Economic Justice Makes or Breaks Elections

Economic Justice Makes or Breaks Elections

In almost every way imaginable, economic justice is the essential issue in the nation’s midterm elections today. Not only are economic fairness issues such as the minimum wage literally being voted on in many states, but the depth of the nation’s economic malaise has turned this year’s race upside down.

Economic dissatisfaction has helped make Senate races in places with large communities of color such as Georgia and North Carolina competitive for more progressive candidates. And it’s placed governors with national aspirations such as Scott Walker of Wisconsin in jeopardy. Still its biggest impact will likely be on the depression of voter turnout this year. Voter cynicism about a lost economic decade might drive voter participation today to its lowest level in the nation’s history.

This shouldn’t come as a surprise.

As I have written before, despite the economic “good news” of recovery, the reality for most Americans is that they remain worse off than a decade ago. Wages are at a 40-year low, black and Latino wealth is the lowest on record, and the unemployment rate for those under 30 is twice as high as the official unemployment overall. The hard truth is that the country is still 18 million jobs short of where we need to be in order to declare the economy to be truly healthy.

And for communities of color this rugged economic terrain, when combined with the highest poverty rates in nearly three decades, means that it may be a generation before black and brown households return to the level of prosperity that existed before 2007.

There is some good news: The lack of movement at the national level to address these issues has shifted momentum back to the states this year. In fact four states—Alaska, Arkansas, Nebraska and South Dakota—have ballot initiatives to raise the minimum wage. There are also non-binding votes to do the same in Illinois and Wisconsin. Even cities are weighing in with voters in Oakland and San Francisco looking to pass hourly rates of $12.25 and $15 respectively.  

Voters are behind these initiatives to such an extent that, as The New York Times reports, the business coalition which normally oppose them “has hardly put up a fight.” In fact, the exasperated chairman of the Arkansas Club for Growth told The Times’ Steven Greenhouse, that the minimum wage is “going to pass whether I jump up and down or spend all my money.” An increase in the minimum wage would be welcomed by women of color who make up the majority of those in the lowest of low-wage work.

The absence of a more progressive economic agenda has also shifted the calculus of Senate races in Southern states including North Carolina and Georgia. In both states Republican governors have passed laws that add to residents’ economic difficulty and decrease economic opportunity. Gov. Pat McCroy of North Carolina cut off unemployment benefits for nearly 200,000. And Gov. Nathan Deal of Georgia eliminated 62,000 students from that state’s higher education HOPE scholarship program even as he pushed through tax cuts for wealthy people. 

Backlash against their policies has been real and consequential. In North Carolina, Rev. William Barber’s Moral Mondays may be why Democratic incumbent Kay Hagan might hold to her Senate seat in this tough year.  A similar movement in Georgia has made that state’s Senate seat and its governor’s race competitive. 

The backlash has also extended to Wisconsin where Governor Scott Walker, the Tea Party favorite and 2016 presidential hopeful, successfully took away the right of unions to bargain collectively for wages and benefits back in 2011. Although Walker survived protests that brought 100,000 people into the streets and sparked a 2012 recall effort, he seems to be in real trouble this year. His Democratic opponent, Mary Burke, is running on her private-sector economic experience using the  slogan “Solving problems, not picking fights.”

But beyond these noisy clashes over economic policy at the grassroots level, the most important impact of economics this year will likely be on voter turnout overall. According to the Pew Research Center fewer voters will turn out than in any midterm election since the first one back in 1790. 

To be clear there is a general drop-off in all voters between presidential years. But as the Washington Post points out, three groups who will turn out far less than they did in 2012 are people of color, young people and single women. Consequently, Democrats might lose control of the Senate as well as seats in the House. “One of the things that seems to have handcuffed the Democrats this year in motivating these voters is that they say that the economy isn’t getting any better,” pointed out CBS News’ Anthony Salvanto on “Charlie Rose” recently. 

Salvanto also noted that not voting is in fact an active decision. What some call apathy could actually be a quiet, mass protest against the status quo. The decision to stay home on Election Day could easily be interpreted to be a vote for none of the above.

ISIS and the Cost of War

ISIS and the Cost of War

The United States is just three weeks into the latest phase of its effort in Iraq against the Islamic State in Iraq and Syria—the Islamic State in Iraq and Syria militant group—but already there are calls for it to escalate.

This past Sunday on CNN, Senator John McCain (R-Ala.) advocated for a greater number of U.S. ground troops to get directly involved in fighting the group. ISIS is “winning, we’re not,” McCain complained. McCain is not alone. His sentiments have been echoed by others in Congress and among key American allies around the world such as the United Kingdom and Turkey.

The problem is that the unfinished business in Iraq and Afghanistan shows us that scaling up the military campaign against ISIS will create severe costs that won’t be shouldered equally by all Americans. Sadly this fact is lost on many involved in the debate.

Before launching headlong into a third Iraq War it’s important to step back and review the costs of the past 13 years of combat. Not surprisingly, the sacrifice of war, monetary and otherwise are disproportionately borne by people of color and the young.

According to The Costs of War project at Brown University, the total costs for the second Iraq War and the ongoing one in Afghanistan is $4.4 trillion. Cost-wise, these two conflicts should be considered as one because it has long been established that the war in Iraq prolonged the one in Afghanistan by drawing away resources from it and causing it to drag on. Everyone in the country could go to college for nearly a decade free of charge with $4.4 trillion.

What’s astounding is that this eye-popping price tag could very well be the tip of the iceberg. As Costs of War points out “each additional month and year of war adds to that toll. In fact, total costs could stretch as high as $6 trillion in the coming years as veterans benefits and the like tally up.

Beyond the monetary issues there are others that are beyond measure.

Nearly 7,000 Americans have lost their lives in Iraq and Afghanistan. But these numbers exclude military contractors, the private paramilitary outfits hired by the government to supplement the work of the armed forces. Folding them into official casualty figures nearly doubles the number of U.S. deaths.

Fifty thousand American men and women were wounded in action, with another 330,000 having suffered some variation of post-traumatic stress disorder caused by their time at war. Added to these dramatic impacts is the grim fact that nearly 200,000 Afghani, Iraqi and Pakistani civilians have been killed in these conflicts since 2001.

Although the deaths and injuries cause unconscionable pain, the ramifications of these casualties are not spread evenly throughout society.

Nearly half of all those who’ve died in the war are under the age of 25. When it comes to race, close to two out of five of those serving in the U.S. armed forces is black or brown. And once they return from the battlefield, according to the Institute for Veterans and Military Families, black veterans are more likely than their white counterparts to be unemployed (PDF). 

The war has also impacted historically marginalized communities in other ways. Iraq and Afghanistan diverted the nation’s attention and financial resources from investments necessary to ensure that the working poor have an economic shot. For instance, additional capital promised to schools identified as struggling by No Child Left Behind wasn’t delivered as planned. In fact, during some of the Iraq War’s most active years, No Child Left Behind school assistance was half of what the law pledged. Schools serving the nation’s poorest children were hung out to dry for low test scores but were not provided the help needed to turn them around.

The two wars have done more economic damage than underfunding. The sky-is-the-limit approach to military spending since 2001 created the massive debt that’s been used to justify the rolling back of economic opportunity programs that helped build the middle class. The entire cost of Iraq and Afghanistan were not paid for directly, rather they were charged to the nation’s credit card. Concern over this mounting debt is what fueled the Tea Party. Once in office, conservative members of Congress went about slashing everything from food assistance, to housing help to pre-school education under the banner of getting the nation’s fiscal house in order.

As I have written before their arguments don’t hold up to scrutiny. The nation is nowhere near broke, but that was never the point. A wing of the Republican Party has always sought to run up the nation’s debt and then use it as an excuse to shrink the government programs they oppose. This even has an unfortunate name: “starve the beast.” Yet the money being shoveled out the door for the two wars was the sort of justification for which they’d worked for so long. They’ve spent most of President Obama’s time in office using it to advance their aims.

The United States is not fully into a third Iraq War, but its important to remember that there students on the verge of entering high school who’ve never known a time when the United States is not a war. Hopefully as decision-makers and the national security establishment will consider what’s next in the Middle East they will recall the staggering economic, political and social costs that continue to reverberate across the nation from the last set of wars in the region.

Unemployment Stats Paint a Dangerously Incomplete Picture

Unemployment Stats Paint a Dangerously Incomplete Picture

Last week the Department of Labor released the September jobs report, one of the key indicators of the nation’s well-being. The report, which could be the last before the midterm elections, shows that the unemployment rate has fallen to 5.9 percent, down from 10 percent when Obama took office in 2009.However, not all the information contained in the September Employment Situation Summary was good news.

Close to 50 percent more Latinos are without work than whites. Black unemployment is double that for whites, with more than one out 10 African-Americans without work. Nearly half of all young black men in many of the nation’s largest urban areas are jobless. The tough news doesn’t end there. The unemployment rate for those under 30 is nearly double the official number, according to analysis by Generation Opportunity, a non-profit organization that focuses on millennials. 

But these numbers weren’t enough to dampen the mood.

On Friday, when the jobs data was released,the White House Council of Economic Advisers put out a statement declaring that “our economy has bounced back more strongly than most around the world.” The Wall Street Journal echoed the economic comeback drum beat by stating that the employment announcement was “lifting hopes” for an economy that’s still flat on its back in many ways.

But the trouble with the official unemployment rate is that it may not tell us much about what’s happening in the real economy. Beyond the terrible numbers for blacks, Latinos and people under 30, there’s an even larger conundrum that casts doubt on using the official unemployment rate to measure economic health.

The truth is that the 5.9 percent unemployment rate doesn’t factor in the millions of people who have stopped looking for work or dropped out of the workforce all together. This trend, measured by something called the “labor force participation rate,” shows that fewer people are effectively working than at any point in almost 40 years. As the Department of Labor states, many of these potential job-holders are not looking for work “because they believe that there are no jobs available for them.”

Analysis from the Economic Policy (EPI) Institute calls these frustrated job-seekers the “missing part of the puzzle” in understanding what’s really going on economically. Their research shows that if you include the nearly 6 million missing workers into official unemployment calculations, the jobless rate nearly doubles to 11 percent or nearly 1 out of 9 people.

As if this wasn’t enough there’s an even larger number that points to our currently reality. If we factor in people who work part-time but want full-time jobs, our economy would be nearly 20 million jobs short of where we need to be for everyone to make ends meet. That’s higher than all of the jobs lost during the Great Recession. 

The truth about where we are may be why Democrats continue to struggle in the run-up to November’s elections. 

Predictions by leading political scientist such as Larry Sabato and statistical websites such as Five Thirty-Eight have barely changed over the last six months. The latest round of opinions and estimates continue to give Republicans the edge in taking the Senate and making modest gains in the House of Representatives where they already hold the majority.

Especially difficult terrain for Democrats is the South. As The Wall Street Journal reports, official unemployment in Georgia, Alabama, Louisiana, South Carolina and Tennessee has gone up this year.Blacks and Latinos suffer disproportionately from joblessness in these states, and their votes could prove critical in key Southern races. For candidates who rely on these groups to show up at the polls, the potential that they’ll skip voting due to worsening economic conditions is a worry. As former White House Press Secretary Jay Carney told CNN “most people this fall are going to vote on economic issues.”

If economic frustration also leads to poor turnout of people under 30, America will take a very different course during the last two years of Obama’s presidency.

