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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.

How Some Tax Preparers Feed on the Working Poor

How Some Tax Preparers Feed on the Working Poor

With the arrival of Tax Day next week away, an article in The New York Times this week details the latest way in which the working poor serve as a profit center for American business. By siphoning off hundreds of dollars in fees from some of the nation’s neediest taxpayers, the $100 billion tax preparation industry—from small neighborhood storefronts to big time chains like H&R Block—can diminish the economic lifeline that tax refunds have come to be for millions of America’s struggling families. Alongside payday loans and car title loans, questionable tax preparation fees for the poor underscore how corporations profit from poverty. Even as more people fall further behind economically year after year, the financial sector will find a way to make money off of it.

The challenge is that tax refunds are one of the important ways that America fights poverty. Close to 50 million Americans are in poverty. Close to one out of three blacks, and one out of four Latinos is poor. Most of those who are in poverty work and have children.

A Critical Tax Rebate for the Poor…

Starting under President Clinton and expanded under President Bush, the Earned Income Tax Credit (EITC) was instituted to transition millions of American families from welfare to work as Aid to Families with Dependent Children, welfare’s official name, was wound down and eliminated. The point was to make low-wage work pay. That’s because without the credit many families can’t earn enough to live. Even with the credit, large numbers of the working poor, especially those without children, have jobs but remain officially in poverty. Regardless, the credit is crucial piece of anti-poverty policy.

Each year the Federal government returns $60 billion to 26 million struggling households in the form of the EITC. According to the Center on Budget and Policy Priorities (CBPP), a non-partisan think tank, the EITC keeps 10 million people out of poverty, half of them children. The average size of the benefit is $2,900 and makes a big difference in the life of recipients. As the Center on Budget and Policy Priorities points out, the children of EITC beneficiaries “are likelier to do better in school, are likelier to attend college and earn more as adults.” 

But like middle and upper income tax payers, working poor tax payers need help in getting their returns together. The problem is that low-wage can often be temporary meaning that a worker may have multiple employers during the course of the year. Moreover parents raising children have to document other income sources such as child support or financial assistance from another relative. The need to understand how to file correctly spurs low-wage workers to seek out tax prepares.

As the Times lays out, as if on cue, the tax preparation industry responds to the need. As early as December “they begin showing up in empty storefronts in neighborhoods where empty storefronts are easy to come by” the Times reports.

…And a Profit Center for Tax Preparers

Tax preparation businesses, which generate $10 billion in profits annually, can charge the working poor hundreds of dollars for what is to them routine work that can take a matter of minutes. Supermarket cashier Brittany Dixon told the Times that for a half an hour of work, the tax preparer charged $400. “That is a car note” Dixon says.

The fact that these fees can represent more than one out of seven dollars that the average EITC recipient gets, as in Dixon’s case, shows how tax preparation can hurt a family’s bottom line.

Arriving in the spring, the EITC refund helps keep poor families afloat for the rest of the year. It provides emergency funds for an unknown such as a broken tire, is used to pay for back-to-school needs or day care over the summer. Given how close these families are to the edge, the slightest financial change can push them right over. The hundreds of dollars that that an EITC recipients fees contribute to the multi-billion dollar tax preparation industry could easily cascade into financial disaster. Missed car payments, which could result in Dixon’s case, and the inability to get to work can translate into lost jobs and worse.

Poverty and Big Business

But skimming money off of the working poor at tax time isn’t the only way that the poor are big business. In fact they face an array of predatory financial practices that make poverty an even heavier financial burden and harder to escape. Given that 50 percent of Americans are either in poverty or one step away from being poor, who makes money off of the most vulnerable must come into sharper focus.

All of this is why Professor Thomas Edsall of Columbia University last year wrote in The New York Times, that there are “multiple pathways eager moneylenders have found to profit from the cash needs of the poor.” 

A prime example is payday loans in which struggling lower-wage workers borrow small amounts of money as a bridge between paychecks. The multi-billion dollar payday loan industry generates massive profits by charging interest rates of up to 400 percent and tacking on additional fees on loans which average just $350.

As the Center for Responsible Lending points out, even moderate income households of $35,000 don’t generate enough income to cover basic household expenses. This fact underscores the driving force behind the working poor turning to these loans: the basic desire to make ends meet. 

