[Joint House and Senate Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 117-77
EXAMINING THE RACIAL WEALTH GAP
IN THE UNITED STATES
=======================================================================
VIRTUAL HEARING
before the
JOINT ECONOMIC COMMITTEE
of the
CONGRESS OF THE UNITED STATES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MAY 12, 2021
__________
Printed for the use of the Joint Economic Committee
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
45-210 PDF WASHINGTON : 2021
JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
HOUSE OF REPRESENTATIVES SENATE
Donald S. Beyer Jr., Virginia, Martin Heinrich, New Mexico, Vice
Chairman Chairman
David Trone, Maryland Amy Klobuchar, Minnesota
Joyce Beatty, Ohio Margaret Wood Hassan, New
Mark Pocan, Wisconsin Hampshire
Scott Peters, California Mark Kelly, Arizona
Sharice L. Davids, Kansas Raphael G. Warnock, Georgia
David Schweikert, Arizona Mike Lee, Utah, Ranking Member
Jaime Herrera Beutler, Washington Tom Cotton, Arkansas
Jodey C. Arrington, Texas Rob Portman, Ohio
Ron Estes, Kansas Bill Cassidy, M.D., Louisiana
Ted Cruz, Texas
Tamara L. Fucile, Executive Director
Vanessa Brown Calder, Republican Staff Director
Colleen J. Healy, Financial Director
C O N T E N T S
----------
Opening Statements of Members
Hon. Donald Beyer Jr., Chairman, a U.S. Representative from the
Commonwealth of Virginia....................................... 1
Hon. Mike Lee, Ranking Member, a U.S. Senator from Utah.......... 3
Witnesses
Dorothy A. Brown, Asa Griggs Candler Professor of Law, Emory
University School of Law, Atlanta, GA.......................... 6
Darrick Hamilton, Henry Cohen Professor of Economics and Urban
Policy, Founding Director of the Institute on Race and
Political Economy, The New School, New York, NY................ 8
Mehrsa Baradaran, Professor of Law, University of California,
Irvine, School of Law, Irvine, CA.............................. 9
Ian Rowe, Founder & CEO of Vertex Partnership Academies; Senior
Visiting Fellow, Woodson Center; Resident Fellow, American
Enterprise Institute, New York, NY............................. 11
Submissions for the Record
Prepared statement of Hon. Donald Beyer Jr., Chairman, a U.S.
Representative from the Commonwealth of Virginia............... 34
Prepared statement of Hon. Mike Lee, Ranking Member, a U.S.
Senator from Utah.............................................. 35
Prepared statement of Dorothy A. Brown, Asa Griggs Candler
Professor of Law, Emory University School of Law, Atlanta, GA.. 37
Prepared statement of Darrick Hamilton, Henry Cohen Professor of
Economics and Urban Policy, Founding Director of the Institute
on Race and Political Economy, The New School, New York, NY.... 45
Prepared statement of Mehrsa Baradaran, Professor of Law,
University of California, Irvine, School of Law, Irvine, CA.... 49
Prepared statement of Ian Rowe, Founder & CEO of Vertex
Partnership Academies, Senior Visiting Fellow, Woodson Center,
Resident Fellow, American Enterprise Institute, New York, NY... 64
Response from Professor Brown to Question for the Record
Submitted by Senator Klobuchar................................. 73
Response from Professor Brown to Question for the Record
Submitted by Representative Beatty............................. 73
Response from Professor Brown to Question for the Record
Submitted by Senator Kelly..................................... 73
Response from Dr. Hamilton to Question for the Record Submitted
by Representative Beatty....................................... 74
Response from Dr. Hamilton to Question for the Record Submitted
by Senator Kelly............................................... 76
Response from Mr. Rowe to Question for the Record Submitted by
Senator Lee.................................................... 77
Response from Mr. Rowe to Question for the Record Submitted by
Representative Beatty.......................................... 81
Question for the Record for Professor Mehrsa Baradaran Submitted
by Senator Klobuchar........................................... 81
Questions for the Record for Professor Mehrsa Baradaran Submitted
by Senator Kelly............................................... 81
Charts submitted by Representative Schweikert.................... 82
Report link: https://www.aei.org/housing/housing-market-
indicators/ titled ``FHFA's Request for Input on Appraisal
Related Policies, Practices, and Processes'' submitted by Ian
Rowe........................................................... 88
PowerPoint presentation https://www.aei.org/housing/housing-
market-indicators/ titled ``Impact of Race and Socio-Economic
Status on the Valuation of Homes by Neighborhood'' submitted by
Ian Rowe....................................................... 89
EXAMINING THE RACIAL WEALTH GAP
IN THE UNITED STATES
----------
WEDNESDAY, MAY 12, 2021
United States Congress,
Joint Economic Committee,
Washington, DC.
The WebEx virtual hearing was convened, pursuant to notice,
at 10:00 a.m., before the Joint Economic Committee, Hon. Donald
S. Beyer Jr., Chairman, presiding.
Representatives present: Beyer, Schweikert, Arrington,
Beatty, Herrera Beutler, Peters, Pocan, Estes, and Trone.
Senators present: Klobuchar, Hassan, Warnock, Lee, Cassidy,
and Cotton.
Staff present: Vanessa Brown Calder, Ismael Cid-Martinez,
Carly Eckstrom, Tamara Fucile, Colleen J. Healy, Jeremy
Johnson, Vijay Menon, Adam Michel, Alex Schunk, Rachel
Sheffield, Nita Somasundaram, Jackie Varas, and Emily Volk.
OPENING STATEMENT OF HON. DONALD BEYER JR., CHAIRMAN, A U.S.
REPRESENTATIVE FROM THE COMMONWEALTH OF VIRGINIA
Chairman Beyer. Good morning. This hearing will come to
order. I would like to welcome everyone to today's hearing
focused on the racial wealth gap. I want to thank our
distinguished witnesses for sharing their expertise today. We
have an all-star panel, and I am excited to hear from them.
As everyone here knows, wealth, and the accumulation of
wealth, enables opportunity. Wealth makes it easier to pursue
an education, buy a car or a home, or even take a chance on an
idea and start a business. Wealth is security, and having a
financial cushion allows families to absorb at least some
financial blows like, for example, those experienced because of
COVID-19, or medical emergencies, or a loss of a job.
And wealth begets more wealth, and is often passed from one
generation to the next. Indeed, our tax policies have made
these transfers much easier to execute. Our estate tax
provisions alone enable couples to pass up to $23 million tax-
free to their heirs.
Unfortunately, the inverse is often true. With minimum or
negative wealth, avenues for opportunities are too often
closed, a problem that is perpetuated from one generation to
the next. Our Nation is plagued by persistent and growing
income and wealth inequality. And this inequality is
particularly tenacious along racial lines.
According to the most recent data from the Federal Reserve
in 2019, a median White family had a wealth of eight times the
wealth of the median Black family. The absolute differences are
far greater if you look at the average, or the mean.
One other statistic helps shine a spotlight on the
inequities, while up to 25 percent of white households have a
net worth in excess of $1 million, only 4 percent of Black
households have this. And that racial wealth gap disadvantages
Black and Brown families, individuals, and communities. As
persistent inequities evolve, they manifest in all kinds of
ways.
For example, Black students are going to take on a lot more
student debt than White students, and they are a lot more
likely to see their debt grow as they enter the workforce.
Black families have much lower homeownership rates. Fewer than
one-half of Black families own their homes, compared to three-
quarters of White families. And even the Black homes that they
own are disadvantaged because those home values are lower than
those of the homes of the White families, about a third lower.
Beyond the damage the racial wealth gap does to Black and
Brown communities and families, it also constrains the U.S.
economy as a whole--because we are leaving an awful lot of very
talented, very bright, very creative people out of the most
productive parts of our labor force. It limits our growth and
our productive capacity.
How did we get there? Well, most of the racial wealth
divide is explained by the inability of Black families to
transfer wealth from one generation to another. And this is the
product of decades of systemic racism and exclusion in our
country with policies such as red-lining, restrictive
covenants, and other forms of housing discrimination playing a
role.
But the racial wealth gap is also a result of the Tax Code
that disadvantages Black Americans in the way that it exempts
gains of home sales, in treatment of the income for married
couples, and even the tax incentives provided for employer-
sponsored retirement plans.
The gap is a result of dramatically unequal access to
credit and financial services. Black Americans much more likely
than White Americans to lack access to these basic services
provisions.
There are proposals, though. The racial wealth gap is
pernicious. It requires sustained, multi-pronged efforts, and
we will hear a lot of the good ideas from our panel today. Baby
bonds provide every child with an interest-bearing account at
birth that would ensure that when they are 18 they have assets
to use on education, or to start a business, or other
productive uses.