The everyday economic reality of people in the United States—where 7 out of 10 Americans believe believe that the recession has continued more than five years after it was declared officially over—may also mean a different political reality after the November 2 elections.

Whatever the electoral outcome, the hope is that millions more people will gain a financial reality that actually matches the upbeat media messages.

Watch Imara Jones on ‘Caffeine TV’ Debut

Watch Imara Jones on 'Caffeine TV' Debut Play

Our economic justice columnist, Imara Jones, just launched “Caffeine TV,” a daily video news brief on YouTube where he offers his take on everything from politics to pop culture.  Jones will continue covering race and economic justice for Colorlines. With “Caffeine TV,” you’ll get him every morning!

For Once, Common-Sense Ideas to Stop Income Inequality

For Once, Common-Sense Ideas to Stop Income Inequality

In two separate reports issued over the past week, a strange thing happened in the fight over America’s economic future: The nation’s big-city mayors and Wall Street got on the same page about the need for broad-based economic fairness. This policy record-scratch came in the form of different documents issued by the U.S. Conference of Mayors and Standard & Poor’s, the ratings agency after whom one of the world’s major stock market indices is named. Far and apart on other issues, these distinct bodies somehow managed to agree within days of each other that income inequality is holding the economy back and that the time has come for something to be done about it.

Given the dramatic and disproportionate impact that income inequality continues to have on communities of color, the alarms raised by the U.S. Conference of Mayors and Standard &Poor’s are a potential turning point in the debate over the drastic steps required to reverse income inequality. Since the growing growing gap is a direct result of policy choices that the United States has made since the 1980s, it can be turned around.  But there’s not a second to waste because, as the Standard & Poor’s reports states plainly, the forces behind income inequality “go long way” to explain why the current recovery hasn’t taken off.

The core problem, as the U.S. Conference of Mayors lays out, is not only the long period of economic stagnation for nine out of 10 Americans but the fact that, even in years of economic growth, only a handful benefit. As Nobel Prize-winning economist Joseph Stiglitz has stated repeatedly since 2000, nine out of 10 dollars from the nation’s economic growth have gone to the top 1 percent. What this means is that even though the economy has recently been growing at 2 percent annually—already a low number—less than 10 percent of that is left for the remaining 99 percent of the people. The bottom line is that the wealthy are capturing the lions share of income.

What this actually translates into for all but a few is lower income and less money to take home. As the Mayors’ Conference’s report highlights, jobs created this year pay on average $20,000 less than those lost before the downturn—$47,0000 now versus $60,000 before. But there’s a reason for this: Most of the new post-recession jobs that have been created are low-wage or part-time.

Lower incomes are only part of the problem. As high-income earners continue to surge ahead, the explosion in low-wage jobs actually widens the gap between those at the very top and everyone else. In fact, the current gap in wages is now twice as large as in a similar period after the last recession in 2002.

The trend of lower wages and a widening income gap is a bad for the economy as a whole, but it has unleashed a full-scale crisis for people of color. Why’s that? Well, first-of-all a huge chunk of middle-income jobs lost during the recession were in construction and in the public sector. A disproportionate number of construction jobs were held by black and Latino men. Jobs such as teaching, firefighting and other key government functions formed the backbone of the black middle class. Those jobs have been whittled away.

Moreover, people of color—specifically women of color—are more likely to hold most of the jobs at the bottom of the income scale such as home healthcare workers and restaurant workers. That means that the growth of the lowest wage part of the workforce is actually a surge in the number of lower-wage people of color in those jobs. Add to this difficult mix of wrong things colliding together the disastrous collapse of post-recession black and Latino wealth to the lowest levels ever recorded and it’s clear that the situation in communities of color is dire.

What’s refreshing is that this dysfunction at the heart of our current economic system is increasingly recognized not as a problem that we can ignore but as a threat to the very promise of America itself. As New York City Mayor Bill de Blasio, chair of the Mayors’ Conference’s’ task force on economic opportunity, said in response to their report, “The inequality crisis facing our cities is a threat to our fundamental American values.” What’s odd is that now a titan of Wall Street agrees with him.

Echoing the argument of those concerned about economic justice, Standard & Poor’s argues that the nation has approached a “threshold” where “income inequality can harm sustained economic growth.” While Standard & Poor’s touches briefly upon well-worn conservative arguments about the reasons for inequality—educational differences, global trade and the impact of technology—surprisingly the heart their argument is devoted to showing what progressives have argued all along. Namely that the government’s policy to lower taxes on income from investments and effectively raise them on income from work starting in the 1980s set us on the path of where we are today.

The good news is that the increasing consensus on the causes of income inequality may now lead the possibility of movement on solutions. Given the political power of Wall Street, their increasing acknowledgement of where things went awry might create the opportunity to begin to change them. The proposals to do so are wide and varied. On the list of the mayors’ priorities are things that make solid economic sense. They include a higher minimum wage, pre-K educational opportunities, protections for part-time workers, a push for affordable housing and access to capital for local entrepreneurs.

Whatever we chose to do about income inequality the need is for speed. That’s because as, Standard &Poor’s concludes in their report, a “rising tide lifts all boats…but a lifeboat carrying a few, surrounded by many treading water, risks capsizing.

There’s Still a Long Road to Economic Recovery

There's Still a Long Road to Economic Recovery

Late last week the United States government issued two of the most important pieces of information that gives us a sense of how the economy is doing—the Gross Domestic Product (GDP) and the unemployment rate. The top-line results were strong. But below the surface these two indicators suggest that the economy is still moving sideways overall and remains downright dysfunctional for people of color and the working poor.

Despite the fact that job growth was in the hundreds of thousands last month, black unemployment remains stuck in the double digits and Latino unemployment 50 percent higher than that for whites. And even though the overall economy grew in the spring at an explosive rate, for the year its on track to be half of that spring growth rate. Analysts have actually downgraded their economic expectations for the rest of the year.

Yet these important caveats were absent from President Obama’s press briefing last Friday. Going all out on the news, Obama declared that “companies are investing, consumers are spending and American manufacturing, energy, technology, autos all are booming.”

But this disconnect between what the headline numbers flowing out of the nation’s capital and what’s actually occurring in people’s lives brings to us to a potentially unsettling place: Perhaps the standard ways we use to gauge the health of the economy may no longer be relevant.

In normal economic times, last week’s GDP and unemployment results would signal that the economy is back. Indeed, based on the initial numbers the good times should be rolling. But they’re not. The truth is that we are not in, nor have we been for the last six years, anywhere near normal economic times.  In fact we appear to have arrived at the point where good economic news is subsumed by the reality of the economic calamity that began in 2008.

There’s a reason why even though even though you might be hearing things are getting better, you may not actually feel it.

For the three-month period beginning in April of this year and ending in June the GDP, which is the total dollar value of all goods and services produced in the United States, grew 4.5 percent. Whenever you hear that the economy has grown or shrank what people are actually saying is that GDP has moved up or down.

With a 4.5 percent surge last quarter, the economy is close to what economists consider to be an economic boom. At nearly 5 percent, jobs should be plentiful with incomes rising.  But they are not. Job growth is near the average of where it’s been for the last 53 months and hourly wages last month rose by just a penny.

The number of jobs generated in July tell a similar contradictory story. Before the crash the 200,000 jobs produced last month would be a sign of a strong economy.  That number is in line with the Clinton Administration average While President Clinton was in office the nation saw the largest number of jobs created and had the country’s longest economic boom since World War II. But the 200,000 job banner doesn’t tell the whole story.

The fact is that, as the National Employment Law Center(PDF) points out, most jobs created during the current recovery have been low-wage jobs. Last month nearly 8 million people were working in part-time jobs when they wanted to be in full-time ones. Moreover, the number of long-term unemployed—people out of work for six months or more— was stuck at more than 3 million.  And another 8 million people continued to be absent from the labor force all together because of the difficulty finding work.

The harsh truth is that even with 200,000 jobs a month being created it’s hard to move the needle because the jobs hole is so wide.  As employment guru Heidi Shierholz of the Economic Policy Institute told NPR, at 200,000 jobs a month “it would take nearly four more years to get back to pre-recession” job levels. 

The bottom line is that only the numbers below the headlines tell the real story.  But why is the disconnect between what’s being communicated and what’s actually happening so wide?  There are three likely reasons.

The first problem is that economic information is constant and concentrated on small chunks of time. The jobs report comes out each month. GDP numbers come out every three months. Like information about the weather these can vary greatly. Just as it can be 80 degrees one day and 60 the next, the month-to-month jobs numbers can swing widely.  That’s why the only way to determine what’s happening is to look at things over time. Unfortunately, neither the federal government nor the mainstream press do a good job of showing the bigger picture.

Another issue is that the scale of the 2008 crisis was enormous.  At one point we were loosing nearly 1 million jobs a month, and it wiped out wealth in communities of color that are unlikely to come back for at least a generation. There were actions that we could have been taken to turn this situation around but we didn’t. The hole was big and we’re climbing out slowly.  That’s why the economic good news needs to be twice as good before most people would feel it.

The last point is that 90 percent of the recent economic gains, as Nobel Prize winner Joseph Stiglitz points out, have flowed to the top 1 percent.  This means that benefits of growth no longer flow to the overwhelming majority of people. Relative to those at the top, Americans are sliding backwards. Even if the economy took off  Our economy has a long way to go before returning to a place where it works for everyone. But we can’t get there until we honestly and clearly acknowledge the challenges that remain. Given the fact that the economy remains voters’ No. 1 priority, it seems as if average citizens understand where we are even if our leaders struggle to acknowledge it.

Subprime Loans Are Back With a Vengeance

Subprime Loans Are Back With a Vengeance

Just when you thought that the subprime mess might be winding down, the truth is that it’s coming back with a vengeance. Even though Citibank recently received the largest penalty ever issued against a financial institution for subprime mortgage loans, toxic loans are showing up for another product: cars. As the New YorkTimes reports,banks are bilking working poor communities of color to the tune of billions. Sadly, they are the latest reason why America should have brought the banks to heel when it had the chance at the height of the financial crisis. Instead the nation propped up the banks and millions are back in a lurch.

As the Times reports, subprime auto products “have risen 130 percent in the five years since the immediate aftermath of the financial crisis.” If loans continue to be issued at the same rate as this year’s, they will reach $600 billion in 2014 alone.

Just what’s brought subprime loans back to life? The answer lies in the origins of the first crisis and the many parallels that this new one has to the old.

The problem is that families haven’t had the opportunity to heal from the last subprime mess. With more than 13 million foreclosures impacting nearly 40 million individuals, personal balance sheets are still recovering. That’s because foreclosed debt weighs down credit scores for nearly a decade. Low credit scores lock out borrowers in need from traditional, non-predatory loans. The legacy of the original subprime crisis is to make once creditworthy people vulnerable to the latest subprime push.

And those most at risk are black and brown. Since people of color with excellent credit before the financial crisis were up to 70 percent more likely to be steered into subprime mortgages—and then foreclosed upon—than white borrowers with similar credit scores, the original subprime mess wrecked both the wealth and credit of black and Latino communities. Not only has the loss of millions of homes sent the level of black and brown wealth to the lowest on record, it’s tanked the credit profile of these borrowers. We’ve arrived at the point now where three out of out four African-Americans have subprime credit scores of 620 and less. Not surprisingly, lenders are pushing the latest predatory loans on anyone with a credit score of 640 and under.