The difficulty is that these financial instruments are structured so that they can’t actually ever be paid back. Taking-out even one loan spurs borrowers to take out a second to cover the expenses from the original debt and so on. This “treadmill,” as the Center for Responsible Lending calls it, of repeat borrowing is where financial companies make their profit: it’s why many offer the first-day loan for “free” in order to get borrowers in the door.

Though designed for the poor, America’s wealthiest banks make money off of them. Bank of America, JP Morgan Wells Fargo and others finance them through different storefront names and are all profiting handsomely from these sky-high short-term loans.

Payday loans flow out of the historic redlining of poor districts where poor communities and communities of color were systematically denied traditional financial and banking services provided to other areas. Though redlining is now illegal, banks have little incentive to reverse their legacy of discrimination. That’s because there’s money to made off of payday loans rather than on traditional accounts. And it’s why Democratic Senator Elizabeth Warren of Massachusetts has suggested that post offices begin offering a broader range of financial products: doing so would be scale-back payday lending abuse. 

The same is true for auto title loans in which car owners use their automobile as collateral for short-term loans. Though the average loan is $951 for car title loans, with annual interest rates of up 300 percent a borrower could end up paying $3,093 (PDF) back to the financial institution which made the loan in the first place. 

Tax preparation, payday loans and car title loans show the multiple ways in which the poor serve as a profit center for America’s biggest corporations often at their own expense. Individuals who take out payday loans, for example, are more likely to default than those who do not.

As the country examines ways to fight poverty and income inequality, surely one place to start is to ameliorate the financial hardship of the working poor which helps fuel the bottom lines of America’s most storied companies.

Good Health Is Good for the Economy

Good Health Is Good for the Economy

As the enrollment date for Obamacare came to an end this week, one overlooked fact is that the law could have a dramatic impact on the job security and earnings of the working poor. More than one out three people who’ve signed up for coverage earn below the poverty threshold qualifying them for Medicaid, with the incomes of millions more eligible for subsidies to help pay insurance premiums.

Disproportionately, people of color are clustered in jobs that pay by the hour and these individuals are more vulnerable to income loss due to their own illness or that of a family member. That’s why the long-term effect of the law, with its potential to increase wellness and decrease illness among Americans on the economic margins, could be genuinely a big deal for the economic well-being of America’s working poor.

Each year the United States loses between $200 to $260 billion in economic output due to the illness of its workers. To put these massive numbers in context, if worker illness could be cut in half, the nation’s economy would grow up to 50 percent faster than it has for the last three years.

A 2005 report (PDF) by the Commonwealth Fund, a foundation focused on improving the nation’s healthcare system, found that Americans lose up 407 days every year to their own sickness or that of a family member. Together these sick days mean up to $48 billion in lost wages; money that comes right out of the pocket of workers.

The problem is that for the working poor time is money. Americans who work in lower-wage service jobs at the nation’s malls, restaurants, call centers and repair shops get paid by the hour. Unlike higher-paid salaried workers who receive income regardless of how many hours spent on the job, when hourly-employees don’t work they don’t earn.

Analysis (PDF) by the Economic Policy Institute shows just how stark these realities for working poor families can be. A single parent with children earning $10 an hour—that’s $15,000 a year—who misses up to three days of work could push an entire family into poverty. “Just three and half days of missed work because of illness is equivalent to an entire month’s groceries for the average family,” the EPI goes on to add.

Moreover, hourly-wage jobs are less likely than salaried work to have sick days. Up to nine out of 10 of higher-wage salaried workers have access to time off for getting sick while only two out of 10 lower-wage workers do. This means that hourly workers are more vulnerable to losing their jobs from getting sick and having to miss work. That’s why a five-day illness can translate into months of lost income.

A personal care assistant Marianne Bullock told NPR just how devastating the toll on working families can be. Upon realizing that her sick child needed to be taken to the hospital, Bullock spoke to her manager about the need to care for her daughter. “You might as well not come back,” the supervisor said.

Bullock’s story is not an isolated one. In fact one out six workers says that they have either lost or could lose their jobs if forced to take days for sickness. The 40 million Americans working without sick days live in fear of just what their illness or that of a loved one could mean for their family’s bottom line.