We also need to do a lot more to improve access to
education with strong pre-K to 12 opportunities, married with
improved access to affordable post-secondary education.
Tuition-free community college is part of that, and student
loan forgiveness is another part of that puzzle.
We also need to acknowledge that education is far from a
panacea. The typical Black family with a bachelor's degree, a
Black man or woman with a bachelor's degree, has less wealth
than the typical White family with a high school degree.
Disparities persist even after accounting for income or family
structure, reminding us that we need to be intentional about
asset building.
The House passed out of committee legislation, H.R.40,
which was named after the failed promise to provide former
slaves 40 acres and a mule. And this legislation called for
creating a committee to study reparations. This is an important
step to face up to our Nation's past, to begin the process of
providing compensation and restorative justice.
We have a long way to go in our country to close this
racial wealth gap. We are only going to get there if we
dramatically intensify our efforts. And this is why I look
forward to the testimony of all of our witnesses today.
Now I would love to turn it over to Senator Lee for his
opening statement.
Senator Mike Lee.
[The prepared statement of Chairman Beyer appears in the
Submissions for the Record on page 34.]
OPENING STATEMENT OF HON. MIKE LEE, RANKING MEMBER, A U.S.
SENATOR FROM UTAH
Senator Lee. Thank you. Thanks so much, Mr. Chairman. Good
morning to all of you, and thanks, Chairman Beyer, for
convening our hearing today.
The heart of the American Dream is when we find the ability
to build a productive and happy life for oneself and for one's
family. It is always necessary to that endeavor to have the
opportunity to build wealth. And unfortunately, while average
wealth for all American households has fortunately risen in
recent years, it remains a fact that Black and Hispanic
households have consistently held less wealth than White
households. Wealth is built, of course, through the
accumulation of assets, and this can include the accumulation
of homes, of savings, and in many cases of inheritance. But
accumulating assets requires income. And income requires
opportunity.
One of the critical questions we therefore have to ask in
order to address the racial wealth gap is one that deals with
how best can we increase opportunity for those with less wealth
so that they can build more. And one of the things that tend to
get in the way of opportunity, and especially upward mobility,
as Martin Luther King wisely observed: A productive and happy
life is not something you find; it is something you make.
But it is of course something you make with other people.
Indeed, supportive relationships and institutions are vital to
facilitating opportunity. The Social Capital Project of the
Joint Economic Committee has for the past few years studied the
health of families and communities and institutions of civil
society. And what we have done through that effort is to try to
document changes in social capital over time. And it is
sometimes uneven distribution geographically across the
country.
Often there are historical injustices that can have far-
reaching consequences for future generations. One of the
project's striking early findings was that there is a
connection between those counties with large enslaved
populations in 1860 and the counties with the lowest rates of
marriage and intact families today.
You see, slavery stole agency from Black Americans, and it
did so for generations, tearing apart one of the most vital
supports that exists for humans flourishing. That is, the
institution of the family.
This horrific legacy that it left, as well as just the
horrific legacy of racism as a whole, undoubtedly led to far-
reaching consequences for Black opportunity. But other policies
have also weakened social capital and opportunity.
Many Black Americans have paid the price for government-
sanctioned red-lining, for lack of lending resources for homes
and businesses, and union job discrimination that their parents
and grandparents may have faced. These policies made it much
harder to build intergenerational wealth.
Today there are still other policies that present barriers
to opportunity, enduring policies that lock so many out of
affordable housing, of good quality education, and good job
opportunities. For example, unequal access to quality education
plays a large role in upward mobility and economic success.
Unfortunately, because of public school zoning and residential
zoning policies, many minority children from low-income
families are required to attend lower-performing public
schools. As a result, they are less likely to do as well on
standardized tests, graduate from high school, than they would
otherwise be, and also less likely to have other opportunities
to move on to college.
They are more likely to end up unemployed at one point or
another, and more likely to end up in lower skilled jobs with
lower earnings, especially if they have not gone to college.
Occupational licensing laws are often a needless barrier to
work, especially for disadvantaged Americans. Many states have
onerous requirements for jobs that can be done with little risk
to the workers themselves and to those they serve, including
jobs performed by florists, hair braiders, and barbers. And
those requirements also make it hard to earn a living.
Similarly, zoning and land use regulations prevent the
formation of home-based businesses that would allow for more
Black entrepreneurship. And zoning segregates Americans by race
and by class. Our current safety net programs included some
disincentives for work and for marriage, keeping many
minorities trapped in a cycle of dependence and poverty, and
preventing wealth accumulation and stable family formation,
which very often go together.
Family stability also plays a key role in affecting long-
term opportunity. White children are nearly three times more
likely than Black children to be born into married households.
And children born into married households are in turn less
likely to be in poverty, and more likely to achieve upward
mobility.
In fact, one study found that the greatest predictor of
young Black children's ability to move up to a new income class
often involves the presence of Black fathers in their
neighborhoods.
In these and other areas we have much room for improvement
to address existing barriers and to enhance opportunity. But it
is important to add that, as far as we have to go, as far as we
have remaining left to go in making progress, we have made some
progress, too.
Personal agency is not lost, and many Black Americans have
advanced and have flourished in spite of the barriers and
discriminatory legacies they have faced. As my friend and
colleague, Senator Tim Scott, recently said, quote, ``Just
before COVID we had the most inclusive economy in my lifetime,
the lowest unemployment ever recorded for African Americans,
Hispanics, and Asian Americans, the lowest for women in nearly
70 years. Wages were growing faster for the bottom 25 percent
than the top 25 percent. That happened because we focused on
expanding opportunity for all Americans.'' Close quote.
Together, I believe we can continue working to expand
opportunity, to help all Americans build a happy and productive
life for themselves and for their families, and thereby make
savings and wealth accumulation a reality for all.
Abraham Lincoln in his message to Congress on July 4th,
1861, wrote that the leading object of government was, quote,
``to elevate the condition of men; to lift artificial weights
from all shoulders; to clear the paths of laudable pursuit for
all; to afford all an unfettered start and a fair chance in the
race of life.'' Close quote.
It is my hope that this hearing will help us do the same.
Thank you, Mr. Chairman.
[The prepared statement of Ranking Member Lee appears in
the Submissions for the Record on page 35.]
Chairman Beyer. Senator Lee, thank you very much. We really
appreciate that.
Now let's move to introducing our witnesses. We have four
distinguished witnesses. We have Professor Dorothy Brown. She
serves as Professor of Law at Emory University School of Law.
She is a nationally recognized scholar in tax policy, race, and
class. Professor Brown's legal scholarship includes co-written
books on critical race theory and taxation, Federal income
taxation. In March of 2021, she published ``The Whiteness of
Wealth,'' which examines how the Tax Code disadvantages Black
Americans and perpetuates the racial wealth gap. Professor
Brown graduated with a Bachelor of Science from Fordham
University, a J.D. from Georgetown Law, and an LLM in Tax from
New York University School of Law.
Then we will have Professor Darrick Hamilton, a Professor
of Economics and Urban Policy, a Founding Director of the
Institute on Race and Political Economy at The New School. He
is one of the leading researchers in the field of
stratification economics. His work on the racially disparate
effects of public policy and structural disadvantages in the
U.S. economy has led him to advocate for a number of proposals
to make wealth more equitable. These include baby bonds or
trusts, and a Federal job guarantee. Professor Hamilton earned
his B.A. from Overland College, and a Ph.D. from the University
of North Carolina at Chapel Hill.
Professor Mehrsa Baradaran is a Professor of Law at UCI
Law. In July 2020, she was named as the Law School's Associate
Dean of Diversity and Inclusion. She is a distinguished scholar
who has published work largely focused on banking law,
financial inclusion, inequality, and the racial wealth gap.
She has written two books, ``How The Other Half Banks'' and
``The Color of Money: Black Banks and The Racial Wealth Gap,''
the latter of which was best book of the year for the Urban
Affairs Association.
Professor Baradaran earned her Bachelor's Degree from
Brigham Young University, and her J.D. from NYU.
And then finally, Mr. Ian Rowe, a Resident Fellow at the
American Enterprise Institute, and a Senior Visiting Fellow at
the Woodson Center. He is also the Founder and CEO of Vertex
Partnership Academies, which is a new network of character-
based international baccalaureate high schools opening in the
Bronx in 2022. Previously, Mr. Rowe was CEO of Public Prep, a
nonprofit network of public charter schools. He served as the
Deputy Director of Post-Secondary Success at the Bill & Melinda
Gates Foundation, and in a senior role as an MTB and at the
White House USA Freedom Board. Mr. Rowe has an MBA from Harvard
Business School, and a B.S. in Computer Science Engineering.
Professor Brown, let's begin with your testimony, and then
we will continue in the order each of you was introduced.
Professor Brown, the floor is yours.