With the millions of new subprime borrowers that the 2008 meltdown created, it’s no surprise that the finance industry is off to the races. As Mother Jones put it, banks “are pooling bad loans just as subprime mortgage lenders did, and then slicing them up and selling them to investors including hedge funds and pension funds.”

As with subprime mortgages, lenders are squeezing borrowers of subprime auto loans in almost every way imaginable. The interest rate on these loans can be up to five times higher than standard-rate loans. Not only can interest rates hover at 20 percent, but subprime loans are often twice or even three times what the car is worth. Financial institutions are profiting from the vulnerable by charging them an exorbitant interest rate on a sky-high principal.

Fraud is likely at work. Loan representatives at dealerships mislead consumers to believe that the high payments will diminish over time. They also help juice the credit applications of potential borrowers and create income for borrowers out of thin air. The New York Times reported that the paperwork of one applicant, Social Security recipient Rodney Dunham, said that he made $35,000 a year—from a job that he’d held 30 years ago. “I’m not sure how I got the loan,” he told the Times.

And just like the last subprime go-round, independent agencies like Standard & Poor’s that are supposed to rate the soundness of these products impartially have given some institutions the green light. Their stamp of approval has provided the necessary cover for some of the worst subprime mortgage offenders like Wells Fargo to get in on the subprime auto game with no looking back.

The reason why borrowers apply and accept these loans is not a surprise. Having been victims of the original meltdown, subprime auto loans are often the only option for getting a car. Automobiles remain the No. 1 transportation method in America, so having access to a car is essential. Applicants for low-wage hourly work are often asked in interviews whether they have reliable transportation to and from work. The choice is often stark: Take the loan or fall further behind. The sad part is that these financial products ultimately create a no-win situation for the nation’s working poor.

But why do banks and other financial institutions underwrite and invest in them? The answer is because they are wildly profitable. The high interest rates and principals provide double-digit returns in the short term. Because banks report profits every three months, what might happen next year is a distant thought. The business community calls it the “tyranny of the quarter” where companies do whatever is necessary to juice profits in three-month chunks.

The broader point here is that traditional banking is a slow growth business. Low interest rates and less borrowing mean lower profits. At a time when average Americans are worse off than they’ve been in nearly four decades, banks are seeking creative—and in this case deceptive— ways to amp up the bottom line.

The only problem is that profits, yet again, are coming at the expense of those who can least afford them. Given the regulatory power that exists in Washington, preying on the working poor can be stopped. But that would mean taking on the banks—something that those with real power refuse to do.

Citibank Pays Up, Finally

Citibank Pays Up, Finally

Earlier this week, Citibank agreed to pay the largest federal civil penalty to date for their role in hawking dodgy subprime loans to consumers—disproportionately people of color—and then lying about their creditworthiness to potential investors. It is the latest sign that the collapse of the housing market six years ago continues to reverberate. Citibank’s admission of de facto fraud on Monday means that it will pay more than $7 billion to settle outstanding claims against its loan activities.

The announcement is bittersweet. It may in some small way go to help the nearly 4 million families at risk of losing their home right now. But the settlement comes too late for the nearly 13 million families, many black and brown, who’ve faced foreclosure since the crisis began. And despite the fact that Citibank will pay a historic cost for its wrongdoing, only a fraction of the total amount will go to help victims of the bank’s activities. Just $1 out of every $4 will go directly to help modify loans or help build new housing for affected communities. Most of the rest will go either to the U.S. Treasury and state coffers.

All of that said, Attorney General Eric Holder underscored the importance of the penalty by noting that, “Citi is not the first financial institution to be held accountable by this Justice Department, and it will certainly not be the last.”

Given its history, the size of the punitive action against Citibank is of little surprise. The bank was one of the most active retailers of subprime mortgages on Wall Street. Next to Bank of America, another subprime mortgage printing press, Citibank received the largest share of TARP bailout funds—$45 billion of taxpayer money—to help it stabilize after the meltdown. The bank’s books were so full of the unfair, high-interest mortgages that two years after the height of the crisis The Wall Street Journal openly speculated about whether the federal government would let the financial behemoth fail.

It did not.

Even though the scale of what Citibank did is of little shock, the details of how they did it are enraging. In order to get to the heart of the wrongdoing here we have to go back to the scene of the crime: subprime mortgages.

As you probably remember, subprime mortgage loans were high-interest loans which had an initial, deceptively low interest rate. People of color who were qualified for traditional, steady-rate mortgages were nonetheless 70 percent more likely to be steered into these subprime loans. Subprime loans were so identified with people of color that brokers at Wells Fargo referred to them pejoratively as “mud people” loans.

But where the real money lay for banks was not necessarily in making these loans to homebuyers. Rather it was in repackaging and selling them in billion-dollar chunks to large institutional investors like pension funds and universities as “safe investments.” Citibank excelled by dressing up and turning subprime loans into giant “mortgage backed securities.”

Citibank knowningly mispresented subprime loans as safe investment vehicles. Internal e-mails released as part of the settlement show that “Citigroup employees learned that significant percentages of loans reviewed in due diligence had material defects.” One person at Citibank responsible for selling the loan products said that buyers should “start praying” because he “would not be surprised if half of these loans went down.”

Not only did Citibank push these busted loans on vulnerable communities and misleadingly re-sell them as high-quality investments, Citibank also corrupted the objective process that’s supposed to prevent these illicit practices.

As The Wall Street Journal lays out, before loans are sold to investors they are reviewed by an outside evaluator who essentially assigns them a grade to rate their investment caliber. This allows investors to know whether their products are quality or not. However, if Citibank didn’t like the results of a particular evaluation, it would practically erase the unbiased grade and assign a new one. Citibank would then turn around and sell the product with its bogus higher rating to unsuspecting buyers.

Of course, as the attorney general indicated, Citibank is not the only bank to engage in these activities. What continues to be astounding is just how consistent the sentiments and practices were across Wall Street firms. Echoing the “we’re selling to fools” sentiment of Citibank, former Goldman Sachs Vice President Fabrice Tourre told his girlfriend in an e-mail on the eve of the crisis, “the whole building is about to collapse now.” Referring to himself in the third person, Tourre swaggered that the “only potential survivor” would be “the fabulous Fab … standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities [sic]!!!” He was convicted last year of mortgage fraud.

Given the fact Citibank will be able to write off much of the penalty as a business loss means that the impact of Monday’s decision on Citibank’s bottom line is small. In fact on the same day of the settlement Citibank reported profits that beat analysts’ expectations. Even with the penalty, the company’s stock went higher on the profit news. 

While it’s true that no one responsible for the mortgage mess has gone to jail, the positive element here is that however haltingly, the banks are being held to some account. This may be of little consolation to the tens of millions of individuals effected by their activities. But given that the financial sector continues to have some of the strongest cards in our winner-take-all economic system, there is some consolation that there was any justice rendered at all.


Subprime Loans Strike Again

Subprime Loans Strike Again

Just when you thought that the subprime mess might be winding down, the truth is that it’s coming back with a vengeance. Even though Citibank recently recieved the largest penalty ever issued against a financial institution for subprime mortgage loans, toxic loans are showing up for another product: used cars. Dealers and the banks that underwrite subprime auto loans are bilking working poor communities of color to the tune of billions. Sadly, they are the latest reason why America should have brought the banks to heel when it had the chance at the height of the financial crisis. Instead the nation propped up the banks and millions are back in a lurch.

As the Times reports, subprime auto products “have risen 130 percent in the five years since the immediate aftermath of the financial crisis.” If loans continue to be issued at the same rate as this year’s, they will reach $600 billion in 2014 alone. 

Just what’s brought subprime loans back to life? The answer lies in the origins of the first crisis and the many parallels that this new one has to the old.

The problem is that families haven’t had the opportunity to heal from the last subprime mess. With more than 13 million foreclosures impacting nearly 40 million individuals, personal balance sheets are still recovering. That’s because foreclosed debt weighs down credit scores for nearly a decade. Low credit scores lock out borrowers in need from traditional, non-predatory loans. The legacy of the original subprime crisis is to make once creditworthy people vulnerable to the latest subprime push.

And those most at risk are black and brown. Since people of color with excellent credit before the financial crisis were up to 70 percent more likely to be steered into subprime mortgages—and then foreclosed upon—than white borrowers with similar credit scores the original subprime mess wrecked both the wealth and credit of black and Latino communities. Not only has the loss of millions of homes sent the level of black and brown wealth to the lowest on record, it’s tanked the credit profile of these borrowers. We’ve arrived at the point now where three out of out four African-Americans have subprime credit scores of 620 and less. Not surprisingly, lenders are pushing the latest predatory loans on anyone with a credit score of 640 and under.

With the millions of new subprime borrowers that the 2008 meltdown created, it’s no surprise that the finance industry is off to the races. As Mother Jones put it, “auto lenders are pooling bad loans just as subprime mortgage lenders did, and then slicing them up and selling them to investors including hedge funds and pension funds.” 

As with subprime mortgages, lenders are squeezing borrowers of subprime auto loans in almost every way imaginable. The interest rate on these loans can be up to five times higher than standard-rate loans. Not only can interest rates hover at 20 percent, but subprime loans are often twice or even three times what the car is worth. Financial institutions are profiting from the vulnerable by charging them an exorbitant interest rate on a sky-high principal. 

Fraud is likely occuring. Loan representatives at dealerships mislead consumers to believe that the high payments will diminish over time. They also help juice the credit applications of potential borrowers and create income for borrowers out of thin air. The New York Times reported that the paperwork of one applicant, Social Security recipient Rodney Dunham, said that he made $35,000 a year from a job that he’d held 30 years ago. “I’m not sure how I got the loan,” he told the Times.

And just like the last subprime go-round, independent agencies like Standard & Poor’s that are supposed to rate the soundness of these products impartially have given some companies the green light. Their stamp of approval has provided the necessary cover for some of the worst lenders to get in on the subprime auto game with no looking back.

The reason why borrowers apply and accept these loans is not a surprise. Having been victims of the original meltdown, subprime auto loans are often the only option for getting a car. Automobiles remain the No. 1 transportation method in America, so having access to a car is essential. Applicants for low-wage hourly work are often asked in interviews whether they have reliable transportation to and from work. The choice is often stark: Take the loan or fall further behind. The sad part is that these financial products ultimately create a no-win situation for the nation’s working poor.

But why do banks and other financial institutions underwrite and invest in them? The answer is because they are wildly profitable. The high interest rates and principals provide double-digit returns in the short term. Because banks report profits every three months, what might happen next year is a distant thought. The business community calls it the “tyranny of the quarter” where companies do whatever is necessary to juice profits in three-month chunks.

The broader point here is that traditional banking is a slow growth business. Low interest rates and less borrowing mean lower profits. At a time when average Americans are worse off than they’ve been in nearly four decades, banks are seeking creative—and in this case deceptive— ways to amp up the bottom line.

The only problem is that profits, yet again, are coming at the expense of those who can least afford them. Given the regulatory power that exists in Washington, preying on the working poor can be stopped. But that would mean taking on the banks—something that those with real power refuse to do. 

No Place Like Home?

No Place Like Home?

As black and brown communities continue to endure the lowest levels of wealth on record—a result of the housing market’s collapse six years ago—there’s one area of the real estate market that’s surging forward: properties that sell for 1 million dollars and up. As the rich dominate the housing market, everyone else is left behind. Given that white people make up nine out of 10 of wealthy households, the disproportionate gains at the top of the market have racial implications as well. 

