or survive an emergency. Lastly, quality, affordable healthcare continues to be out of reach for many low-income communities due to cost and because healthcare is connected to employment. Black and Latino workers are the most likely to be laid off during a pandemic, due to overrepresentation in fields such as hospitality, and are most at risk of losing health care.

Why state and local governments matter?

States have always been our nation’s laboratories for democracy on issues of economic development to labor reform, healthcare, and environmental protection. The gridlock in our nation’s capital slows the progress needed to address the challenges of today. States must work together to lead when Washington cannot.

I represent the 24th Legislative District in Prince George’s County, Maryland, the nation’s wealthiest predominantly black county. Even here, a decade after the recession, we are still struggling with the effects of predatory loans and suppressed home values. Access to quality healthcare for minorities can still be challenging. For example, the life expectancy of predominantly African American Suitland is 70 years, compared to 86 years in predominantly white Greenbelt. Our state, one of the most diverse in the nation, is at a disproportionate risk for the effects of exacerbated racial inequality, given our diversity. Our community cannot wait for change on Capitol Hill. We will need to get it done in Annapolis, our state capitol.

What can we do about it?

The most effective wealth-building tool today is starting a business or purchasing a home. States must increase the flow of capital to minority business owners, and I advocate for states to utilize diverse public pension fund managers to do just that. According to Pensions and Investments, in 2018, the top 1000 retirement funds’ assets reached a record of $10 trillion. As reported by the Black Economic Alliance, minority-owned equity firms represented 34% of the top quintile of performers but managed less than 1% of available capital. States should establish a domestic emerging market fund manager, a person more likely to invest and allocate capital in non-traditional low income urban and rural communities, to increase the flow of capital to minorities. These public pension funds must work in conjunction with opportunity zones to increase capital flow to the small businesses and housing developments most in need. We must also use state tax credits to help scale alternative financing options for minority communities. Financial Technology firms (FinTech), Community Development Financial Institutions, Credit Unions, and Minority Depository institutions outperform traditional banks in providing loans and credit to minorities and low-income communities across both urban and rural areas.

Further, we must create incentives to develop new housing options for low to moderate-income families in “high opportunity, low poverty” neighborhoods. Data shows that providing vouchers for low-income families to move to “high opportunity” communities can influence the lifetime earnings of the children. We must also develop current neighborhoods through school improvements.

Education is the great equalizer, but the cost-benefit of attending college is becoming too expensive for everyday Americans, particularly most minorities. States must use their budgets to reduce student debt reliance by supporting more short-term occupation-specific certifications over traditional college and making community college free for all. Further, creating universal child savings accounts, paired with baby bonds as proposed by Sen. Cory Booker for families in the bottom 20% of incomes, will help increase intergenerational social mobility by giving assets to the next generation when they need it most.

States should also institute auto-expungement policies such as those established in Pennsylvania by Gov. Tom Wolf and Rep. Jordan Harris to allow low-level offenders to reenter the job market without the scarlet letter of a criminal conviction holding back their earning potential. The collateral consequences of a criminal conviction prohibit access to Pell grants, housing relief, and much more.

Altogether, the time to build our nation back better begins now, and our states have the opportunity to lead the way. We need not wait any longer to address the ramifications of inequality. We need to muster the political will to unleash the full force of our economy and our democracy by ensuring the American dream, a dream of equal opportunity for all, is indeed real for everyone.

Delegate Jazz Lewis represents Maryland’s 24th Legislative District, currently serves on the House Judiciary Committee as Chair of the Family Law Subcommittee, and is the Chair of the Maryland House Democratic Caucus.