STATEMENT OF DOROTHY A. BROWN, ASA GRIGGS CANDLER PROFESSOR OF
LAW, EMORY UNIVERSITY SCHOOL OF LAW, ATLANTA, GA
Professor Brown. Thank you for inviting me to share these
views on the role that our tax system plays in perpetuating the
racial wealth gap.
In my testimony today, which draws upon research in my
book, ``The Whiteness of Wealth: How The Tax System
Impoverishes Black Americans--And How We Can Fix It,'' I will
discuss three ways that tax policies are increasing the racial
wealth gap.
The one thing that I would like you to remember is that the
racial wealth gap will not be eliminated without a fundamental
change in our tax laws.
First, marriage. Roughly 9 in 10 married couples have their
taxes changed because of marriage. Half get a tax cut, 40
percent pay higher taxes. My research shows that the half most
likely to pay lower taxes are disproportionately White, while
the 40 percent most likely to pay higher taxes are
disproportionately Black. It is largely a function of the joint
return combined with spousal contribution to household income.
A study of Black and White families over 25 years showed
that a marriage significantly increased the wealth holdings for
White families, but had no statistically significant impact on
African Americans. I believe the marriage penalty
disproportionately paid by Black married couples was part of
the reason why.
While the 2017 Tax Act temporarily eliminated the marriage
penalty for many married couples, it left intact the
significant marriage penalties found in the Earned Income Tax
Credit. Along with high-income households, Black Americans are
still more likely than their white peers to pay higher taxes.
My proposed solution is a repeal of the joint return. It
would immediately eliminate the marriage penalty and singles
penalty currently being paid by hard-working Black taxpayers
who would have more money available to save toward building
wealth.
Second, student debt. Black students leave college with
more student debt than their White peers. Over time, Black debt
grows, while White debt decreases. And the Black/White student
debt gap is present across income levels. Not even wealthy
Black taxpayers can protect their children from higher student
loan debt the way their White peers can. Tax policy does not
help. The deduction for interest on student loan debt is
limited to $2,500 per return, and subject to income limits. By
my calculations, the gap in debt means that there are years
where Black Americans are unable to deduct all of their
interest. White Americans with lower debt loads are more likely
to be eligible to deduct all of their interest.
Researchers have placed student debt at roughly 10 percent
of the racial wealth gap when a college graduate is 25 years
old. But by age 30 to 35, it explains about 25 percent of the
gap. I have two solutions:
Increase Pell Grants, and student debt forgiveness. Pell
Grants cover only 29 percent of the average cost of tuition
fees at public four-year colleges. Increasing the amount of
Pell Grants should enable future generations of Black college
students to graduate with significantly less debt. I support
targeted debt forgiveness of 100 percent of student loan debt
for households with below-median wealth. Congress must also
ensure that any debt forgiveness is tax free.
The median household wealth of a White high school dropout
is greater than the median wealth of a Black college graduate.
Part of the explanation lies in a family's financial transfers,
which is my third example.
Research shows that gifts and inheritances explain about 5
percent of the racial wealth gap. White Americans are five
times more likely to inherit than Black Americans. And for each
dollar inherited, White families were able to use 91 percent to
increase their wealth, compared with only 20 percent used to
increase Black wealth.
When it comes to gifts, Black college graduates are more
likely to send money to their parents, while White college
grads were more likely to receive money from their parents.
Once again, tax policy makes it worse. Gifts and inheritances
are received tax free, while transfers by Black Americans that
help support family members are not tax deductible.
While there is no single tax policy change that could
eliminate the racial wealth gap, I propose a wealth tax credit
for all taxpayers in households with below-median wealth.
I appreciate the opportunity to testify before the
committee today, and look forward to your questions.
[The prepared statement of Professor Brown appears in the
Submissions for the Record on page 37.]
Chairman Beyer. Thank you, Professor Brown, very much. And
you will provoke many questions, I am sure, with that. Let's
move on now to Professor Hamilton. We have enjoyed our
wonderful conversations with you early last year and the floor
is yours.
STATEMENT OF PROFESSOR DARRICK HAMILTON, Ph.D., HENRY COHEN
PROFESSOR OF ECONOMICS AND URBAN POLICY, FOUNDING DIRECTOR OF
THE INSTITUTE ON RACE AND POLITICAL ECONOMY, THE NEW SCHOOL,
NEW YORK, NY
Dr. Hamilton. Good morning, Chairman Beyer, and good
morning Ranking Member Lee and other esteemed members of the
committee.
Our enormous and persistent racial wealth gap is an
implicit measure of our racist past, a past rooted in a history
in which White Americans have been privileged by government,
political, and economic interventions, as well as entitlements
that have afforded them access to resources, and the
interactive and intergenerational accumulation that comes with
those resources.
This is in contrast to a history for Black and Indigenous
Americans where their personhood, and whatever capital they may
have been able to establish, has always been vulnerable to the
exploitation and extrapolation by state-complicit confiscation,
disruption, fraud, theft, terror, and other acts of violence.
As a result, Blacks as a group have very little ownership
in America's land or means of production, and remain in fear of
violent incarceration and state-facilitated exploitation.
Still, much of the framing around the racial wealth gap focuses
on the poor choices and financial decisions on largely Black,
Latinx, and poor borrowers. That framing is wrong. The
directional emphasis is wrong. It is more likely than meager
economic circumstance, not poor decisionmaking or deficient
knowledge, that that constrained choice itself and leads poor
borrowers with little to no financial options, but to attain
and use predatory financial services. These last-resort death
traps render the recipients of them, these predatory products,
modern-day indentured borrowers.
What's more, high-achieving Black Americans, as measured by
education, still exhibit large economic and health disparities
relative to their White peers. What we do is we overstate the
functional role of education, to the detriment of understanding
the functional roles of both wealth and power in the first
place.
Racial inequality and despair are not inevitable. This is
good news. Rather, they are the results of political choices,
and likewise we can make different political choices to change
them. To achieve racial justice, we need an honest and sobering
confession about historical sins for slavery, appointed
American history in which Blacks were literally capital assets
for White land-owning plantation class, and for sharecropping,
White-capping, Jim Crow, and the exclusion of Blacks from New
Deal and Post-War policies by both design and implementation.
Those policies built an asset-based White middle class.
Reparations provide a retrospective direct and parsimonious
approach to redress the Black/White wealth gap. Moreover, it
would require the U.S. to take public responsibility and atone
for that long history of racial injustice. As a complement,
baby bonds are a seed capital prospective approach, a program
that in perpetuity would establish an economic birthright to
capital for everyone. The account from these baby bonds would
be held in public trust, similar to Social Security, and be
used as a capital foundation when every child reaches adulthood
to access an appreciating asset like a home, like a new
business, all those attributes that generational wealth affords
Americans.
The extent of our dramatic and unjust racial disparity is
at least as much a problem of politics as it is a problem of
economics. Public provisions of baby trusts, or baby bonds,
would go a long way toward eliminating the transmission of
economic advantage or disadvantage across generations, and
establish a more moral and decent economy that facilitates
assets, economic security, and social mobility for all its
citizens, regardless of the race and family economic position
in which an individual is born.
And in my last minute, I just want to bring up the word
``opportunity.'' I fear that that word has become a political
ruse; that it has become a distraction; that it has become a
mechanism by which we can put the onus of the structural
barriers right back on the individual, while absolving the
state of responsibility as it related to creating some of these
structural inequities.
Like I said, the good news is that we can redress this
past. We can do things by lessons from the past, where we
pursue anti-racist, anti-sexist, economic rights so that every
American has the necessary ingredient so that they can truly
have authentic agency and achieve their self-determined goals
based on a good concept of economic freedom. Thank you.
[The prepared statement of Dr. Hamilton appears in the
Submissions for the Record on page 45.]
Chairman Beyer. Professor Hamilton, thank you very much.
And now we will hear from Professor Mehrsa Baradaran, from the
University of California, Irvine.
Professor.
STATEMENT OF PROFESSOR MEHRSA BARADARAN, PROFESSOR OF LAW,
UNIVERSITY OF CALIFORNIA, IRVINE SCHOOL OF LAW, IRVINE, CA
Professor Baradaran. Thank you, Chairman Beyer, and Ranking
Member Lee, for the opportunity to testify today.
When the Emancipation Proclamation was signed in 1863, the
Black community owned less than one percent of the U.S.'s total
wealth. More than 150 years later, that number has barely
budged. The gap between average White wealth and Black wealth
has increased over the last decade. Today, across every
socioeconomic level, Black families have a fraction of the
wealth of White families.
Without targeted policies to close this wealth chasm, it
will continue to grow. The racial wealth gap was created,
maintained, and perpetuated through public policies. Federal,
state, and local laws and policies enforced segregation and
created a race-based bifurcated economy. Black men and women
have been shut out of most avenues of middle-class wealth
creation. Black homes, farms, and savings were not given the
full protection of law.