Top-end home sales were the first to recover from the housing meltdown and have been rocketing upward ever since. This trend is but the latest sign of divergence between the rich and everyone else. And there aren’t just domestic factors at work here; the luxury housing boom is the result of global forces of inequality turbocharged since the financial crisis. This points to a fundamental change in the way our economy operates.

In the wake of the Great Recession, growth in purchases of a homes valued at $1 million dollars or more has at times outpaced that of homes on the market for $250,000 and less by as much as 3-to-1.The surprise is that it’s worse than it even looks. The downward spiral in home sales below $250,000 would be even steeper if the rich weren’t snapping up vacation homes at a bargain. So far this year, sales of part-time vacation homes—with a median price of nearly $200,000—have increased by the largest amount in over a decade. Fueled by wealthy buyers, this activity in the middle part of the housing market is actually helping to prop up the cost of lower-priced homes. Economist David Berson told The Wall Street Journal that even though “the benefits of second homes accrue disproportionately to the upper half of the income distribution” ultimately “it’s a positive thing.”

But even the most expensive of homes for the wealthy are soaring to new levels. In the first three months of 2014 home sales of $2 million and above were 1/3 higher than in the previous record-breaking year of 2013. In May, sales of million dollar homes were almost five times greater than those selling for $100,000 and less, according to the National Association of Realtors. As Bloomberg News,“million-dollar homes in the U.S. are selling at double their historical average while middle-class property demand stumbles.”

What’s great news at the top of the housing market is bad news for everyone else.

Although overall housing market values have recovered from the 2008 meltdown, the reality is that these gains are concentrated amongst wealthy homeowners. And as their home prices surge, average homeowners and potential homebuyers are sidelined with real-life consequences. 

As I have written before, homeownership is the number one way that people of color accumulate wealth in America. Home equity—essentially the ability to borrow using one’s house as collateral—is the way that countless numbers of blacks and Latinos have gone to college, started businesses and been kept out of poverty when emergencies arise. In fact, homeownership accounts for 1/2 of all black wealth in the United States—double that of whites.

Given the stakes, how have the wealthy seized the commanding heights of the real estate market while everyone else is stuck below? The answer lies in how we responded to the 2008 financial calamity. In the late Bush and early Obama administrations, the government’s post-crisis energy and money went to prop up Wall Street—the center of global finance—while large parts of the economy were left to fend for themselves.

By writing a blank check to Wall Street through the $800 billion TARP program, the United States ensured that the economic mechanisms that the wealthy use to get rich— bank-administered financial instruments—would continue to operate. Coupled with the fact that central banks in the United States and around the world essentially loaned trillions of dollars to global financial institutions for free, this means that the über-rich were supported even as the economic survival for everyone else was left to atrophy. In fact, nearly four million homes are either in foreclosure or a month past due even though billions in unspent TARP and other federal funds were designed to help average homeowners.

Given the indirect bailout that the U.S. taxpayer provided for the wealthy in the United States and around the world, it’s of little surprise that a driving force behind high-end home sales are the global rich. Purchases by international buyers have increased by almost 50 percent—to $92 billion in the period ending of March of this year.

Entire areas of the country have been transformed and integrated into the international real estate market in response to the demand. More than half of all global buyers in the U.S. are snapping up properties in Florida, California, Arizona and Texas.

As Steve Brown, president of the National Association of Realtors said recently, “We live in an international marketplace. So while all real estate is local that does not mean all property buyers are.” The center of gravity for the wealthiest of the world’s buyers is New York City.

In a recent New York Magazine article titled, “New York Real Estate is the New Swiss Bank Account,” Andrew Rice lays out how nearly one out of three luxury property sales there have been made to international buyers. Property seekers from Asia,  Europe  and Latin America have snapped up condos for as much as $90 million. Real estate agent Ryan Serhant of Bravo’s “Million Dollar Listing” recently called an apartment listing for $110 million a bargain.

With all-cash offers funneled through shadowy offshore companies, the global rich so dominate the city’s real estate market that up to one out of three apartments in New York’s wealthiest zip codes remain empty 10 months a year. As one developer put it, New York is now the safe deposit box of the international 1 percent.

The bottom line is that America’s real estate market is distorting itself in new and potentially harmful ways.

Yet the hardest thing about the entire situation is that the housing market can’t be retooled without a dramatic change in Washington where the rules of the road for housing and the way we finance it are set. And that will only happen when citizens demand it.

Income Inequity Is a Choice

Income Inequity Is a Choice

As the U.S. celebrates its 238th anniversary this week, during a year in which income inequality reached heights not seen in almost a century, now is as good a time as any to ask whether American democracy and its winner-take-all capitalistic system are compatible or need to part ways. It’s particularly important given the fact that people of color disproportionately suffer the negative consequences of the nation’s economic inequities even as they form an increasing demographic majority. How this question is answered is crucial to the immediate future of communities of color and by extension the country as a whole.

The facts of current income inequality are well known and are broadly not in dispute. The guru of income inequality, economist Emmanuel Saez, concludes that the top 1 percent of all income earners in the US have a greater share (PDF) of national wealth than at any point since 1928. For the uber-wealthy, the top .1 percent, the increased proportion of the economic pie is even more astounding. It’s on par with that of more than a century ago in 1913 during the nation’s so-called Gilded Age, when dramatic wealth was predicated on mass worker exploitation. Added to it all is the fact that inequality in the United States now exceeds that of every advanced economy on the planet except Chile’s. 

Of course income inequality has dramatic economic consequences that are even more stark when viewed through the prism of race. According to the Federal Reserve more than nine out of 10 of the wealthiest American households are white. Since 2000, as Joseph Stiglitz has determined, nine out 10 dollars in economic gains in the U.S. have flowed to the richest. During this same time, black and Latino wealth has cratered to the lowest on record. Blacks and Latinos are more likely to have jobs where wages are at a 40-year low, be without work or live in poverty. Economic inequality in America has a black and brown face.

What’s interesting is that the growth in inequality occurred just as the doors of political power and economic opportunity were flung open to people of color. A set of professors from Columbia, Princeton and the University of Houston lay out the case in their 2003 paper “Political Polarization and Income Inequality (PDF).” What they show is that beginning in the 1970s, the political views of the wealthy began to harden against the very economic policies which had previously given everyone an economic shot. The authors, Nolan McCarty, Howard Rosenthal and Keith Poole, note that this turn against equality was so jarring because it “began after a long period of increasing equality” back in the 1930s.

But as important as the wealthy’s turn away from economic fairness and toward political movements created to prevent it is the way that this transformation was informed by race. “The bipartisan consensus among elites about economic issues that characterized the 1960s has given way to the ideological divisions” that are directly “linked to race,” the paper says bluntly.

The key here is that there’s nothing about the transformation of our of political and economic system in the 1970s  that was either inevitable or Act of God. Rather they are the result of specific choices, made at a specific time, with race at the heart of the change. As Stiglitz wrote recently, “widening and deepening inequality is not driven by immutable economic laws but by laws we have written themselves.” 

In the 1980s Ronald Reagan picked up on the changed mindset of the wealthy towards economic fairness, captured the White House, and implemented policies based on the ideals of the rich. Since then, besides a brief detour in Bill Clinton’s second term, inequality has been off to the races, erasing economics gains in one generation that took two generations to build. In fact the International Monetary Fund—the global organization focused on the health of the world’s financial structures—concludes that rich-oriented political policies benefitted the wealthy but ended up causing the financial and economic crisis of 2008. 

Our experience with inequality over the past three decades brings us to the core of the precariousness of our current moment. Not only does inequity produce the type of recent inherent economic instability that we’ve already lived through but over time it’s politically unstable as well. Researchers Alberto Alesina and Roberto Perotti looked at 70 countries over a 25-year period and asked, “Does income inequality increase political instability?” Their answer conclusively was, “Yes…more unequal societies are more politically unstable.”

With each passing year the strength of the political and economic system we’ve chosen to build since the 1970s will continue to be tested. As people of color move toward becoming the majority in America—should current trends hold—economic opportunity and the political influence necessary to bring economic change about could be out of reach for the black and brown democratic majority. We’re already seeing the beginnings for what what the future might have in store on this regard.

As the wealthy increasingly exercise their power to give unlimited contributions to campaigns and then use this power to fuel political efforts hostile to voting rights and economic justice, more and more Americans could find the instruments of democracy harder to exercise. What’s currently happening in North Carolina due to the efforts of the Koch Brother-backed Americans for Prosperity to fund a political backlash against economic fairness is a shining example. 

The bottom line is that asking the question of whether a country in which economic gains are concentrated in fewer and fewer hands can also be a stable democracy is not an esoteric exercise. Actually, it goes to the core of who we are and what we stand for. And it has preoccupied America’s heart and soul since formal establishment in 1776.

Who gets to have an economic shot and who gets to have a vote through the recognition of their humanity form the center of gravity of a 200-year national debate that has yet to be fully resolved. But with the volatile mix of demographic change, economic inequality, political stagnation and the disproportionate empowerment of the wealthy, we may be in uncharted territory.

Yet what’s amazing about America is its capacity to change and renew itself, seemingly out of nowhere. The possibility for renaissance is perhaps more true now than in the beginning. More citizens have a say-so in what happens to a degree unimaginable nearly two and half centuries ago.

As Stiglitz put it, “It is only engaged citizens who can fight to restore a fairer America and they can only do so if they understand the depths and dimensions of the challenge.”

What Obama Gets Right About LGBTQ People in the Workplace

What Obama Gets Right About LGBTQ People in the Workplace

As LGBTQ Pride celebrations reach a fever pitch across the country over the next few days there is real reason to celebrate. In the next couple of days President Obama is likely to sign an executive order—announced nearly two weeks ago—that would ban workplace discrimination against LGBT employees at any company that does business with the federal government.

Obama’s executive action will bring important safeguards to nearly one out of five LGBT workers. That’s because the U.S. spends nearly a half trillion dollars on goods and services in the private sector each year. Companies that do business with the United States government will have to provide workplace protections whether they work on a federal contract or not.

As the report A Broken Bargain: Discrimination, Fewer Benefits and More Taxes for LGBT Workers (PDF) put it, “Inequitable laws impose across-the-board hardships that undermine both the economic security of millions of workers and the ability of businesses to recruit, employ and retain the best the the brightest.” Given that nearly two out of five  (PDF) gay and lesbian workers have experienced discrimination on the job, with the transgender community bearing the brunt of workplace hostility, Obama’s action could help change all of that.

The president’s decision to do something about LGBT workplace discrimination comes as a surprise. In fact, his decision to shield workers at companies that make everything from the nation’s jet fighters to the asphalt in our roads marks a stunning reversal after six years of solid resistance to the idea. In fact, months before the 2012 election when LGBTQ contributions and votes were vital, LGBTQ activists were called to the White House in order to receive the news that Obama had decided not to sign the very order that will be offered up in a matter of days. The New York Times described attendees after that meeting with White House Counselor Valerie Jarrett as “disappointed and vexed.” But just two years later Obama stands to make history with a stroke of a pen.

When asked what emotion he felt after receiving word that the executive order would move forward Freedom to Work’s Tico Almeida said elation. Almeida founded Freedom to Work three years ago to fight for LGBT workplace protections. “It was inexplicable and frustrating why [the White House] delayed this for six years, but now the president leads Congress by example and he does so from a place of moral clarity.”