As Kai Wright recently wrote, “three out of four uninsured people had jobs in 2013” and make less than $25,000 a year. Nearly 6 out of ten were people of color. If access to healthcare reduces time off from sickness by just two days a year for America’s lowest-wage workers, it will help keep millions of families from experiencing real economic hardship or even job loss.

Of course these real benefits of a fully-functioning and fully-implemented Affordable Care Act—as Obamacare is formally known—is lost in the broader controversy over the economic impact of the law. That’s why Obamacare’s early missteps and current administrative twists and turns are so damaging: they prevent the Affordable Care Act from being as effective as the country needs it to be for the working poor and people of color.

But as I have written before, Republican governors such as Rick Perry of Texas claim will look back on Obamacare to see “taxes skyrocket and our economy crushed as our budget crumbled.” Yet these doomsday predictions fail to take into account the current economic nightmare caused by the lack of access to healthcare for America’s historically marginalized communities.

To the contrary, the evidence suggests that both for America’s working poor families and the nation’s economy as a whole Obamacare could very well prove an essential economic lifeline.

The Economic Truth About the ‘Model Minority’

The Economic Truth About the 'Model Minority'

As the United States hurtles toward becoming a nation where people of color form a majority of the population, economic differences between communities of color must come into sharper focus. A group that epitomizes this need perhaps better than most are Asians and Pacific Islanders living in America. That’s because their recent history underscores the fact that we can’t make smart economic decisions based on wrongheaded economic stereotypes.

Unfairly labeled as an economic superclass, the truth is that there are vast disparities in economic well-being across the spectrum of Asian-Americans. Given that individuals from Asia form America’s fastest growing population, the country has to grapple with the reality of this diversity. Doing so is key to ensuring prosperity in states and entire regions across the nation. But doing so will require a dramatic shift in mass thought. Looking at the gap between the economic perception of Asian-Americans and Pacific Islanders and the reality of their economic lives makes the point. 

The Model Minority Fallacy

Since the 1960s Asians and Pacific Islanders have been typecast as part of a “model minority” of non-whites capable of outperforming the rest. The hard-fought and hard-won higher rates of college completion and median incomes of AAPI Americans have been used to nullify the idea that the nation’s legacy of racial and economic injustice continue to matter.

The problem is that the term “model minority” applies only to racial and ethnic racial groups such as those from the Chinese mainland and Indian subcontinent. Asians comprise the largest populations of people on the planet and cover over a third of the earth’s landmass. Any label applied to such diverse human beings as the Pashtuns living in rugged areas of Pakistan, to the Javanese people on the volcanic islands of Indonesia to Japanese communities along the stricken shores of the Fukushima coast are bound to be inaccurate.

Despite its deeply problematic origins and inherent weaknesses, the “model minority” continues to be trumpeted by public intellectuals deeply invested in it as a concept. One is Charles Murray, whose 1994 book “The Bell Curve” argues that “cognitive” and “cultural” differences between racial groups explains racial disparities. Recently cited by Paul Ryan to explain why young black and Latino men have sky-high unemployment, Murray wrote just after President Obama’s reelection that every day “observation of Asians around the world reveal them to be conspicuously entrepreneurial, industrious, family-oriented, and self-reliant.” 

But as a Professor Ellen Wu—author of “The Color of Success: Asian Americans and the Origins of the Model Minority”—wrote earlier this year in The L.A. Times, the idea of the model minority “fascinates” because it allows America to explain away or even justify economic inequities without having to take any action to actually erase them. The problem with this culturally based explanation for economic achievement is that it falls apart under closer inspection.

What the Facts Show

As a recent report by the Center for American Progress lays out, the “model minority” view masks real economic pain and hardship for large parts of the Asian-American and Pacific Islander community. 

Of more than 14 different AAPI ethnic groups included in the study, all but three had poverty rates nearly equal to or higher than whites. Only three of the ethnic groups had per capita incomes higher than whites, underscoring that while AAPI individuals on average may earn more, these earnings have to spread over larger families who are in need. Moreover, Asians and Pacific Islanders have the highest long-term unemployment rate of any group in America. Nearly half of Asian-Americans who are unemployed have been without work for six months or more.