Even as these properties were subject to racial terrorism
in employment, education, housing, farm loans, even patent
rights, racist policies and practices have either shut Black
communities out of the market entirely, or offered them
separate but subpar services.
The American middle class was created principally through a
government-supported credit infrastructure that did not cross
the red lines that policymakers drew around Black
neighborhoods. Those very same redlined communities were
targeted, then, with the most toxic loans during the subprime
crisis. This time without the Federal guarantees.
Those communities had yet to recover from that blow when
they were hit yet again with the devastation of the COVID
crisis and the unequal distribution of the PPP loans. This is a
system that can accurately be described as Jim Crow credit,
separate and unequal. Many of these discriminatory policies of
de jure exclusion have faithfully been abandoned, and some have
faced--others have faced scrutiny. Yet, the racial wealth gap
remains because the damaging effect of these policies have not
been directly remedied and counteracted.
The wealth gap that those redlines put into motion
continue, and will continue unless it is disrupted by the same
policymakers--namely, Congress and the regulators it oversees.
In order to achieve true racial justice, we must reckon with
the fruits of our Nation's history.
In fact, I believe it is the myths that we tell about our
history and economy that present the biggest hurdles to
achieving economic justice--myths that blame those who were the
targets of the discrimination for disparities that they did not
create, and myths that offer personal responsibilities instead
of justice.
In my own work, I have tried to debunk two of these myths
in particular. One, the myth of self-help finance as an avenue
to wealth creation. I call this ``The George Bailey Myth.''
And, two, the myth of personal decisionmaking, the
bootstrap myth. There are no amounts of individual spending
decisions and savings decisions, no amount of lattes, avocado
toast, or sneakers, and no amount of hours worked can
counteract the forceful headwinds of historic inequalities.
People do work hard, and people do make hard financial
decisions. And yet they still face the legacies of racist
policies and segregated schools, neighborhoods, and access to
mobility. No matter what the family structure, the wealth gap
exists. Black and White families who do everything, quote,
``the right way,'' get married, get an education, buy a home,
start a business, save their money, and still the racial wealth
gap persists.
In fact, the gap is highest at the very top of the income
and education ladder. And just to be clear, investing, working
hard, getting an education, starting a business, are all great
things to do. My point is not that these things are not worth
doing; it is that they have been done for centuries, from
investing hard-earned wages into the Freedman's Bank, to
marching for jobs, to taking out a mortgage, to prudent
financial decisions, were often taken amidst the history of
exclusion, exploitation, violence, and virulent racism.
Black institutions have been creative and innovative in
serving those communities in hostile climates. There is a long
history of entrepreneurship, self-help, and mutual uplift.
HBCUs have provided a stellar education. Black banks have lent
to Black businesses, churches, and families. They have offered
credit where the FHA refused to guarantee loans, and Black
families have invested in these homes at great personal cost,
as these homes had differences in value.
The racial gap in home values is just one example of the
tangible effects of the history of exclusion. The racial wealth
gap is what past injustice breeds present suffering.
In order to move forward, we need public policy to destruct
these patterns of sustained disparities to wealth. The racial
wealth gap was created by exclusionary policies coordinated
across the government. It was created systematically to tax,
banking, and housing laws, and private markets sustained by
Federal subsidies.
This is exactly the level of holistic coordination across
government agencies that is necessary to close the gap. As
President Biden said, we need to make the issue of racial
equity not just an issue of any one department of government;
it has to be the business of the whole government.
In my written testimony elsewhere I have suggested several
steps, and I am running out time here. But I will say that
policies must provide a meaningful path toward capital
creation, access to low-cost credit, financial inclusion, tax
justice, and homeownership grants. In other words, the same
programs provided to White families over the last century.
And I will conclude, again, with the words of President
Biden: It is time to act now, not only because it is the right
thing to do, but because if we do we will all be better off for
it. Thank you.
[The prepared statement of Professor Baradaran appears in
the Submissions for the Record on page 49.]
Chairman Beyer. Thank you, Professor. And we have
circulated all of your written testimony to all the members of
the committee, too, which I am sure we have all diligently
read.
Now let me move on to our final witness, Mr. Ian Rowe. Mr.
Rowe, the floor is yours.
STATEMENT OF MR. IAN ROWE, FOUNDER AND CEO, VERTEX PARTNERSHIP
ACADEMIES; SENIOR VISITING FELLOW, WOODSON CENTER; RESIDENT
FELLOW, AMERICAN ENTERPRISE INSTITUTE, NEW YORK, NY
Mr. Rowe. Chairman Beyer, Vice Chair Lee, and Distinguished
Members of the Joint Economic Committee, good morning.
I am a proud product of the New York City Public School
System, kindergarten through 12th grade, and a graduate of
Brooklyn Tech High School, Cornell University College of
Engineering, and Harvard Business School.
I am a Founder of Vertex Partnership Academies, a new
network of international high schools that we are opening in
the Bronx next year. And for the last 10 years, I led a
nonprofit network of public charter elementary and middle
school in the heart of the South Bronx and Lower East Side of
Manhattan, educating more than 2,000 students, with nearly
5,000 on the wait list, primarily low-income Black and Hispanic
kids.
Our parents knew their children would likely face
discrimination in their lives, but they chose our schools
because they wanted their children to develop the skills and
habits to become agents of their own uplift and build a better
life, even in the face of structural barriers.
In District Eight, where our schools are, only 2 percent of
the nearly 2,000 public school students beginning high school
in the South Bronx in 2015 graduated ready for college four
years later. By contrast, at our all-boys school in the South
Bronx in 2018-19, nearly 70 percent of our students passed the
state math exam.
As we as a country have crucial conversations about racism,
it is easy to forget that the racial disparities we are seeking
to close now originate early in life, long before they show up
as statistical gaps in financial wealth, or homeownership, or
educational achievement.
According to the Federal Reserve's 2019 Survey of Consumer
Finances, the wealth gap between Black and White Americans was
$164,000. As a result, today's public discourse is dominated by
the disempowering narrative that unless institutional barriers
are removed, Black Americans will remain trapped in a perpetual
cycle of economic victimhood.
``The New York Times'' reporter Nicole Hanna Jones argues
that, quote, ``None of the actions we told that Black people
must take if they want to lift themselves out of poverty and
gain financial stability: not marrying, not getting educated,
not saving more, not owning a home, can mitigate 400 years of
racialized thundering.'' End quote.
Imagine you are a 12-year-old Black boy living in the South
Bronx with aspirations of working hard to achieve the American
Dream, yet you are repeatedly told there is nothing you can do
individually to achieve that goal because you are Black.
Not only does this message of hopelessness depress human
motivation, it also ignores the tremendous public investment
that has been made to fight poverty. U.S. spending on poor
children has increased 17-fold since the 1960s. Federal
spending on means-tested programs are now more than $300
billion per year.
Consumption-based measures for the U.S. child poverty rate
are at less than 5 percent today, yet the racial wealth gap
does persist for certain communities. But what is interesting
is that the same 2019 Survey of Consumer Finances shows that
when family structure and education are considered, on an
absolute basis the median net worth of Black married two-parent
college-educated households is nearly $220,000. And more than
three times that of the typical White single-parent household,
which is $60,000. That $160,000 gap is almost equal to the
racial wealth gap we often discuss, but in reverse.
As we consider strategies to create an opportunity society
and upward mobility for people of all races, I submit to you
the two-pronged philosophy we practice in our schools: start
early with the end in mind, and study the success of those who
have achieved excellence, not just equity. It we know there are
factors beyond race, such as education and family stability
that can make a difference in generating wealth, we should
promote empowering policies like school choice, and launching
national campaigns to encourage young people of all races to
adopt a new cultural norm--encouraging education, work, and
responsible parenthood in order, instead of the defeatist
messages.
I look forward to your questions, and thank you for this
opportunity.
[The prepared statement of Mr. Rowe appears in the
Submissions for the Record on page 64.]
Chairman Beyer. Mr. Rowe, thank you very much.
We will now turn to questions for our various participants.
And as chair I get to begin. So I will start with five minutes,
and then we will be followed by Senator Lee.
Professor Brown, if I can begin, you explain that for every
dollar inherited White families were able to use 91 percent of
their wealth of that inheritance to increase their wealth, but
Black families with only 20 percent. Why is that difference?
What are Black families doing with that other 71 percent?
Professor Brown. They are often helping to support family
members who were born during Jim Crow and did not have
opportunities that others did. So Black families are more
likely to have extended family members--Black Americans are
more likely to have extended family members who need financial
support because the government had programs that systematically
excluded them.