Obama’s intensified focus on employment non-discrimination is key for LGBTQ people of color. As I have written before, people of color are more likely to identify as LGBTQ than their white counterparts. While many who work in professional jobs at the largest corporations like Citibank and Google already enjoy the protection of sexual orientation and gender-identity safeguards, many at medium-sized and small companies do not. Given the fact that LGBTQ Americans are more 30 percent more likely to have lower-wage, hourly jobs than the population overall, this difference is key. Many fast food franchises, for example, are in fact small businesses.

But even at some large companies gaps remain. According to The Williams Institute more than seven out of the nation’s biggest corporations provide protections for LGBTQ workers but Exxon Mobil (PDF), for example, has none. Exxon Mobil is the second largest company in the world and employs tens of thousands people in the United States. Since Exxon Mobil does business with the federal government once the executive order takes effect all of its employees will be subject to the new non-discrimination rules.

The new executive order is also important for LGBTQ workers in the South where over 50 percent of African-Americans live and states with the second and third largest numbers of Latinos are located. Out of the roughly 30 states without nondiscrimination laws, nearly half are below the old Mason-Dixon line. In parts of the country where no workplace protections exist, as Lambda Legal’s Holiday Simmons told me, the order “will have more impact than in other states” with safeguards.

“Every year we get thousands and thousands of calls from people of color who believe that they’ve faced employment discrimination,” said Simmons, the director of community education and advocacy for Lambda Legal’s Southern Regional Office. “This is a big, big issue because you can’t do much in life until you have a livelihood. Until that happens everything else is secondary.”

Of course the reason that Obama is required to act unilaterally is because the Congress has chosen not to do so. Though the Employment Non-Discrimination Act (ENDA) passed the Senate last year it’s stuck in the House of Representatives where Speaker John Boehner said that there is “no way” ENDA will see the light of day this year. ENDA would guarantee LGBTQ workers in all 50 states the protections they need to be judged on their performance rather than who they are.

What’s interesting is that the only way we’ve arrived at this moment of historic guarantees for LGBTQ workers is through the exercise of authority that Obama has been resistant to use: the inherent power of the presidency. What’s equally curious is that the president remains reticent to take the sweeping executive action he has on LGBT issues and apply them with equal force to other parts of the progressive agenda. Immigration of course is a stand-out where the president has consistently asserted that he has little room to maneuver on the scope of deportations, even as the Secretary of Homeland Security reports directly to the Executive Office of the President. Adding to this picture is the fact that the executive order raising the minimum wage for federal contractors is limited, applying only to private sector employees who work on government contracts.

But the path to full economic justice is full of advancements and setbacks. Without a doubt, Obama’s looming action is a clear, historic win. For that he and the entire nation should celebrate this weekend with Pride.

Why Don’t We Raise More Hell About Unemployment?

Why Don't We Raise More Hell About Unemployment?

We’re halfway through 2014 which means that it’s a good time to ask “Just where are we on jobs?” Sparking the conversation is the fact that last Friday the Department of Labor released its sixth jobs report of the year.
The jobs number is the most important piece of economic data for the overwhelming majority of Americans, especially people of color who rely more on work than on wealth to make ends meet.

Though at first glance the news appears to be generally positive, the reality is that the numbers reveal a jobs machine in shambles. Despite 51 months of job gains, the economy is short 20 to 30 million jobs of where the country needs to be in order to make a difference in the lives of most. When multiplied by the number of family members who depend on household breadwinners, this means that there are as many as one out of three Americans who are losing ground because of the pitiful state of the labor market.

But this crisis seems to be missing something that its scale would indicate is needed: a sense of national urgency about the dire state of unemployment. Although headlines continue to be dominated by Bowe Bergdahl, Bridgegate, Benghazi and Beyoncé, what’s key is the fact that half of all Americans are on the precipice of economic calamity because of a lack of national attention to jobs.

Out of the 10 million Americans officially unemployed, more than one out of three have been so for six months or more. An additional 7 million people are in part-time jobs who want full-time ones. Another 2 million people are “marginally attached” to the labor market meaning that they want work but search for it sporadically, many due to the difficulty of actually finding work.

But the whopper is that up to 8 million others who want a job have stopped their search altogether and disappeared from the workforce.

Tally these numbers up and we’re close to 30 million people who remain flat on their backs six years after the economic meltdown began.

However, headlines in The Wall Street Journal, The New York Times, and The Financial Times 
put forth a different interpretation. They trumpeted the fact that labor market has regained, numerically speaking, all of the nearly 9 million jobs lost in the wake of the 2008 financial meltdown. CNNMoney proclaimed, “Finally! Job Market Returns to 2008 Peak.” However, as Maya Angelou often said, “You can tell a fact but not the truth.”

If you include the new entrants into the jobs market during that time—specifically young people graduating from high school and institutions of higher learning—we’re still short 8 million jobs. The bottom line is that despite more than four years of official economic “recovery,” the employment market has gained almost no new ground.

One of the reasons for an overall lack of alarm in the media might be that the jobs crisis is no longer considered news. Rather than a spectacular event, it’s now become the prolonged de facto grind that our culture now accepts. Additional facts from last week’s jobs report points to why.

As has been the case for years now, black, young adult and teenage joblessness is up to three times higher than the overall unemployment rate. Fortunately, the unemployment rate for Latinos has fallen from double to single digits, but it’s still 50 percent higher than that of whites. And half of all young black men in urban areas across the country are without work.

Because of the duration of this same-as-it-ever-was scenario for groups key to America’s economic future perhaps the harsh reality has been baked into public consciousness. This conventional wisdom may be so ingrained that it can be ignored by large portions of the press and toned down into a more easily digestible scenario.

The interesting thing is that average people may not be completely buying the rosier outlook.

In most Gallup surveys since 2008, Americans have ranked “jobs and/or the economy” as the number one issue. And yet public opinion hasn’t translated into public action. Besides the stimulus bill of 2009, Washington has taken no substantial steps on jobs and the national conversation has moved on to the latest conflagration, either manufactured or real.

Cable news networks have focused more on whether aliens kidnapped Malaysia Flight 370 rather than the actual jobs crisis. The disappointing irony is that this coverage choice has been a ratings bonanza. It may not matter what we’re actually experiencing day to day. Somehow we might rather hear a fanciful story about a distant, missing aircraft instead of plugging into what’s going on right in front of us.

I put the question about this fundamental disassociation to Jared Bernstein, Vice President Biden’s former chief economic advisor and now a Senior Fellow at the Center on Budget Policy Priorities. Berstein battled inside the Obama administration for a more aggressive jobs push and has organized a recent project to focus on full employment. He’s also a frequent guest on financial news networks.

“The toxic combination of increasing wealth concentration and evermore money in politics means less representation for those on the short side of the inequality divide,” he said. “One way you see this played out is when trickle-down tax cuts targeted at the wealthy are sold as a way to create jobs. There’s no empirical evidence to support that specious connection, and yet we still hear it all the time.”

But here we have the problem presented again. There’s a gap between what’s being said about jobs and what’s actually true about the jobs crisis.

Employment guru Heidi Shierholz of the Economic Policy Institute put it even more bluntly.
She argues that there is “a huge disconnect between the scale of the problem out there and what Washington is doing. Policymakers have done things to make conditions worse. Washington got obsessed with budget hysteria which is absolutely the wrong thing when what we need is stimulus. That’s what’s required.” Shierholz is right.

That’s why President Obama and former President Bill Clinton have jobs plans that seeks to ignite demand and create jobs. The conservative American Enterprise Institute and progressive-leaning Bernstein have some job ideas that overlap. In fact there’s no shortage of jobs proposals. But they’re not going anywhere. As Shierholz says, “Decisions are being made on something other than economics.” Still the question remains of why there’s a lack of public outcry about the stagnation?

Perhaps the fact that crisis has gone for six years now may be part of the answer. As students in Psychology 101 are often taught, humans, like frogs, will immediately leap out of boiling water but if the temperature is turned up gradually frogs will remain in the water even to their detriment.

Whatever the reason, time is not on our side. A generation of young Americans is at risk of being lost to an economy that’s not working for them. This will have a myriad of unforeseen circumstances.

Let’s hope that we learn to leap before its too late.

Changing the Economics of Climate Injustice

Changing the Economics of Climate Injustice

President Obama takes today what is arguably the boldest step on climate justice advanced by any occupant of the White House in the last half century.

Initiating a broader use of executive authority announced earlier this year, the president proposes new rules that require the country’s dirtiest fossil fuel-reliant power plants—those which burn coal—to cut their carbon-dioxide emissions by 30 percent. Carbon dioxide is the leading driver of the globe’s warming temperature and the unstable environmental conditions this brings. The mechanism for this carbon reduction, known as “cap-and-trade,” promises to remake the economics of domestic energy production by essentially making polluters pay for the harm that they cause in the short-term, and by incentivizing them to do less harm over time. Cap-and-trade will diminish the amount of carbon that can be emitted into the atmosphere each year, while at the same expanding the market for and price competitiveness of renewable energy sources such as wind and solar.

Obama’s action comes five years later than many of his supporters had hoped, but it arrives at a crucial time for those hardest hit by climate change. As the planet warms, the negative consequences that flow from it are not equally borne by everybody. As the government’s latest National Climate Assessment forecasts, the globe’s warming atmosphere means particularly devastating consequences for urban areas across the country and for regions, especially the Southeast and West, where more than eight out of 10 people of color in America live. It’s why “CNN Crossfire” co-host and leading environmentalist Van Jones said earlier this year that it would be “delusional” not to tackle the issue.

Last year was one of the most frigid in recent memory for the United States, but it was also one of the hottest on record for the planet overall. These two extremes may seem contradictory, but they go hand in hand. Earth’s overall warming, as former Vice President Al Gore points out in the Oscar-winning film “An Inconvenient Truth,” produces dramatic climate variability from country to country and fuels dramatic weather events. Our harsh winter is consistent with what can be expected from a climate in flux.

As a result of the mind-numbing cold in 2013, the poor were hit with energy costs which were as as much as 20 percent higher than normal, forcing those on fixed with incomes to grapple with unimaginable trade offs between heat and something else crucial. The extreme drought in the West is expected to push food costs up at the highest rate in three years, at a time when food stamp benefits have been cut and local food pantries are overextended.

For the poor and people of color impacted by the more extreme aspects of climate change, the effects are not only excruciating but long lasting. Take Superstorm Sandy, the mostly working poor areas of New York and New Jersey that were slammed hardest by Sandy continue to languish in wait of help. As The Huffington Post’s Amy Liberman points out, less than 1 percent of thousands of applications for a special program for those with low-to-moderate incomes whose lives were wrecked by Sandy have been processed. Astoundingly, another 20,000 remain on the waiting list. In ways that range from the shocking to the obscure, the poor and people of color are already grappling with the impact of climate change in their daily lives.

Perhaps that’s why people of color have been such strong backers of federal action on climate change. A report by the Yale Project on Climate Change and George Mason University shows that blacks and Latinos were the “strongest supporters” of policies to address climate change “and were more likely to support these policies even if they incurred greater costs. 
African Americans and Latinos back cap-and-trade policies at rates up to 40 percent higher than whites.