The lack of heterogeneity of Asia is reflected in the range of economic outcomes of the people of Asian descent living in the United States. Individuals from countries such as India, China, Japan and the Philippines—with their varying combination of strong education systems, economic opportunity, widespread use of English and cultural history with the United States—do well in America. Whereas others fleeing political or economic oppression from countries such as Myanmar, Cambodia, Pakistan and Bangladesh find it far harder. Showing just how large these economic gaps can be, Indian-Americans on average have per capita incomes twice as large as Cambodian-Americans.

And as people of color make up a larger proportion of the American population each year, these differences in economic need will matter more and more.

Though there are half as many people of Asian and Pacific Islander descent in the United States than African-Americans—nearly 20 million versus 44 million—they are the fastest growing population of any group in America. Between 2000 and 2010, the Asian-American population increased by 50 percent. Every single state saw growth in these communities, some by as much as 116 percent. Interestingly, Southern and Western states including Georgia and Nevada racked up the fastest growth. If governors and legislators ignore the real contrasts amongst Asian-Americans as part of a “model minority” ideal, they leave an increasing number of their residents behind economically.

Of course just how to grapple with and accept the range of AAPI economic realities is up for debate within these communities.

Arguing Over the Future

The latest book by author and professor Amy Chua of “Tiger Mom” fame, titled “The Triple Package” uses the “model minority” argument and extends it to other groups prospering in the United States economically such as Nigerians, Cubans and Lebanese. Mainstream publications such as Forbes have asked whether prominent Indian-Americans such as Governors Bobby Jindal and Nikki Haley of Louisiana and South Carolina respectively form “a new model minority?” 

But other writers and thought leaders such as 23-year-old Suey Park reject the concept outright and argues that it blocks the wider society’s ability to recognize Asian-Americans as people. “The model minority prevents Asian-American women from being seen as separate from Asian-American men and from finding our own place among women of color feminism,” says Park. “That’s why I started the #notyourAsiansidekick hashtag.” 

Regardless of the outcome of these political and cultural debates, the facts show that the term “model minority” is totally meaningless when applied to the array of human beings and the range of their needs that it’s meant to cover. The only way it works at all is to shrink it to ever smaller groups of people and to subdivide them further still. All that this slicing, dicing and spinning does of course is to undermine the very point of the phrase. That’s good news. Perhaps with its shrinking explanatory power the country can return to addressing the stubborn structural and institutional barriers which all Americans of color continue to face.

Paul Ryan’s Fatally Flawed Economics

Paul Ryan's Fatally Flawed Economics

Former vice presidential candidate and House Budget Committee chair Paul Ryan last week set off the latest round in the ongoing saga of race and the Republican Party when he uttered words that obscured the truth about racial and economic inequity in America. The trouble started seven days ago in response to a question on right wing radio about his own experience as a young man. When asked, “Who taught you how to work?” the GOP standard bearer veered off course into an riff that oddly fused the racial euphemism “inner city” and the topic of joblessness: There’s “a tailspin of culture in our inner cities, in particular, of men not working and just generations of men not even working or learning the value or culture of work” he said.

Although Congressional Black Caucus Chair Marcia Fudge said that Ryan should be “ashamed,” Ryan’s not likely swayed.

Given the cringeworthy nature of Ryan’s comments, it’s easy for economic progressives to ignore what he said and move on. But given Paul Ryan’s position—chair of the House Budget Committee—and his youth and ambition, he’s likely to influence American economic policy for at least a generation. With that in mind, let’s take a closer look at who he is, what he said, and what it might mean.

Paul Ryan’s Beliefs

The Wisconsin representative— like his party—has a history of pathologizing those on the most precarious rungs of the nation’s economic ladder even as he pursues the very policies that will keep them there. Ryan has served as the primary architect of the Republican party’s budget and economic policies since 2010. As I have written before, these center on vast giveaways to the wealthy paid for by debt and dramatic reductions in economic opportunity programs centered on health, education, transportation and housing.

The core document that reflects his thinking, “A Roadmap for America’s Future”—like his radio comments—cites the need to terminate a “culture of dependency” caused by the economic fairness efforts of Franklin Roosevelt and Lyndon Johnson. His new poverty report reverberates with the same points (PDF). Somehow Ryan manages to overlook the fact that in the wake of Johnson’s Great Society and Civil Rights programs, poverty in the black community fell by half and the black middle class doubled.