In addition, Black Americans are paying higher taxes.
Chairman Beyer. I was also surprised that inheritance
explains so little of the wealth gap, only 5 percent. Yet my
impression was that, you know, the White families were getting
a lot more from, especially Baby Boomers like me, from parents
than Black families were.
Professor Brown. So part of that is, most Americans do not
get inheritances. So there is a smaller slice of Americans that
get inheritances, and that smaller slice though
disproportionately benefits White Americans. So part of why it
is only 5 percent is that many Americans do not get any
inheritance.
Chairman Beyer. Thank you. Professor Hamilton, I know you
are a huge champion of baby bonds, which Senator Booker and Ms.
Presley, and even Chairman Neil are all working on.
One of the arguments I have heard for baby bonds is that it
has a universality to it; that it is not specifically for Black
families, but that anyone who is significantly below the wealth
line would qualify.
Do you see this as being helpful, especially in
anticipating potential White backlash to programs that are
focused on Black families?
Dr. Hamilton. You know, wealth inequality is not a problem
unique to Black households. It is amplified by the fact that we
had that long history. So making it universal I think is akin
to our most successful public--arguably, our most successful
public policy, which is Social Security.
We have something for people when they age into the elder
part of their life, but nothing for young adults at a key point
where they are building a lifetime of economic security.
What makes it anti-racist, even though it is universal, it
is still anti-racist. The reason why it is anti-racist is
because the domain for inclusion, as well as the outcome that
is intended from the policy, is very tied to wealth, which a
distribution in America for the most disparate. So, you know,
just going back real quick to the inheritance question that you
asked, Dorothy--I say that--inheritance bequests account for
more of the racial wealth gap than education, than household
structure, or any other characteristic. But what's more, race
is more determinate of one's wealth position than class itself.
And baby bonds would redress that.
Chairman Beyer. Thank you, Professor, very much. And,
Professor Baradaran, you focused a lot on the millions of Black
or Brown Americans who are underbanked, or have no banking at
all. Can you explain how this leads them to be in a
disadvantaged position in every other way?
Professor Baradaran. Yes. The banking system, you know,
besides access to credit, it is also a public system whereby
you can engage in financial transactions. So the merger wave of
the last several decades has made it such that many
communities, especially LMI communities in the rural West, in
the South, and just LMI communities in general, have lost bank
branches, which means that they have to pay extra through
payday lenders and check cashers. So it is the fee that is
collected upon people who are at the bottom of the income and
wealth scale. And it is a tax, really, that the wealthy do not
pay.
On top of that, there are the fees that the banks charge,
themselves, on overdrafts, and that subsidize the higher
accounts of the customers. And so there really is an unequal
banking system, and really the banking system itself is
supported by vast public infrastructure. And so having these
unbanked, I do not think is just an economic problem, it is a
problem of democracy. If we are going to support the banking
system, we should make sure that it provides people access for
all.
Chairman Beyer. Thank you very much, Professor. My time is
about up. I would like to recognize Senator Lee, but I fear
that he is voting. Senator Lee, are you with us?
[No response.]
And if not, I believe Congressman Schweikert is next--
David, if you are here, I would love to recognize you.
[No response.]
And failing that--oh, David, there you are. Our Ranking
Republican Member on the House side.
Representative Schweikert. Thank you, Mr. Chairman. Can you
skip me for a moment? I am having to deal with one other group
that needed an answer on something. You know the chaos we live
in, because I do have some questions for the panel.
Chairman Beyer. I do. Not a problem. Is Mr. Arrington with
us?
[No response.]
Jodey, I know you are around.
[No response.]
Let me move on----
Representative Arrington. I am here.
Chairman Beyer. Oh, Jodey, you are here. So, Congressman
Arrington from Texas, due to various missing Senators you are
up.
Representative Arrington. Wow, that was quick. I was not
prepared, but I enjoyed hearing everybody's testimony. I want
to thank the witnesses. And, Chairman, thank you for holding
this important discussion. And it is important. I do not have
to be Black to be concerned about the disparity, the gap in
wealth for my fellow Americans who happen to be Black, or of
any color. I want Americans to succeed. And I think this is the
prevailing view of Americans, by the way, is we want everybody
to realize their greatest God-given potential, and feel like
they can pursue their dreams, and realize as much success as
the next person by putting in the hard work, et cetera, et
cetera.
But the reality is there is a gap. And I acknowledge that.
What I am trying to discern is how much of that is based on
systemic policies, laws, systemic societal sort of public
policy issues, versus the, you know, other factors, systemic
factors in the Black community.
And I have read the data, like everybody else, about
children born out of wedlock, and the marriage rates that were
the same as Whites, and Hispanics, in the 1960s, now
significantly lower. I have read about the higher,
disproportionately higher crime rates among Black Americans.
And so, you know, for me, my first question is what can--I
think all too often, folks, we think that the Federal
Government is going to solve all this. You know, just because
we pass laws that said it is illegal to discriminate does not
mean that we were able to change the hearts of people.
And so there were lingering effects in our society. And, by
the way, racism, discrimination, segregation, deplorable!
Intolerable! And by the way, illegal.
So what, Mr. Rowe--let me just ask you--what do you, if you
were going to sort of gauge the factors of law and policy
versus systemic issues, familial issues, norms in the Black
community, where would that fall? Is it 50-50? Is it half, the
laws need to be changed, and then half the Black community
norms that need to change at the grassroots in terms of family,
community, institutions?
So I will stop there, because that is a long-winded
question. I hope that made sense.
Mr. Rowe. Well thank you for the question. Let me just
first say that in 2019, only one-third of all 8th grade
students in our country scored proficient on the National
Assessment of Progress in Reading, often referred to as the
Nation's report card.
And since it was first administered in 1992, less than half
of the Nation's White students in 4th, 8th, and 12th grades
scored proficient in reading. I mean, consider that. There has
never been a majority of White kids reading at grade level.
So the sad irony, if you look at education as one example
of the gap, the sad irony is that closing the Black-White
achievement gap in terms of academic outcomes in reading would
simply mean that Black kids are going from sub-mediocrity to
full mediocrity. So this obsession with the gaps ignores the
fact that a lot of kids of all races are not doing well. And
that is the foundation.
And so we have to be careful, because it is not because of
systemic racism that the majority of White kids in our country
for generations have not been able to read at grade level.
There must be other factors, both policywise and norm-wise. I
mean, in terms of family structure, it certainly is true that
non-marital birth rates are a factor.
My research focuses on non-marital groups to women aged 24
and under. In 2019, for the 10th consecutive year, at least 70
percent of births to all women in that age group were outside
of marriage, according to the CDC. By race, the non-marital
group rate for Black women 24 and under was 9.1 percent. It was
61 percent for White women aged 24 and under. This is an equal
opportunity tsunami.
In addition, nearly 40 percent of unmarried women aged 24
and under who gave birth in 2019 were already mothers, giving
birth to at least their second child.
Given these multiple births, unmarried women aged 24 and
under who gave birth in 2019 alone were raising an estimated
850,000 to 1 million children, according to CDC. And, look,
there is no guarantee that being a single mom means that you
are doomed to failure, nor does it mean that being a child of
married two-parent households is a guarantee for success. But
the data is overwhelming.
This pattern of out-of-wedlock childbearing is often
established at a young age. Almost two-thirds in 2019, 6
percent of first out-of-wedlock births were to women 24 and
under. Like kids of teen mothers, these children are at much
greater risk of experiencing child poverty, poor education,
lack of upward mobility, traumatic stress, and many other
adverse childhood experiences that impede their ability to
generate wealth later in life.
We just have to be honest about these conversations. If we
want to reduce such risks and mitigate the economic distress
that usually ensues for both parent and child of all races--
this is not just a Black problem--we must educate adolescents
about the likely outcomes associated with different behaviors,
and encourage them to think critically about the steps and
timing of family formation.
Representative Arrington. Well said. Thank you so much,
Chairman, for your indulgence, and again to the witnesses.
Thank you guys, and God Bless.
Chairman Beyer. Thank you very much. Thanks, Mr. Arrington.
I now will yield five minutes to the Chairman of the
Congressional Black Caucus, a wonderful member of this
committee, Ms. Beatty.
Representative Beatty. Thank you so much, Chairman Beyer,
for not only hosting this committee, but bringing in witnesses
that have been able to speak to this issue. Whether I agree 100
percent or not, it has certainly been educational.
When I think about the words I have heard, better life,
race versus class, disparities, education, choice, gifts of
inheritance versus not. A lot of data. A lot of information.
But we are still, in my opinion, hitting the headwinds of
systemic racism. We are still looking at the data that tells
us, when we look at examining the wealth gap in the United
States, no matter what factors you believe in--I can give you a
story of both sides. I can tell you about the teen mother that
birthed her first or second child before she was 18, that now
sits on a powerful corporate board. And I can tell you about
another one like that same female that is still living in
poverty.