But this is not a surprise. Cap-and-trade has already served as an important instrument in cleaning up the environment in communities of color. As The Economist lays out, an existing cap-and-trade program for a range of other air pollutants—like sulfur dioxide—has already helped slash air pollution for power plants in the U.S. by almost 70 percent, particularly over the past 20 years. Even as the U.S. population has increased by almost 100 million people, the country has managed to get cleaner air through these programs.

Polluting plants are more often than not located in communities of color. As a recent University of Minnesota study makes clear, even though poverty is an important factor in where dirty electricity facilities are found, “race matters more” according to one of the authors, Dr. Julian Marshall. So individuals in black and brown neighborhoods know first-hand just how important measures such as cap-and-trade are—because we live with them each day.

The Economic Case for Reparations

The Economic Case for Reparations

In his sweeping, data-driven piece published last week, Ta-Nehisi Coates asks if it’s time to consider far-reaching compensation for those wronged by America’s formal system of economic oppression beginning in slavery and rolling on until almost 1970. 

Not surprisingly, his gritty cover story in The Atlantic titled “A Case for Reparations” is already generating controversy on the right and elsewhere.  The conservative National Review ran a reply that argues that Coates’ article shows “that there is not much of a case for reparations.” But this derision is misplaced. The truth is that there is a strong rationale for renumeration grounded in airtight economic principals at the the heart of the free market system: access to capital. This precept is so essential that it gives our modern economic way-of-life its name. We call it capitalism.

In fact, Coates’ case for reparations is one that Adam Smith, the Scottish philosopher who birthed the theory and mechanics of capitalism during the same year that the Declaration of Independence was declared, would recognize. Smith’s “An Inquiry into the Nature and the Causes of the Wealth of Nations” details how capital in all its forms is the source of revenue from which all profit is “ultimately derived.” The bottom line is that capital is what individuals and entities use to produce the stuff that they ultimately take to market and sell. The gap between the costs of capital and the price that products sell for is profit. Profits piled up over time create wealth. This is all pretty straight forward.

But the key to absorbing the core of Coates’ argument is the recognition that capital takes four primary forms: physical, intellectual, labor and financial. Physical capital is composed of the buildings and equipment necessary to produce an item. Labor capital is the sweat equity—i.e., the work of actual people who do so. Intellectual capital is made up of the ideas, innovations and knowledge that allow for an item to be made. Financial capital is the money that makes all of this possible.

The center of gravity of Coates’ argument is that the current gap in wealth between blacks and whites—the highest on record—can be explained by the wholesale transfer of African-American capital in each of these forms to an economic system which has redistributed them in a way such that whites have overwhelmingly benefited.

A Singular Story

The micro illustration of this macro point is the life of Clyde Ross. Ross’ 91 years serve as the emotional center for Coates’ piece.

When Ross was a boy, his family was dispossessed of their farm—their physical capital—due to racist local officials. Without a way to make ends meet they were forced into sharecropping which took away the benefits of their labor and devoted them to the output of a cotton plantation. Because Ross’ family’s sharecropping wages were as close to slave wages as one could imagine, his parents could not afford to send him to school. This diminished Ross’ intellectual capital. And the constant cheating of the family by plantation owners of what they had earned made the accumulation of financial capital virtually impossible. Ross mother wasn’t able to save enough over the course of one year to buy him a $7 suit.

But the capital transfer didn’t only occur only in Ross’ youth. It continued well into adulthood and far outside the Deep South. Over the course of decades in Chicago, Ross’ labor and financial capital were diminished further still in order to pay for a house that had been sold to him at twice its value and in what can only be described as a dodgy “rent-to-buy” program. The economic injustice occurs solely because he is black. Because Ross is African American both traditional mortgages and houses at market prices were unavailable to him.

Ross and his neighbors describe the ways in which “contract buying” was so onerous that thousands lost homes for which they had paid on time for years. They also point out how the necessity of taking up extra work to cover exorbitant home costs meant that they invested less in their children’s education. Yet while these families were barely hanging on, the person who sold Ross and the other black residents their homes became a millionaire from his technically legal but morally reprehensible practices. In so many ways Ross embodies the American story.

An American Tale

Of course capital dispossession for people of African descent did not begin with Ross nor his generation. As I have written before, it actually is the foundation for the modern world. The mass destruction of societies in Africa and the movement of their labor and intellectual capital across the Atlantic created the pathways for modern globalization.

The emergence of cities like New York and London into financial and transportation powerhouses; banking institutions like J.P. Morgan Chase and New York Life; and the Industrial Revolution itself would not have been possible without the removal of capital from black people. And as Ross’ story illustrates, this capital transfer did not end with slavery nor the beginning of the end of American apartheid in the 1950s, but in the 1970s.

This is the core argument for reparations. The impact of the 400-year dispossession and exploitation of black capital didn’t end in four decades. Indeed, as Adam Smith argues, wealth accrued over time creates inherent advantages. Therefore the only true way to give AfricanAmericans an equal shot is through the opportunity of mass capital formation. You can call it reparations or something else; either way there is a need for it.

Though Coates essentially advocates that reparations be formally studied to determine whether they are both just and feasible, the economic case for them is sound. For those wondering how we would pay for them, it’s important to note that the United States has fought two wars over the past 13 years. Together their costs exceed that of what experts say a reparations pay out could be, $2.5 trillion for reparations versus $4 trillion for the wars in Iraq and Afghanistan. Each war has been paid for on the nation’s credit cards. The bottom line is that large wealthy nations have the capacity to do what they want.

This means that the case for reparations largely boils down to a test of America’s political, ethical and moral fiber. In this still-new millennium are we willing to face up to some of the darkest chapters of the old one? Perhaps a reason for resistance to the idea is that signing off on reparations for African-Americans means doing so for Native Americans and others such as the Chinese who were forcibly removed from the United States after they had helped to complete the TransContinental Railroad. But we’re a grown up country which means it’s time to do the adult thing and own up to the past. In his article, Coates details why that time is now.

Lessons from the Bangladeshi Factory Collapse

Lessons from the Bangladeshi Factory Collapse

Just over a year ago, in the wake of Rana Plaza factory collapse in Bangladesh, retailers, unions and NGOs banded together in two separate efforts to ensure that such an event would never happen again. A little over 12 months later, the work of the Accord on Fire and Building Safety in Bangladesh 
and the Alliance for Bangladeshi Worker Safety struggle to make sustained progress. Their difficulty should not come as surprise. The problem is that they are fighting the sometimes savage laws of economics. The bottom line here is that the only way to ensure real change is to transform our global economic rules to value workers no matter where in the world they might be.

This is a tough but necessary task, and Rana Plaza underscores why.

In an instant on April 24, 2014 1,100 workers—almost all young women and girls—died when the eight-story clothing production facility in Dhaka, the nation’s capital, collapsed. Over the next three weeks, another 2,500 people were pulled painstakingly to safety. Many emerged to lives that would emotionally and financially never be the same.

It wasn’t the first time that Bangladesh had experienced tragedy in the garment industry, one essential for the nation’s economic growth and the provider of opportunity to millions. In 2005 and 2012 there were fires at the Spectrum Sweater and Tazreen Fashion factories in which nearly 200 people died.

But Rana Plaza was simply too shocking to ignore. For consumers used to donning items with a “Made in” label from a distant place, the cost of our out-of-sight, out-of-mind global system of production became quite real.

The Accord and the Alliance

This collision with reality is why retailers across the world who source their garments from factories in Bangladesh scrambled to respond. Within days after the event, a few companies like the The Walt Disney Company either committed to review or suspended their operations in Bangladesh altogether. Mounting global pressure, particularly in the U.S. and Europe, led clothing settlers to commit to doing more through either the hastily formed Accord or the Alliance.

Corporate signatories to both the Accord on Fire and Building Safety in Bangladesh and Alliance for Bangladeshi Worker Safety pledged to ensure minimum standards to ensure that garment employees and the places they work are safe.

The essential difference between the two is that the Accord (PDF) is composed of 150 mostly European companies, such as H&M, whose agreement is legally binding with the prospect of legal action and penalties to ensure that their goals are met. The Alliance, made up of 26 American companies— including the world’s largest retailer Wal-Mart—is strictly voluntary. Another important distinction is that the Accord was formed with key support from international union organizations industriALL  and the Uni Global Union. The Alliance has no such backing.

Either way, these organizations face a difficult task. Only half of Bangladesh’s 5,000 garment factories employing 3.5 million people are covered by their separate agreements. The Accord will protect 1,500; the Alliance another 700. Reporting by The New York Times refers to remaining 2,500 facilities as those with worse conditions than the others that will be inspected. 

What’s essential to grasp is that despite the harsh conditions and low pay, apparel production is an essential lifeline for Bangladesh. The $38 a month paid to most workers was as much as double as what employees could earn in other common areas like housework. It allows for money to be sent back to pay for the schooling of loved ones and the purchase of essentials. It also grants young women the step towards an independent life that would not be possible if they remained in rural villages.

Factory worker Nazma Akhter’s mother worked her entire life farming rice. Akhter, who jumped from the stricken Rana Plaza building, told Bloomberg Businessweek about why she worked there: “My mother couldn’t stand straight anymore. I couldn’t live like that. I couldn’t make my daughter live like that.” 

Moreover the $20 billion garment industry is also the way that the country as a whole generates the money it needs to pay for global essentials. Eight out of 10 dollars that this South Asian parliamentary democracy earns from exports comes from the manufacture of apparel. This cash is how Bangladesh pays for products like oil, gas, medical equipment and other key items the nation needs to stay afloat. Without the garment industry, Bangladesh would essentially be effectively bankrupt.

The problem is that all of this, as Rana Plaza highlights, comes as a steep cost. That’s because Bangladesh is playing an international economic game in which it is stacked to lose. The current economic rules of the road incentivize Bangladesh, the companies that produce there, and the foreign firms which hire them to keep costs low. It’s one of the reasons that half of Bangladesh’s garment producers remain outside of the Accord and the Alliance. The nation’s lower labor costs relative to other countries and cheaper facilities, with less safety features, helps Bangladesh attract international investment as a result of its bargain-basement prices.

It’s All About Pay

What’s counterintuitive to this situation is that worker pay is essential to worker safety. The bottom line is that companies will only invest in worker safety and protections when the numbers say that employees are worth it. And what telegraphs a worker’s value to owners and managers is how much they are paid.

As I have written before, the challenge is that fundamental economic assumptions and the corporate profits that rest on them hold that labor costs should essentially hold steady year after year. This means that when worker pay and worker regulations begin to raise the price of keeping people on the payroll, employers begin to look around for where they can do the same work cheaper.

Factory owner Shabbir Mahmood told PBS’ Newshour, “The buyer says if you can’t give it (to us) for our price, we’ll go somewhere else.”

In low-cost industries like the garment industry, this can fuel a disruptive race to the bottom where producers are constantly on the move across the globe—opening and closing factories—to hold costs down. In fact, until late last year when the nation’s parliament voted to raise it, Bangladesh had the lowest official minimum wage of anywhere in the world.

That’s why, in the wake of the Rana Plaza disaster, Thomas Palley of the London School of Economics proposed the idea of a global minimum wage. Though his proposal and the others that followed it
would calculate the global minimum wage differently, the goal is to raise wages in countries around the world sufficiently so that the destructive in-out cycle of producers would be reduced. It wouldn’t be as cost effective to pick up leave, and companies would have a stronger incentive to invest in local worker safety.