But that’s a key problem with Ryan’s ideas. They can be light on evidence and long on ideological social engineering. The people behind his thinking reveal why.

During the radio interview, Ryan cited the work of researcher Charles Murray whose 1994 book “The Bell Curve” argued that whites form a “cognitive elite” of high IQ holders. Murray believes that the inherent advantages of this “cognitive elite” explain why non-whites have lower levels of wealth. A key takeaway from Murray is that the difference in intelligence between whites and everybody else is result of their social habits and values. “The Bell Curve” is clearly one of the reasons why Ryan believes that culture is the key to everything.

Data Point to Another Story

The irony is that this attachment to cultural arguments as a way to explain economic differences between whites and everyone else demands that Republicans abandon one of their key beliefs: faith in market economics. That’s because economics doesn’t measure culture it measures results. And a core tenet of economics is that broad-based outcomes have systemic origins. In other words, if people of color are doing less well economically it’s because there are widespread barriers to them doing so. The existing evidence is compelling.

As I have written before lower levels of education, the mass application of disproportionate school discipline for boys of color, and extensive incarceration are key drivers behind the 50 percent unemployment rate for young black and Latino men in urban areas across the country. Moreover the economy is still short eight million jobs from where we need to be to get it working for everyone.

Additionally there are nearly 10 million long-term unemployed and “discouraged” workers in line for whenever those jobs come back. The bottom line here is that work begets a culture of work, and there are not enough jobs to go around.

In fact, while Ryan is busy exhorting “inner city” (read: black and Latino) communities to change their culture he’s been busy rewriting the economic rules of the road in favor of the One Percent. Ryan advocated the nation’s dangerous flirtation with default in 2011 in a bid to rescue the Bush Tax Cuts. Had he and Mitt Romney won the White House the wealthiest Americans would have received the lion’s share of $5 trillion in tax cuts while the working poor would have had to bear the brunt of $10 trillion in spending cuts. 

While Ryan works to get the wealthy more, the working poor find it harder to get ahead. Sequestration—championed by Ryan—cost tens of thousands of poor children a shot at early childhood eduction and more than 100,000 working poor families with decent housing that they could afford. Sequestration lived up to its name and wreaked havoc across the board. It also cut economic growth by 30 percent and prevented the creation of close to 2 millions jobs. America is stuck economically with historically marginalized communities falling behind not because of “culture” but because of many of the policies that Ryan advocates.

It’s important to point out that Ryan and his party are not alone in pointing to cultural reasons as a cornerstone for economic disadvantage in communities of color. President Obama cited the “negative reinforcement” that young men of color receive and the need to give them a “sense that their country cares about them” as motivating factors behind his initiative “My Brother’s Keeper.” But as I laid out there are concrete actions that can be taken at the federal level right now to improve the prospects for young black and Latino men. 

What the entire political class in Washington should grasp is that historically marginalized communities need more results and less stigmitazation. Policies from both parties since the 1980s have rolled back much of the economic progress that communities of color made in the aftermath of far-reaching economic changes in the 1960s. These are the very changes that Ryan castigates.

On a hopeful note, Paul Ryan and the Congressional Black Caucus agreed late last week to meet in order to discuss these and other differences. Perhaps this a start to ensuring that communities of color get the real economic help they need. Though unscheduled, it should take place sooner rather than later. The persistent gap between cultural perceptions and economic realities is too big to ignore, and too many are continuing to live out the consequences.

Keeping it Real About Our Growing Economy

Keeping it Real About Our Growing Economy

With the outbreak of spring-like weather across much of the country this week, there’s hope that a “spring effect” will take place across our economy. As if on cue with the milder temperatures, recent headlines in the mainstream business media trumpet possible green economic shoots that appear to be emerging. Bloomberg, The Wall Street Journal and CNBC point to the fact that small businesses are confident enough to begin borrowing again, home prices are on the rise increasing the wealth of those still in them, and credit card companies are ramping up credit lines to consumers to levels not seen since before the crash. But hold the champagne.

One area that seems immune to this burst of optimism is the jobs market. That’s why the reality of your economic life may not match the weather outside, nor the sunny predictions in the media. The disconnect over what people are saying about our economy and the jobs market versus what most people are going through can be one can be frustrating, confusing and possibly even enraging.