But, conversely, I can tell you about the well-educated
child with advanced degrees that was denied because of
redlining buying a home, that was not able to get her car
financed in a rate that many of us would see. So these stories
go both ways, because racism is racist. This is extremely
important to me today because, as you know, I chair the
Subcommittee on Diversity and Inclusion. And next week we will
be holding a hearing I think at the end of the month in the
House Financial Subcommittee, Mr. Chairman. And it is holding a
hearing that talks about the legacy of George Floyd and the
examination of financial services industries comments to
economic racial justice.
And you cannot talk about economic racial injustices
without talking about the wealth gap, without looking at much
of what, thank goodness, you have brought before us today.
So I have a question to the panelists. If I go into this
hearing next week talking about the injustices, of the
injustices that we are facing in the Nation, the injustices
because of this pandemic that none of us had ever lived through
with COVID-19. We know it is health care. We know it is the
economy. And we know it is social injustices.
What do you think that I should focus on to get the
attention of the Nation as we talk about the wealth gap, the
economy in relationship to social justice? And I am going to
start with you, my good friend, Darrick Hamilton. I had to get
that in, Mr. Chairman, because he has spent a lot of time in
Ohio, and we had an opportunity to spend a lot of time
together. So the first question goes to you, Darrick. And we
will follow up with Professor Baradaran.
Dr. Hamilton. Good friend, indeed. Thank you,
Representative Beatty. I am going to jump right into it and say
I would focus on history. I would focus on the fact that the
Federal Government created this problem, and we need an honest
conversation to recognize that.
And likewise the Federal Government can redress this
problem. So that is the good news. This is not all dismal. We
can do something about it.
I would also like to point out that a lot of this
conversation--you know, Representative Arrington made the point
that in 1950 marriage was similar across race. But certainly we
would argue that racial disparity and racism existed in 1950.
If we fast-forward, the reason we got this marriage gap is we
incarcerate Black people en masse. And also, if we think about
the causality, family structure is as much, if not more,
affected by family resources than vice versa. And that is the
point of this whole conversation.
The agency did resources forward, and it is linked to
history that has limited Black people the resources so that
they can intervene into getting a good education. You know, I
will say that umbrellas do not make it rain. We observe people
with umbrellas when it is raining, so similarly we observe
people that are Black with high educations have a better
outcome. But if we compare across race, we know that the same
college degree for a Black person does not afford the same
income, the same health status, the same wealth status as it
does a White person.
In fact, disparities across race rise with education, not
decrease with education. So we need to really understand the
functional roles of power, wealth, and resources as really
giving people agency so that they can have economic freedom
regardless of race.
Representative Beatty. Thank you so much. And thank you for
that overstatement of the function of education, because I
agree with that.
Professor, any comments you would like to add?
Professor Baradaran. Just amen to what Darrick said. I
mean, the thing with the history and the data reveals, look at
it honestly and the data and the history is there exactly as
Darrick said. And the myths--and the causes have changed over
time.
So now we are talking about maybe family structure, but
before it was racial mapping. We really had some really
pernicious myths about biological differences, about Divine
right, about what Christianity deemed as master and slave. So
these myths have changed alongside.
So let's look at this history very honestly, and look at
this data, and look at the umbrella versus the rain.
Representative Beatty. Thank you so much, Mr. Chairman. I
know I am over my time, but if I could ask all of the witnesses
to give me a written statement on their opinion of the
direction we should be looking at at the Tulsa massacre, 100
years ago with the Black Wall Street that deals directly with
today's topic, I would be interested in any of their thoughts
on how we move forward. Thank you. And I yield back.
Chairman Beyer. Thank you, Congresswoman Beatty, very much.
I now recognize Congresswoman Jaime Herrera Beutler, from
Washington State, for your questions.
Representative Herrera Beutler. Thank you so much, Mr.
Chair. This has been a really interesting discussion for me.
You know, having grown up--I am actually--grown up on the West
Coast with an Hispanic father who came from total poverty, and
a Caucasian mother, I have seen pieces of this, but not all of
it. And I can tell you, when I look at my dad and how he grew
up, I mean there were 10 kids and there was not always running
water in the house. Like it was a very different situation.
And then I think about, when I look at my two sides, who
was able to leave money to the next generation of kids, on my
mom's side versus my dad's side, it is a difference. And when
you speak about wanting--you know, adults today needing to take
care of their parents, that is true across this country. We are
seeing that in a lot of areas, but it certainly makes sense
that if you are taking care of a generation that grew up in Jim
Crow, or grew up in a situation where the government really
just literally made certain things illegal, that those are
going to be burdens that this generation has to bear.
And so how do we fix some of those inequities that were put
into place and that we are still living with? One of the things
I wanted to ask Ms. Brown about was, you mentioned the paying--
sorry, I was writing notes in those little places--paying for
having to help elderly parents, I have a bill with
Congresswoman Katie Porter from California that would change
the Dependent Care Accounts to bring them up to inflation. So I
think about it often in terms of child care help, because that
is expensive for the middle and working class families--it is
expensive for everybody, but on either end there tends to be
some either help or ability to do it. But it is those middle
working class people who get really squeezed.
But this also would allow you to then pay for dependent
care for parents, for the generation ahead of you. And I did
not know if you had heard about it. I have looked at some of
those ideas, but that is another way to use the Tax Code to
empower families to meet their own needs without the government
saying this is how you have to use it. And I wanted to ask
that, because tax policies have been obviously in your
wheelhouse.
And the other thing I wanted to ask about--oh, go ahead.
Professor Brown. No, I had not heard about that. And to the
extent that Black Americans would be able to avail themselves
of that policy, that would be forward progress.
Representative Herrera Beutler. If there is a way that we
can make sure that that--I mean, I would love for you to look
at it and provide your feedback to me, because I would love to
hear that.
Professor Brown. And I would love to look at it.
Representative Herrera Beutler.And then, Mr. Rowe, you
spoke of starting early with the end in mind, and as part of a
philosophy for creating opportunities of upward mobility. And
we know that early education during key points of a child's
development are crucial for addressing gaps for low-income
families that are often contributing to the wider racial wealth
gap.
And I represent an area that also has a very poor rural
White population, so we see some of these gaps in early
education there as well. And according to recent analysis,
public school enrollment has dropped nationwide with the
sharpest decline evident in pre-K and in kindergarten.
A recent poll in 20 states showed an average of
kindergarten enrollment down--a drop of 60 percent. And I was
hoping maybe you could speak to how the pandemic might
exacerbate that gap for disadvantaged children who have been
forced out of the classroom. And how can we address some of
their learning loss and opportunity loss?
You know, I will say I am very frustrated with the State of
Seattle, Washington, only returned to in-person teaching within
like the last two weeks. And we know that some of the children
that they serve are some of the most--either they are some of
the poorest or the most disadvantaged, certainly where more of
the Brown and the Black families live. And now they are being
put up to a year behind.
I was just hoping you could help speak to how we change
that.
Mr. Rowe. That is a very good question. I mean one of the
things coming out of the pandemic is that many parents got a
much more direct view of what was happening in their kids'
education, and they are not happy. And so this idea of school
choice I think is going to be much more in demand for families
who want a high-quality education for their kids.
In our schools, again in the South Bronx, we are educating
more than 2,000, but we had nearly 5,000 families on the wait
list. Those families do not have time to wait for some rezoning
to occur. They do not have time to wait for suddenly White
people to show up and suddenly that is going to make their
schools better.
These are segregated schools, but that does not diminish
our expectation of excellence. The thing that parents want now
is a high-quality educational option for their kids today. And
so they can see--like, for example, in our schools we started
with pre-K. In fact, we started with a program where we
partnered with the parent-child home program. So the 18-month-
old younger siblings of our current scholars had 2 years of
home visits by an early learning specialist who would go to the
home of the parent and the toddler two times per week, 30
minutes per visit, a book every week. The early learning
specialist sits with the parent to build their capacity to be
the at-home reading coach for two years. So by the time that
toddler enters pre-K, their level of social/emotional
readiness, their vocabulary acquisition, is so much higher.
That is the kind of policy we need.
And the other reason for starting early with the end in
mind, part of the reason we also talked about family structure,
we need kids born into family situations that are much more
likely to be stable so they get nurturing experience and access
to high-quality education early.
Representative Herrera Beutler. Thank you, Mr. Chairman,
and thank you for that. I yield back.
Chairman Beyer. Thank you very much. We next recognize Mr.
Pocan from the State of Wisconsin.
[Pause.]
Mark, we cannot hear you yet.
[Pause.]
While you are fooling with that, let's move on to Mr.
