For John, BLUF: Many members of the Black segment of our society are still battling to break into the Middle Class and remain there, and this is often because of perverse incentives, which have, in turn, distorted the values of these people. This needs to be fixed.
The Blogger Philo of Alexandria, back in September of 2010, drew attention to what he called Reynolds Law:
“Subsidizing the markers of status doesn’t produce the character traits that result in that status; it undermines them.”Philo links it back to Woodrow Wilson, President of the United States. I admit that at one time Woodrow Wilson was a hero of mine. Then I realized that he and I didn't really think alike, but that we both wanted good outcomes for the People.
It’s easy to see why.
If people don’t need to defer gratification, work hard, etc., in order to achieve the status they desire, they’ll be less inclined to do those things.
The greater the government subsidy, the greater the effect, and the more net harm produced.
But, back to the issue of the moment. It all starts with this Washington Monthly article by Professor Thomas J. Sugrue,♠ "A House Divided: Why do middle-class blacks have far less wealth than whites at the same income level? The answer is in real estate and history." The title sums it up. Discrimination held Blacks back from developing capital, and capital builds slowly until it moves one into the Middle Class, and then helps provide a launching platform into the world of small enterprise and further wealth accumulation.
When I was young, back in the '40s and '50s, people would sometimes comment that they didn't understand why Blacks drove shiny new cars, but lived in homes that were down-scale. I didn't have a clue. Only later did it come to me that we were dealing with a reaction to housing discrimination. Reacting to restrictive covenants and other forms of discrimination. And, it was a sign of the capital accumulation problem mentioned above. A shiny new Caddy didn't increase in value, the way a home might. It depreciated in value.
Writer Walter Russell Mead, writing in The American Interest, points out the consequences of such discriminatory practices:
So when the real estate bubble burst, it hurt Blacks much more than whites: 25 percent of African-Americans who purchased or refinanced homes from 2004 to 2008 have lost or are losing them, compared to 11.9 percent of white Americans. According to Sugrue, “the median black family today holds only $4,955 in assets.”Needless to say, this is not good from a societal point of view. An effort to move more Blacks into the housing market resulted in not just efforts to eliminate Red Lining, but, eventually, predatory lenders stepping forward. Those predatory lenders contributed to Blacks being disproportionately hurt in the bursting of the real estate bubble.
Law Professor Glenn Reynolds, quoted above, touches on one aspect of this problem. As the late Senator Daniel Patrick Moynihan pointed out, we have distorted, through Government programs, the values, the character traits, of some members of the Black Community. Another side of this problem is that as things were going bad in the real estate market we ignored it and allowed perverse incentives to continue. The percent of foreclosures for the Caucasian side, 11.9%, or over ten percent, is a sign of serious problems and millions of people hurting. A 25% rate for Blacks is just scandalous.
The question is, what steps can we take to redeem the situation, both in terms of preventing more family capital being lost and in terms of reversing perverse incentives, so all who are willing and capable can be put on the path to long term success.
It is my personal opinion that we should create a law that creates a legal bond between an unmarried woman and the father of her child, requiring the father to acknowledge, to the child, birthdays and some festive winter holiday (e.g., Christmas or Kwanzaa) and requires report cards to be reviewed and endorsed and requires payment of child support through high school graduation and education support through a bachelors degree for those children actively in college.
We need to create sufficient jobs to drive the unemployment rate down to a manageable level. Not with make-believe jobs but with real jobs, creating opportunities for people to develop skills as well as earn (and save) money.
We need to find a way to liquidate much of the bad paper in the real estate bubble, rewarding those who tried for the American Dream, but without rewarding those who would distort that dream for their own criminal intentions.
We need to do this in a way that is both color blind and at the same time sensitive to the fact that many in this nation have not gotten a fair break in the last century and a half.
And, we need to do it while reducing our Budget Deficit and the Federal Debt, and without contracting the economy by raising taxes too far.
And, finally, we need to understand that we will encounter unintended consequences, which will need to be looked at. Every solution will contain the seeds of future problems. Not a reason to not act, but a caution as things evolve.
Hat tip to the Instapundit.
Regards — Cliff
♠ "Thomas J. Sugrue is the David Boies Professor of History and Sociology at the University of Pennsylvania. His most recent book is Not Even Past: Barack Obama and the Burden of Race."