It’s important to emphasize that the global minimum wage would not equalize pay between a garment worker in another country and that in Bangladesh. But it would reduce the difference in pay between the two so that the churn of moving from country to country and skimping on worker protections is less systemic. If the global minimum wage had been in effect last year, a garment worker in Bangladesh would have earned $95 instead of the actual $38 a month that they were paid.

To be clear low pay in did not cause the Rana Plaza disaster, but it did induce it. And the global incentive for rock bottom wages is why both the Accord and the Alliance are finding it difficult to gain traction. The only way to avoid another repeat of the tragic affair is to raise the value of workers everywhere so that companies will be encouraged to treat them more like human beings and less like cogs in a dangerous machine.

Why a Raise in the Minimum Wage Will Happen

Why a Raise in the Minimum Wage Will Happen

Today in a move of coordinated mass-action fast food fast workers in 150 cities in the United States will go on strike to demand to a higher minimum wage.This unprecedented walk-out, combined with overwhelming public support for an increase in the minimum wage, could signal good news for our economy.  That’s because they point to the political inevitability that the minimum wage will to be raised.  The faster Wall Street and corporations resisting the income hike grasp this reality, the better it will be for the millions of people who work full-time but don’t earn enough to live; especially women of color.

The trend line of where the country is headed on the topic is borne out by the recent history of worker action.  Starting with a single walk-out at one McDonald’s restaurant in 2012, fast-food related strikes grew to more than 100 in 2013, and is expected to exceed that number by 50 percent over the next 24 hours. But the expansion isn’t only limited to the United States.

Low-wage workers across the country will be joined by those in 32 other nations on six continents.  Ron Oswald, General-Secretary of the International Union of Food, Agricultural, Hotel, Restaurant Catering and Tobacco and Allied Worker’s Associations, told Al-jazeera America that the U.S. strikes had encouraged workers around the world to emulate their “fight for higher pay and better rights on the job.”

Today’s  action is coordinated by Fast Food Forward,  an organization with backing from several groups including the nation’s largest union. But the growing grassroots participation by workers shows the depth to which employees believe that higher wages are a matter of survival.  When asked during a walk-out last year just steps away from Times Square, in the heart of one of the world’s most expensive cities, Elba Godoy told NBC News simply about her $7.25 hourly wage, “It’s not enough.”  

Public Support and Economic Need

Unsurprisingly most Americans agree with the walk-out’s goals. A recent Quinnipiac University poll shows that seven out of 10 people support a lift in the minimum wage, including half of all Republicans.  Results in a poll taken last year by Gallup were nearly identical.

Increasing the minimum wage is so overwhelmingly popular because the current minimum wage of $7.25 reflects a harsh financial reality.  A single parent with a full-time job at a fast-food restaurant who earns the current minimum wage is officially in poverty.  Women make up most of those in low-wage work, and the majority of those at the bottom of the pay scale are women of color

That’s why legislation currently before the Senate proposes raising the minimum wage to $10.10 an hour.  The Economic Policy Institute says that $10.10 per hour will lift 4 million families out of poverty and raise the wages of another 24 million workers. But it would still leave millions more behind. 

Therefore it’s no surprise that those on-strike today are calling for a “living wage” of $15 an hour. That’s enough to keep the vast majority of working families from being poor.

But there’s a broader economic truth here.  Overall, corporations are more profitable than at any point since World War II, yet workers’ wages are near a 40-year low. In way that’s painfully ironic the declining wages of millions of Americans, such that close to half of all families are poor or near poor, is one of the key drivers of these record private sector gains.

The fact that the minimum wage, adjusted for inflation, is lower than its ever been is a reason why—for example—McDonalds has had double-digit increases in profits over recent years akin to what Wall Street expects of high-growth tech companies of the future rather than more mature companies from the past. That’s because every year companies that rely on minimum-wage work have relatively fewer labor costs thanks to the stagnant minimum wage.

The problem with this scenario of economic imbalance—with enormous gains at the top fueled by declining earnings at the bottom—is what it caused the Great Recession.  As I have written before, analysis from the International Monetary Fund concludes that mass economic inequity fuels economic crashes

Though these severe economic crises express themselves differently, the housing bubble in 2008 or the stock bubble in 1929, they have the same root: a growing gap between economic beneficiaries and economic losers.  

To put it bluntly, raising the minimum wage would be an act of national economic preservation, rather the calamity that those who are hostile to it claim.

Corporate Opposition and Change

Despite this growing political and economic rationale for raising the minimum wage, private-sector lobbying organizations are nearly unanimous in opposing it.  The U.S. Chamber of Commerce calls the minimum wage debate a “distraction.” 

The National Restaurant Association and the Business Roundtable are in agreement. And the National Association of Manufacturers came out against even allowing the $10.10 measure before the Senate to proceed to an up or down vote.

The challenge is that though their resistance may not be futile, it is potentially self-defeating.  Stifled debate and action at the national level has resulted in 13 states moving forward with higher minimum wages earlier this year on their own, with 34 others perhaps ready to do the same. 

Moreover, local pressure for the even higher wage of $15 an hour is mounting.  Earlier this month, Ed Murray, Seattle’s Mayor, announced a plan to up Seattle’s minimum hourly wage to $15.  San Francisco is also considering passing the “living wage” of $15.  And demonstrations across the country led by thousands of workers today will only increase the weight behind the concept.  In short, the private sector fight against $10.10 an hour is only adding heft to the movement for $15 an hour.  

The changing landscape is perhaps why Howard Schultz CEO of Starbucks has recently come out in favor of increasing the wage to $10.10.  Schultz believes that a raise in the wage would not have any impact on jobs nor his company’s bottom line.  Subway’s CEO, Fred DeLuca, echoed the same point last week, as did Costco’s CEO over a year ago. Hank Greenberg, former head of Wall Street firm American International* Group, told Bloomberg News plainly about the minimum wage, “from a practical point of view I hope they get it done.” 

Whatever the eventual raise is—$10.10, $15 or somewhere in between—a change is coming.  The combination of worker action, public support and economic necessity is pushing it further along as time goes on.  The fact that it’s all coming to head during an election year adds momentum to the likelihood of change. 

The bottom line is that worker action over the past two years has helped pushed the country that much closer to a new economic contract for those on economic margins and the private sector is perhaps on the verge of finally accepting it.

Correction: Hank Greenberg was the head of the American International Group, not the American Insurance Group as previously stated. 

How the Most Ambitious Affordable Housing Plan in the Country Falls Short

How the Most Ambitious Affordable Housing Plan in the Country Falls Short

Earlier this week New York City Mayor Bill de Blasio laid out his vision for addressing housing availability and affordability in one of the most expensive cities on the planet. Yet based upon the available details contained in the 115-page proposal, (PDF) de Blasio’s housing strategy appears likely to fall short of his objective to restore New York as a center of equal opportunity for all its residents. Should de Blasio’s effort on the housing front falter, it would be a setback not only for the city over which he presides but for all who share his progressive vision in the United States and around the world. That’s because for anyone concerned about economic justice, what Bill de Blasio does matters.

The mayor’s plan, which he says is “the largest and most ambitious affordable housing program initiated by any city in this country in the history of the United States,” calls for $41 billion in private and public dollars to build and preserve 200,000 units of affordable housing over 10 years.

According to city standards, “affordable” is determined by your income and varies according to how much you make.

What’s interesting is that these number of affordable housing units contained in de Blasio’s program is just 35,000 more than were created by his predecessor, Mayor Michael Bloomberg, under whom the city’s affordability and availability crisis ballooned. During his 12 years in office Mayor Bloomberg—himself a billionaire—built and preserved 165,000 affordable housing units.

We’re going to get a little wonky here, but the numbers reveal the story of what seems to be off.

The problem with the “build and preserve number” is that, according to analysis (PDF) by the non-profit Community Service Society and the Office of the Speaker of the New York State Assembly, New York City lost more than 574,000 units of affordable housing during that time.  Even with Bloomberg’s addition to New York’s housing stock, the city still faced a net lost of more than 400,000 units.

To underscore the size of the hole, if you apply de Blasio’s 200,000 unit goal to the Bloomberg Years, New York City still would be short 300,000 affordable housing units. Over the next 10 years, de Blasio would replace only two thirds of the affordable housing units lost in the decade before his program began.

The bottom line is that even with Mayor’s de Blasio’s exhaustive list of new ideas, including a requirement that developers increase by one third the number of affordable housing units in new private housing developments, expanded use of abandoned land, and stepped up enforcement of tenant protections, New York’s housing losses would far outpace any proposed gains.

And given the role that housing plays in de Blasio’s plan to attack economic inequity, the rapid disappearance of homes available for half the city’s populace would undermine the example he’s trying to provide to the nation and the world.

A former Clinton Administration housing aide, de Blasio was elected as part of what The Washington Post’s E.J. Dionne described as a “progressive wave” of political leaders last November. At 6 ’ 5” de Blasio towered literally and figuratively over a vanguard of local office-seekers who were explicitly dedicated to turning back the pernicious inequalities that comprise America’s current economic reality. In fact, the newly-elected mayors of Boston, Minneapolis and Los Angeles are all shades of de Blasio. The first socialist candidate elected to the Seattle City Council, Kshama Sawant, in over 100 years, is even more so.

With a campaign theme of a “Tale of Two Cities” de Blasio encapsulated his city’s historic economic divide. His heartfelt refrain of his core beliefs enabled him to sweep away his five principal rivals in the Democratic primary and ensured his overall victory in a landslide garnering seven out 10 votes cast. Along the way, he seized international headlines around the world which pointed to a reassertion of economic equity at the heart of American political life. Global op-eds held him up as an example for the way progressives could gain office in democracies around the world. Underscoring his importance, just last month, de Blasio gave the keynote address at the New Democratic Alliance, a gathering of the largest donors to progressive causes.

The key takeaway is that de Blasio is a pivotal voice in shaping the way forward for those committed to economic justice.

Housing availability and affordability is at the core of de Blasio’s plans for a fairer economic future for New York. During the campaign, after job creation, candidate de Blasio listed “a dramatic expansion in affordable housing” as his top goal. But the scale of the problem that new mayor faces is truly enormous.

Though the Big Apple is home to more billionaires than any other city on the planet, and where one out of 20 people is a millionaire, half of its residents live in poverty or are near poverty. The loosening of affordable housing policies under Republican Mayor Rudy Giuliani in the 1990s, combined with a massive run-up in the wealth of New York’s 1 percent since then, created an almost unimaginable housing crisis.
While top apartments sell for a record-breaking $90 million, in a parallel historic-first the city has more people on its waiting list for public housing than actual public housing units; 227,000 names for 178,000 apartments.

But the details of de Blasio’s sweeping housing blueprint raises serious questions about whether his local attempt at correcting these eye-popping imbalances has what it takes to make a real difference.

Perhaps the ambition that de Blasio set for himself was too great. Beginning in the 1980s, the federal government abandoned the construction of public housing. Section 8, the program designed to replace public housing with private housing vouchers, is increasingly under pressure. Analysis by the Center for on Budget and Policy Priorities shows that the most recent recent budget proposal of House Budget Chair Paul Ryan would slash housing voucher assistance by $580 million. Additionally, the 40-year decline in wages means that each year affordable housing is out of reach for more and more Americans.