Peters from San Diego. And then, Mark, we will come back to
you. Hopefully we will figure out the audio.
Congressman Peters.
Representative Peters. Thank you, Mr. Chairman. I have to
laugh because the last time you had someone from Duke, this
time from NYU Law School, it's like you are working off my
resume. So I appreciate that.
I have a question for the very well-educated Professor
Baradaran about the PPP loans. We had a story on our NPR
affiliate in San Diego, KPBS, that detailed the racial gaps of
recipients of the Paycheck Protection Program. Many of my
colleagues have similar stories in their districts regarding
COVID relief funding.
Minority business owners have often struggled to get relief
because they did not have existing banking relationships. So in
response, in a subsequent round Congress set up a minority set-
aside for those businesses so they could get access to loans
without fear of the tap being shut off before they could get a
loan.
Currently the PPP is out of funds, but there is still
funding left for community development and financial
institutions that serve low-wealth areas.
I wonder if you could touch on the success of these set-
asides for under-served businesses. And if you think there are
other things Congress should be doing to improve the racial
disparities in this type of Federal aid.
Professor Baradaran. Thank you for the question. It is
always nice to see another NYU alum. You know, I think the
spirit in which these set-asides were done is exactly the kind
of thing that we need to recognize.
Recognizing that a program that allows banks to choose the
recipients of these subsidies, and among their existing
customers, is always going to have an outcome that is both
disparate impacts race-wise, and also is going to exclude
people who are unbanked, under-banked, or at the lower income.
And so I think if we want to get the thing that we want,
which is, you know, Black and Brown businesses and communities
to get those loans, then we have to be very thoughtful about
it, and target those communities specifically.
So I do think the way that the Fed and Congress have
adjusted has been exactly the right kind of responses. And I
would hope to see a lot more of that. I think it has been
great.
Representative Peters. Okay, I want to follow up with a
housing question, too, for you also. In San Diego, we look
back, has a history of redlining and exclusionary zoning, like
a lot of communities where Black and Brown residents were shut
out from certain areas because the Federal Government would not
back home loans there. And if you look at a map of the redlined
neighborhoods and see the ultimate 30s, it is not surprising
that you see the same socioeconomic status of those
neighborhoods reflected today.
Can you tell me what you think of the importance of
homeownership as a way to create generational wealth in the
African-American or in the Latino-American communities? And
what do you think our policy response should be today, given
where the country is?
Professor Baradaran. Yes, and I think that is exactly the
right question. I think homeownership is at least one of
several pillars of wealth building. It is still the number one
asset for most middle class families, and it is a number one
cause, or at least one of the top three causes, of the racial
wealth gap today.
These redline maps, as you say, you can go on a website
mapping inequality and you can see exactly--I have looked at
the San Diego map, because I live right up the street, and you
can see where the White flight occurred. You can look at those
redlined areas. You can put the Census tract on them today
across the country, and you have those communities remaining
intact. And that is where the low-funded schools, the schools
that do not get the tax money, the neighborhoods that do not
retain their home values, and the places that have issues with
all sorts of environmental hazards are in those formerly
redlined areas. And it is a result of the lack of access to
political--the political enterprise. It is lower wealth that
self-perpetuates. And so I think those red lines are a great
place to start.
Homeownership is not the only thing. I think there are
student--as Professor Hamilton and Professor Brown have talked
about, taxation; student lending; baby bonds. All sorts of
holistic responses that I do think homeownership is at least a
key pillar.
Representative Peters. Do you have an idea, though, of what
policy responses we might take to encourage more homeownership
among those underserved communities?
Professor Baradaran. Well, I am glad you asked. I did write
up a 21st century Homestead Act, which looks at green
financing. It looks exactly at those redlined communities, and
puts in money exactly where it is needed. It is called A
Homestead Act for the 21st Century, and it is online for free.
Representative Peters. Alright, great. I appreciate it,
Professor. And, Mr. Chairman, I yield back.
Chairman Beyer. Thank you, Mr. Peters, very much. And I now
recognize Mr. David Schweikert from Arizona.
Representative Schweikert. And I apologize to you, Mr.
Chairman. The nature of our lives when we are juggling a
handful of things at once.
Mr. Chairman, without any objection, I would like to
actually submit a number of my charts, because this format is a
little hard holding up charts in front of a camera.
So, with no objection.
[The Charts referred appears in the Submissions for the
Record on page 82.]
Representative Schweikert. Thank you, Mr. Chairman.
Chairman Beyer. Without objection.
Representative Schweikert. I would like to run through,
because oddly enough I am actually fairly familiar with
Professor Brown, from her writing. I wanted to touch on a
couple of things and make sure I have my head around it.
In 2017, we eliminated much of the marriage penalty.
Professor Brown--and I know it is such a short window--but did
you see anything in your data, or is there a reference point
out there in 2018, 2019 that the changes in the marriage
penalty were actually helping?
Professor Brown. So actually what I said in my testimony
was, while the marriage penalty for many couples was
temporarily eliminated with the 2017 Act, it still remains in
the Earned Income Tax Credit community, as well as high-income
households. And in high-income households, Black Americans are
still more likely to pay a penalty than their White peers.
Representative Schweikert. But that was--as you have seen
the charts--but that is actually sort of a thin, very much more
wealthy stratus. What I have been hunting for is trying to see,
before the pandemic, because as some of the charts I just
submitted show, it was really our first time that wealth
inequality was really, really fairly steeply changing in 2018
and 2019, which is a personal fixation of mine.
But I have also seen African-American, Hispanic families,
their percentage in poverty in 2018-2019. Now I think a lot of
that was finally a more egalitarian value of labor. You have
also written about, and we probably should take a real serious
look at the ability to itemize deductions, because that
actually does skew for----
Professor Brown. Higher income.
Representative Schweikert [continuing]. Yes. Are you still
of that mindset?
Professor Brown. Oh, absolutely. And right now we have only
1 in 10 Americans who are itemizing deductions. Why do we need
to keep it?
Representative Schweikert. Alright, you will be happy to
know there is someone even on my side who reads much of your
stuff.
Professor Brown. And I am very happy. Thank you.
Representative Schweikert. It is a fascinating subject, and
I am hoping, Chairman Beyer, in the coming weeks we can
actually have a discussion of how much of the spending in the
United States is actually subsidizing the very, very, very
rich.
We are actually working on a small project that
demonstrates that when we discuss change in capital gains taxes
and some of those things, we may create some distortion in the
economy that produces productivity, that therefore really hurts
working people's wages. But on the other hand, we spend a
trillion-plus dollars subsidizing the rich. So the subsidized
flood insurance for your multimillion dollar house on the
coast.
Mr. Rowe, or Dr. Rowe, I am fascinated because, being from
Arizona, you know, my ethnic breakdowns are a little bit
different. I represent a couple of Tribal communities. My
Hispanic population, which I think sometimes are the Census
definition of Hispanic, is a little bit more complex, has been
becoming very entrepreneurial.
With what you are doing with education, are you seeing a
model than I can bring that to my Native American communities,
to my Hispanic communities, or even those out in the Southwest.
What can we do to help sort of this class stratification that
we seem to be going back to?
Mr. Rowe. Well that is a good question. Again, I will start
with my own personal experience in the South Bronx. So right
now there are 5,000 families waiting on a wait list to get into
a great school. And if you had a great idea, if you had the
idea to launch a great school today, you could not do it
because there is a cap on the number of charter schools.
There are incredible people--incredible Black leaders, who
want to start amazing schools for kids, and they cannot. It is
crazy. School choice exists for middle and upper class families
across the country, but for some reason we want to restrict
choice for the very people who need it most.
And as one example of what choice can matter to the school
system that we are launching next year, Vertex Partnership
Academies, will be an international baccalaureate program that
both has a diploma pathway which is a pathway to college, and
the international baccalaureate careers pathway which will be a
pathway where you can have an industry credential with labor
market value upon graduation.
Both are of equal status, but it recognizes the fact that
we want to create options for kids no matter what they choose
to do. And the more that we build in these kind of
apprenticeship models, internship models, in the 11th and 12th
year of high school, that is what gives kids more choice and a
pathway to building wealth.
But we cannot get there if parents do not even have the
ability to choose the great schools for their kids.
Representative Schweikert. And there becomes our great
battle. Will our brothers and sisters be willing to take on the
teacher's unions.
So, Mr. Chairman, thank you for your patience with us.
Chairman Beyer. Thank you very much, Mr. Schweikert. I
now recognize Mr. Pocan.
Representative Pocan. Is this working?
Chairman Beyer. You are good. Go right ahead.
Representative Pocan. Sorry about that. We tested it in the
beginning, but something happened. Thank you, Mr. Chairman, and
thanks to all of our witnesses.