That’s why in a Wall Street Journal poll released this week President Obama’s approval rating fell to 41 percent—a new low—with most people citing the economy as a leading reason for their lack of confidence. In a worrying development for the president, more Democrats disapprove of his performance than approve, with support eroding for him amongst people of color whose communities remain in economic crisis. An electorate which has been in an economic deep freeze for six years is growing impatient.

So why exactly do things still feel stuck? The unemployment rate is the lowest its been in four years and our economy is adding jobs each month.

Federal Reserve Chair Janet Yellen provided the answer last month in testimony before the Senate Banking Committee. The head of the nation’s blank put it bluntly saying that, “of course, the unemployment rate is not a sufficient statistic to measure the health of the labor market.” The truth is that despite what we learned in high school about the unemployment rate as a key indicator of the economy’s health, it’s actually only one piece of a complicated jobs puzzle. To learn what’s really going on we have to dig deeper.

With this in mind, here are five pivotal reasons why the jobs market remains in a ditch while the economy moves sideways and Americans increasingly find it difficult to figure out where it’s all going.

1. There still aren’t enough jobs.

Even though the economy has created 8 million new jobs since the recession officially ended five years ago, we actually need twice that amount to feel the turnaround. As The Wall Street Journal reports, a total of 16 million new jobs is required to to get back to pre-recession levels of unemployment. The problem is that each month, due to population growth, 150,000 new people come into the work force. Consequently, between 250,000 to 300,000 new positions need to come on line every four weeks before the economic recovery can feel real rather than imaginary. Last week’s jobs data underscores the point. Just 175,000 new jobs turned up last month.

2. Young people are in an economic depression.

More than one out six people between the ages of 16 and 24 who want a job can’t find work. One out five without employment is what economists classify as an outright economic depression. In fact those under 34 are living in totally different economy all together with higher debt, lower wages, and less savings than at anytime since their grandparents or even great-grandparents.

3. The same is true for black and Latino communities.

With unemployment at up to twice the rate of whites and the lowest level of wealth on record, blacks and Latinos are being pushed even further to the economic margins. In urban areas across America half of all young men of color are out of work making this unemployment crisis the worst in America with the exception of hard-hit Native areas where the problem is on a similar scale.

4. Millions have given up looking for work.

One problem with the unemployment rate is that it doesn’t pick up the number people who want work but who’ve given up looking due to the lack of jobs. These discouraged workers are captured by something called the “labor force participation rate.” That number tells us something very different about where we are right now. The labor force participation rate is the lowest in three decades. The Economic Policy Institute, using data from the Labor Department, estimates that this means that close to 6 million people want a job but have abandoned the search for one. If they were included, the official unemployment rate would be 50 percent higher than it is now and increase back up to the double digits.

5. Millions more are waiting in the wings.

More than four million people have been unemployed for six months or more. This means that any jobs recovery has to be even stronger than normal to absorb those who’ve been looking for years in many cases. The fact that Congress failed to renew longterm unemployment insurance late last years withdrew $40 billion amount in economic stimulus this year and will cost our economy thousands more jobs that we can’t afford to loose. 

The bottom line is that there are real reasons why what you’re hearing about the economy and jobs might not match what you’re experiencing. The good news is that things can turn around if these green shoots grow and bloom over the summer. But we all need to be honest about the fact that there’s a ways to go before we can celebrate.

Four Ways to Go Beyond “My Brother’s Keeper”

Four Ways to Go Beyond

With the announcement of the My Brother’s Keeper initiative last week, President Obama unveiled his first effort explicitly aimed at the social and economic dimensions of racial injustice after nearly five years in office. Its focus on improving the life chances of men of color is welcome and badly needed. But there’s an open question as to whether My Brother’s Keeper is structured in a way that can make any difference.

The truth is that given the limited goals of My Brothers Keeper it may be too unambitious for the task required. That’s because nearly half of black and Latino men in communities across the country are without work. The level of incarceration for black and Latino men is higher than the incarceration rate in many authoritarian regimes around the world with black and Latino men up to six times more likely to be jailed than whites. College completion levels for these men is the lowest of any other group in America.

But the way that My Brothers Keeper is set up makes it appear that we are at the beginning of a crisis rather than in the desperate throes of one. Its two main objectives—the generation of another study on the challenges facing men of color and the coordination of $200 million in private philanthropy in pilot programs in communities across the country over five years—underscore the point.