The other option of course is for de Blasio to go even bigger and make a commitment that there will no net loss of affordable housing during his time in office. This would require taking on New York’s housing development industry—which like that of the nation as a whole—is one of the most powerful after Wall Street. But this would necessitate a massive political battle with an uncertain outcome. The New York Times observed that the mayor’s current plan “contained few ideas that would rattle the real-estate industry.” 

De Blasio’s housing proposal underscores how different running for office is from actually running the city’s front office. That’s why former New York Governor Mario Cuomo once remarked that, “You campaign in poetry. You govern in prose.” As more specifics of the mayor’s plan are released in the next several days, perhaps New Yorkers bearing up under Dickensian levels of income inequality, will hear details that match their electoral hopes rather than those which might only mitigate their current lived experience.

Cliven Bundy, Donald Sterling and Affirmative Action

Cliven Bundy, Donald Sterling and Affirmative Action

Two events over the past seven days underscore just how badly off-the-mark the Supreme Court’s ruling on race (PDF) was last week. In a 6-2 decision, the Court upheld Michigan voters’ amdendment to the state constitution to end the consideration of race as a factor in the state’s higher-education admissions.* Almost on cue, racially charged incidents quickly followed the decision and unfolded in a way that seemingly only Hollywood could engineer.

The spectacle of racist rancher Cliven Bundy and racist NBA owner Donald Sterling underscore why minority political and economic rights cannot rest solely upon majority rule. America is changing but it’s not changing fast enough to do away with key protections, and that’s what the Court seemingly did not get.

Before turning to the way in which the race-infused antics of rancher Cliven Bundy and Los Angeles Clippers chief Donald Sterling upended the Supreme Court’s rationale of a race-free America, it’s important to quickly review the action the Court took.

Last Tuesday the Supreme Court upheld in Schuette v. Coalition to Defend Affirmative Action a ban on the use of race as a factor in university admissions. That prohibition was passed by the people of Michigan in a 2006 referendum. By upholding the state’s referendum, the Court effectively gave a green light to states that want to ban affirmative action through popular vote. Eight states have already done just that. Politico reports that initiatives in three other states—Ohio, Missouri and Utah—are underway. Should these pass, more than one out of three Americans would be impacted by these laws. States with majority people of color populations, specifically California and Texas, are already among them.

Economic Consequences

A key problem with the growing unpopularity of affirmative action programs in higher education admissions is that they are an important tool in the economic advancement of people of color.

For example, research by The College Board Shows that black men benefit more economically from higher education than any other group when compared to those with a high school diploma. Black men with college degrees earn almost seven out of 10 dollars more than those without college degrees. This trend of greater economic benefit of college education holds true for all non-white racial groups. That’s why access to higher education is essential to closing current economic gaps created and enlarged by history. The economic weight (PDF) of the past is why white households have six times the wealth of black and Latino households. 

But once a popular vote shuts down affirmative action, the doors of higher education lock out droves of people of color. The results of Michigan and other states bear this out.

After the 2006 ban, as an analysis from The New York Times lays out, the number of blacks enrolled at the University of Michigan fell by 25 percent even as the proportion of black high school students rose by 30 percent. When California did the same in 1998, the percentage of Latinos fell by 30 percent where it’s remained for the past 16 years. That’s five times lower than Latinos’ share of California’s high-school students.

Why We Don’t Vote on Rights

The racial inequities that reassert themselves after popular votes against affirmative action have economic consequences. These twin pillars of injustice, one political and the other economic, are why Justice Sonia Sotomayor declared from the bench that “race matters” in her dissent. Her need to do so points to her belief that the Supreme Court just didn’t get it.

Even with its beginnings as a slave republic, the drafters of the U.S. Constitution knew instinctively that minority rights shouldn’t be subject to popular vote. Their deep concern and warnings against “the violence of the faction” is one of the reasons that popular referendum is left out of the Constitution for federal lawmaking, why there’s no direct election of the president, and is a key rationale for the establishment of the Supreme Court itself. “Faction” is described by founder James Madison as a group of people who are opposed to “the rights of other citizens” due to “some common impulse of passion.”

The issue here is that Supreme Court clearly doesn’t see that race can still be an “impulse of passion” that denies “the rights of others.” That’s why it easy to believe that the justices somehow live in a world separate from the rest of us.

Of course there is a black man as president, but only six out of 100 seats in the Senate are Latinos, blacks and Asian-Americans. Yes people of color lead some of America’s largest and most storied companies but, as I have written before, only two out of the 100 wealthiest people in the country on the Forbes list are people of color. And the Supreme Court’s utopian vision was bound to collide with the reality of America’s complex racial landscape.

Race Still at Work

Just 24 hours after the affirmative action ruling, a bombshell recording of Tea Party darling and racist rancher Cliven Bundy quickly reminded us that race is still an animating factor.

Bundy, in a protracted standoff with the federal government over grazing fees for his tax-payer subsidized cattle, was filmed exhorting “the negro” to return to slavery. Bundy is a cause celebre for the Tea Party and for large parts of the Republican Party.

Up until his incendiary comments in which he said that blacks should be “picking cotton and having a family life and doing things” Bundy had the support of two leading GOP presidential candidates, Senators Rand Paul and Ted Cruz. But, as The Washington Post reports, Bundy’s views are not new and have been well known for 20 years.

Two days after the Bundy revelations, a tape was released to TMZ with LA Clippers owner Donald Sterling allegedly telling his biracial girlfriend “not to bring [blacks] to my games” and admonishing her for posting pictures on Instagram “walking with black people.” Like Bundy, Sterling has a long track record of racial bias but in his case includes proven discrimination.

The bottom line is that days after the Supreme Court essentially said that race doesn’t matter, race showed up in a spectacular way. And it continues to show up in America’s voting booths.

Though people of color, youth, and women voted in higher numbers in the presidential years of 2008 and 2012, their share of the electorate plummets by as much as 50 percent in off-year elections. The different racial composition of the electorate depending on the election year helps explain why America elected a conservative Congress in 2010 and Barack Obama in 2012.

And the variation of the electorate depending on the year is another reason why rights aren’t left to be voted on by electorates.

All in all, its easy to understand why Justice Sotomayor ended her written objection to the affirmative action ruling by saying “the decision can hardly bolster hope for a vision of democracy that preserves for all the right to participate meaningfully and equally in self government.”

A glimmer of hope in all of this that those who support affirmative action can focus their energy away from legal proceedings and towards what matters now: the long and difficult work to win the issue at the ballot box.

*Post has been updated since publication.

The Truth About the Housing Rebound

The Truth About the Housing Rebound

After a brutal winter and difficult start to the spring, a string of housing data set to be released this week is likely to show continued overall improvement in the housing market. Though the monthly numbers are up and down the trend is clear: the housing market is stronger by some measures than at any point since 2005. But this good news isn’t good for everyone and that’s bad for our economy.

Despite strong gains, especially at the top of the market, the housing recovery is preceding in such way that keeps those hardest hit by the foreclosure crisis and frozen out of the housing market left on the margins; particularly people of color and people under 35. The point is that the housing market may be back but in a way that only enlarges existing inequities. But before turning to where the housing market is off track, let’s take a look at what’s working.

Back from the Precipice…

All of the main indicators for where the housing market is headed year-upon-year are up. Existing home sales, new home sales and year-to-year price increases are the highest in years. According to the National Association of Realtors, in 2013, existing home sales reached a seven year high. In fact, more new homes were sold last year than in any year since 2007 and the median price of existing homes posted its strongest gains since 2005.

Though the housing market suffered a setback early this year due to extreme cold and the lack of homes going on the market for sale, according to a consensus view compiled by The Wall Street Journal, this month’s housing data will show either little change from last month or a slight improvement. That’s a dramatic turnaround from the height of the Great Recession when sales were collapsing by as much as 40 percent each month. It all points to a housing market that’s seemingly back on its feet.

The housing recovery is a leading reason why total national household wealth now exceeds pre-crisis levels. According to The Federal Reserve, household wealth posted its biggest gains last year of any since records began to kept in 1945. Household wealth in the United States now stands at $70 trillion.

…Except in Communities of Color

The problem is that these gains are concentrated. As The Federal Reserve points out more than nine out of 10 of the wealthiest households in America are white (PDF). A report by the Urban Institute last year quantifies the disparity fueled by this racial wealth gap (PDF) and it’s off the charts. Average white household wealth is $632,000 versus $110,000 for Latinos and $98,000 for blacks. 

What blew open the racial wealth gap was the Recession and communities of color haven’t recovered from it. As NYU Professor Darrick Hamilton told The New York Times, “It was already dismal. It got even worse.” That’s because housing forms a larger share of black and Latino net worth, the total value of what you own minus the debt of what you owe, than White households.

That’s why black and Latino home ownership rates collapsed to levels not seen since the 1990s. In fact median household net worth of African-Americans and Latinos tanked by as much as 60 percent. 

Warning Signs Ahead

Consequently historically marginalized communities need a broad-based housing recovery in order to begin to recoup a generation’s worth of lost wealth. But there are some worrying trends in the current housing data for why that might be harder than at any point in nearly three decades:

1) Price increases are fueled by Wall Street and the wealthy.

Although theoretically it’s great for all homeowners, the most of the recent benefits from higher prices are flowing into fewer hands. As I have written before, billions of dollars in mass purchases by Wall Street firms is a driving force behind the sales of existing homes. As the value of these homes grows, Wall Street, rather than average homeowners, benefits.

Moreover, the purchases by the rich of second homes—instead of new purchases by first-time homebuyers—is pushing new home prices upwards. Both of these trends underscore that what appears to be a functioning market is actually one dominated by increasing fewer players. Another indicator of this is the fact one out of three home purchases are now all cash deals, double the historical norm.

2) Lending Standards have tightened.

Keeping homeownership out of reach for many is that financial institutions have tightened mortgage eligibility rules. Many banks won’t allow down payment help from relatives or friends. Additionally average credit scores required to secure Federal Housing Authority (FHA) home loans aimed at helping the non-wealthy are around 700. Six hundred eighty is the average score of most Americans but three out of four African-Americans have scores close to 620.

3) Lack of jobs.

The greatest determination of whether people can buy and hold on to homes are jobs and income. The double-digit unemployment of blacks and youth, and an unemployment rate amongst Latinos 50 percent higher than whites underscores that homeownership in these communities is infinitely harder. The fact that interest rates are up by as much as 20 percent only adds to the income required to purchase a home. And with the top 1 percent capturing nine out 10 dollars in national income, the likelihood of home ownership skews even more towards those with significant cash flow.

The bottom line is that our lopsided housing recovery is expanding racial and economic inequity, rather than narrowing it. And in just a few short years this will be a big problem.

As Forbes points out, in just six years the majority of prospective new home buyers will be people of color.
And given the centrality of housing to the nation’s economy, there’s no way the U.S. can have a strong future without reopening the doors of home ownership to everyone. But we can do just that.

As economist Thomas Piketty points out in his new book, “Capital in the 21st Century,” the only way to produce an economy that works for everyone is with economic policies that are actually designed to work for everyone. To that end, The Federal Reserve can encourage banks to return to common-sense lending policies like those that existed before the “anything goes” era of mid-2000s. And Washington can get serious about income and job growth by raising the minimum wage, enacting comprehensive immigration reform, and investing in the country ‘s future in a big way.

There’s lots that can be done to recreate a housing market produces the gains that all communities need, but we don’t have a second to waste in actually creating it.

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