The reality is that the economic, educational and criminal justice disparities faced by black and Latino men have been studied exhaustively for the past 50 years. All the while the situation has worsened. That’s because the issues facing men of color are systemic rather than individual, and systemic problems require widespread remedy.

To that end here are four actions that President Obama can champion right now that we know can a big difference in the lives of black and Latino men.

1. Make Work Pay for Single Men.

Given the fact that black and Latino men are disproportionately employed in lower wage, hourly-jobs, too many work but can’t earn enough to live. That’s why there’s something called the Earned Income Tax Credit (EITC) that’s designed to ensure that low-wage workers can make ends meet . Through an average lump-some payment of more than $2,000 each year it provides working poor families with the critical help they need to stay afloat. That’s how it manages to keep 10 million people out of poverty, half of them children.

The difficulty is that the EITC is currently designed for parents. According to the White House a single-person earning minimum wage is eligible for up to only $25 (PDF) a year in EITC help. This puts single men at an immediate disadvantage and it needs to be changed.

In a positive step this week, President Obama announced an expansion for singles, but it would require congressional action. In the meantime, the White House could also explore ways to begin to unilaterally enlarge and retool the program while it waits for Congress.

2. Break the School to Prison Pipeline.

Disproportionate school discipline is a key driver for both high levels of unemployment and incarceration for black and Latino men. As I’ve written before, students who are suspended are up to five times less likely to graduate. Each year the Department of Education collects detailed information about racial disparities in school discipline. This existing data could be used by the government to mandate that each of the thousands of schools who receive federal education funds create an action plan and a timetable to eliminate racial disparities in school discipline.

3. Transform Prisons Into Education Centers.

Six out of ten of the 2.3 million people behind bars are men of color. The lack of education is an important reason for why they’re in the criminal justice system. According to the National Education Association, eight of 10 of those behind bars did not finish high school. 

The link between educational attainment and prison is why New York Governor Andrew Cuomo, has proposed a program to fund associate and bachelor degrees in New York’s prisons. The governor points out that it costs $60,000 to incarcerate someone but only $5,000 a year to educate each prisoner all while “giving a real shot at a second lease on life.” 

Those who earn degrees in prison are less likely to come back. A study by the Rand Corporation shows that those leave prison with a high school degree are 30 percent less likely to return and those with a college degree are up half as likely end up in the criminal justice system.

A call by President Obama for a similar effort on a national scale could make a big difference. And given the fact that he runs all of the federal government’s prisons, Obama could begin laying the groundwork for that to happen.

4. Focus Job Training Programs on Men of Color.

Another way to help remedy the job skills gap fueled by incarceration and educational barriers is to focus existing job training programs on black and Latino men. Currently the federal government spends $18 billion a year on job training programs.

As a report by Congress’ General Accounting Office details, many of the nearly 50 job training initiatives are scattered across nine governmental departments with most of their money sent to the states in the form of grants to fund uncoordinated efforts (PDF) at the local level. 

One way to better organize these patchwork programs is to target them on those who need help the most. Some, such as those that concentrate on the disabled and Native Americans already do that. But President Obama could issue an executive order asking that priority be given to efforts that are directed at men of color.

These are but a few of the ideas of ways in which we can help black and Latino men right now in a big way. Others include dramatically expanding federal national service programs such as AmeriCorps which gives volunteers a stipend and future educational assistance to serve in country’s hardest-hit communities; ramping up school-to-work apprenticeships to ensure that when students leave high school they land good-paying jobs and opening housing, educational and health benefits far more widely to single men.

The bottom line is that we don’t need to wait five years— a time beyond President Obama’s term in office—to take dramatic action for those most at risk in America. The good news is that there’s no reason to do so.

Why Women Should Be First in Line for Salary Boosts

Why Women Should Be First in Line for Salary Boosts

Lost in last week’s technical debate over the minimum wage is the fact that raising the hourly earnings for women of color is essential to bringing about a dramatic change in their well-being and that of their children. More than six out 10 low-wage workers in America are women, with a starkly high number of the lowest-wage work at the bottom of the pay scale occupied by women of color. As women of all backgrounds take the economic lead in their households, what’s true for non-white women is doubly true for black women and Latinas. A hike in the minimum wage to $10.10 would narrow the male-female pay gap and combat poverty in historically marginalized communities across America.

To be clear, all women need a pay raise. Despite the fact that women have “leaned in” and made dramatic progress in the workplace unimaginable 50 years ago, the gap in pay between men and women has only approximately come down by 1 cent every other year since 1960.  According to the National Committee for Pay Equity, women now take home 77 cents for every dollar a man earns.

But for women of color the need is even more stark. Black women earn 62 cents and Latinas 54 cents when compared to what white men earn.  According to research by the National Women’s Law Center (NWLC) these differences can translate in up $10,000 a year in lost earnings [PDF] for women of color.

There are a broad array of structural reasons for these differences in pay between both men and women, and amongst women of different backgrounds.  First to the legal ones.

The defeat of the Equal Rights Amendment in 1980, which would have rendered pay differences between men and women unconstitutional, markedly set back the cause for pay fairness. Throughout the 1980s and early 1990s, this blow was followed up by lax enforcement in both the Reagan and first Bush Administrations of gender non-discrimination clauses of the Civil Rights Act. The lack of a constitutional amendment, combined with two hostile White Houses in a row, put “equal pay for equal work” out of reach for more than a decade. A series of federal judicial rulings right up to now haven’t helped.  It was just in 2009 that the Congress passed the Lilly Ledbetter Fair Pay Act—overturning a 2007 Supreme Court ruling—which makes it easier for women to sue for the wages they’ve legally earned.

But the truth is that these legal barriers layered on top of existing economic ones. Historic gender and racial forces have clustered all women into low-wage work and have pushed women of color into the bottom of low-wage positions. In 20th Century America, to the extent that women worked out of home, they were almost exclusively permitted to do so in support positions such as those in office administration, education or health care where their were work was valued less. They were paid less as a result. And as a result of America’s even earlier period of slavery and its aftermath of racial discrimination, women of color were steered into the lowest of low-wage work like that of custodians, cooks, household cleaners and hospital attendants.  

The legacy of these of these legal, economic and racial imbalances is why analyses by the Economic Policy Institute and the NWLC [PDF] show that up to 15 million women in some of America’s toughest jobs could receive a pay increase if the minimum wage is raised, with more than two million women lifted out of poverty.

Why is that exactly?

According to Congress’ General Accounting Office (GAO), 60 percent of America’s 20 million low-wage workers are women [PDF].  An hourly rate of $11 and below is considered by the GAO to be low-wage.  On average, men in low-wage jobs earn about 20 percent more than women in similar work.  That’s because men tend to get jobs at the higher end of lower-wage work such as in transportation and construction while women are at the opposite end of low-wage work. This is one of the ways in which the gender imbalances from the last century continue.

Women predominate jobs at the very bottom of the pay scale, basically anything below $8 an hour. These positions in healthcare, social assistance and in the restaurant industry can be among America’s most demanding but least compensated.  Over eight out of 10 workers in healthcare support positions and seven out of 10 restaurant servers are women.

But all of this leads to the place where historic gender and racial differences collide.  

Half of all healthcare and social assistance workers, such as at-home indigent caregivers, are women of color. These women earn up to 30 percent less than their lower-wage male colleagues.  Women of color also are disproportionately sub minimum wage restaurant workers, who are guaranteed only $2.13 an hour with the rest of their salary made up with tips. According to a report by The Restaurant Opportunities Center United, the pay differential for these workers can translate into $400,000 in less pay for black women servers over the course of their lifetime when stacked up against the lifetime earnings of their white male counterparts.

Given the fact that low-wage women of color are in low-wage jobs that pay less it’s no wonder that close to half of all black and Latino female led households—where women are either the primary or only breadwinner—are in poverty.  And its the reason why Congresswoman Maxine Waters called raising the minimum wage, “an economic issue that’s hitting home” As the share of families reliant upon women’s earnings increases, up 400 percent from 1960, it will continue to do so to even greater effect.

The bottom line is that raising the minimum wage for women of color is essential to fighting poverty and improving the life chances for people of color.  As demographic changes forecast that the future of America will be decided by the fate of these communities, such a move would translate into brighter days ahead for us all. 

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