I am going to slightly change the order, because I was
watching the last questions, and I serve on the Education and
Labor Committee as well as the Appropriations for Education.
And my experience with charter schools, especially private
charter schools, is they have a dismal rate of success. Many
get money and never open.
I was watching Professor Hamilton's head nodding during
that. Would you like to make some comments about that? Because
I do not think taking money from public schools is in the best
interest of solving the racial wealth gap.
Dr. Hamilton. Thank you for that. And there is a certain
amount of irony that Mr. Rowe began his comments by touting his
credentials in being a public school graduate, and always going
to public schools.
He also pointed out the fact that he graduated from
Brooklyn Tech, which is the centralized high school in New York
City that, one might argue, has a talented and gifted
curriculum.
I think at issue is we need to have pervasive, talented and
gifted curriculum throughout the school system so that we are
not engaged in zero-sum battles about some schools offering it
and others not. So I think an investment in public schools, and
we can do this. You know, America--you know, I do not have to
tell you all--is a very powerful country with a great deal of
resources. We can get committed teachers throughout the public
school system that are empathetic to the experiences of
students, and make sure everybody has a talented and gifted
curriculum and not segregated within and across schools where
Black students do not have access to that curriculum but White
students do.
Representative Pocan. Thank you, Professor Hamilton.
Professor Rowe, I am giving you a thumbs up. So that is
good. That is the best. Public schools, I agree. Let me ask a
question about the Child Tax Credit. You know, we in the
American Rescue Plan have a Child Tax Credit in there, and
often we know that a lot of Black children have not been able
to receive the maximum Child Tax Credit because it was not
fully refundable, and people were unable to get the full
credit.
We made it fully refundable. I am looking at--Professor
Brown, you are nodding your head. This is apparently how I ask
questions if I see nodding.
Can you just talk a little bit about that? Is that
something we should make permanent? And would that help the
racial wealth gap?
Professor Brown. Yes. Absolutely. And I just want to say, I
was born and raised in the south Bronx, so Mr. Rowe is not the
only one. I just want to say that.
Okay, so absolutely it should be made permanent. But
because it was not fully refundable, there were a lot of Black
and Latinx children who should have been valued and were not
able to benefit from it.
Representative Pocan. Great. Thank you. And then also,
Professor Brown, because you brought this up in your opening
comments, I am a huge proponent of Pell Grants. Having been a
recipient, growing up in a lower middle class family. I do not
want to take the ladder up with me, but I think that Pell
Grants--right now, working with Bobby Scott on a very
significant bill in the next few weeks when it will be
released.
Can you talk a little more about the Pell Grants and fixing
some of the problem when it comes to higher education access,
as well as the treatment of student loan debt that currently
exacerbates the wealth gap. And if you wanted to talk a little
about interest rates, because I have got a bill to allow people
to refinance student loans.
Can you answer that group of questions?
Professor Brown. Yes. So Pell Grants, right now 70 percent
of Black college students receive Pell Grants, as opposed to
something like 30-something percent of White college students.
Pell Grants have not kept up with inflation.
When they were first proposed, Pell Grants paid for roughly
70-something percent of college. And right now it pays for 20-
something percent. So increasing Pell Grant significantly is
going to be important to Black college graduates in the future
graduating with significantly lower debt. Because right now,
college student debt is crippling the Black community not only
because Black students graduate with more debt, but there is a
significant percentage of Black students who start college who
never graduate, but they leave with high amounts of debt.
So anything to decrease the amount of college debt would be
a great thing going forward.
Representative Pocan. Great. Thank you. And I do not know
if I can give this justice--I know I can't in the 36 seconds--
but we have not talked about reparations. Sheila Jackson Lee
has a bill that I am going to try to have a commission to study
reparations.
Does anyone want to take a quick 26-second crack at it,
please? Professor Hamilton, I see you nodding.
Dr. Hamilton. I mean, at the end of day reparations is a
necessary ingredient if we are ever going to get beyond the
historical sin at our inception that has devalued Black lives.
America needs to take account, atone for it, and redress
it. I mean, also it will benefit poor people, writ large,
because it will ground inequality in what it is actually
grounded in, not deficit behavior, not deficit attitude, but
rather resources, and ensure that every American, Black or
White, is properly resourced so that they can truly benefit
from the activities of a market, or whatever agency they want
to offer to attain their self-determined goals.
Representative Pocan. Thank you. Mr. Chairman, thank you
for the indulgence. I yield back.
Chairman Beyer. Absolutely. Thank you, Congressman Pocan.
And now we get to hear from the former Secretary, or Treasurer
of Kansas who has had a lot of responsibility for resources,
Mr. Estes.
Representative Estes. Well, thank you, Mr. Chairman.
America remains a beacon of hope for millions around the
globe who live without freedom or opportunity. And while
hurdles certainly exist for many in our country, including
family instability, unaffordable housing, and as mentioned
earlier failing schools, the United States remains a leader in
economic opportunity and entrepreneurial drive.
Our country provides Americans an equal opportunity to
improve their economic situation through things like hard work,
self-discipline, education, and a committed family. This
success sequence goes beyond helping Americans with their
financial goals, but to truly achieve the American dream.
Yet, many Americans do face real hurdles, and I believe we
will find solutions for those. We need to understand why
housing is so expensive, and what is causing the epidemic of
family instability in our culture.
The National Association of Home Builders recently said
that building homes cost an average of $36,000 more than last
year, and a fourth of that price is due to regulations. This
includes higher lumber prices, wages, and a labor shortage.
If owning a home is a key to building wealth and passing it
down to children and grandchildren, which I believe it is, we
need to look at policies that help Americans save money on
homes, like less regulations and lower taxes.
Rather than punish Americans who have climbed up the
corporate economic ladder, we need to look for ways to help
open the doors of opportunities for all Americans.
One example of common-sense policy to help create economic
opportunity was a recent reform in my home State of Kansas that
will decrease occupational licensing requirements for military
families who move in to Kansas. It will cut down wait times
from 60 to only 15 days for military members and their
families, allowing military spouses to return to work sooner
after relocating.
This is an example of a simple reform that is focused on
expanding opportunity by cutting red tape, and ultimately
helping to increase the wealth of others.
I think it is important that we point out that in America
wealth is not a pie. If someone works hard and does well, they
are not taking away from someone else's piece of the pie. In
fact, they may be helping create an even bigger pie by creating
a job for them.
Unfortunately, we are pursuing policies today that make it
harder for that to happen. Tax hikes and more regulations will
combine to form barriers to affordable housing for Americans
who are trying to build wealth.
I want to turn to Mr. Rowe and ask a few questions. Mr.
Rowe, your work has helped many succeed. What are some of the
key ingredients to creating more of these success stories?
[Pause.]
I believe you are on mute.
Mr. Rowe. Thank you for the question. I will once again
proudly say I am a graduate of the New York City Public School
System, and Brooklyn Tech. And it is, it is one of the
specialized high schools in New York, and there is frustration
that there are not enough Black and Hispanic kids going to
Brooklyn Tech.
So what has been the idea? The idea is to somehow increase
the number of Black and Hispanic kids, is to eliminate the
objective standard. Eliminate the assessment. It is reducing
the standard, so instead of saying how do we improve the
quality of education K through 8 so that more kids can compete
to be successful in these specialized high schools, and why
don't we create more great high schools, as I am doing,
launching Vertex Partnership Academies so that kids in the
Bronx, those 5,000--and that is just for our network--tens of
thousands of families are desperate, desperate for a great
chance to go to a school like Brooklyn Tech. I agree. We need
all of our public schools.
I champion public schools. That is why I run public charter
schools. And you mentioned the success sequence. I do think it
is important for folks to know, you know, in 2017 there was a
report called the Millennial Success Sequence that found that a
stunning 91 percent of Black people avoided poverty when they
reached their prime young adult years, aged 28 to 34, if they
followed what is called the Success Sequence--and again, that
is no guarantee, but that is the term--but essentially they
earned at least a high school degree, worked full time so they
learned the dignity and discipline of work, and married and had
children, in that order.
And this is not the only study, ``Where is the Land of
Opportunity? The Geography of Intergenerational Mobility in the
United States.'' He studied intergenerational mobility of more
than 40 million children and their parents. He found hyper
willful factors, most notably measures that father and marriage
rates in a given location drive upward mobility. If we know
that, we have to make that part of the conversation.
Representative Estes. Well thank you. Because you are, I am
also a proud graduate of public schools, and I insisted that my
kids go to public schools. I wanted them to get a good
education there.
I also want to make sure that when public schools are
failing, that we can come up with opportunities to make those
work right and improve, and hold them accountable so that they
can help all children.
So I appreciate the time and, Mr. Chairman, I yield back.
Chairman Beyer. Congressman Estes, thank you very much. And
now I will recognize my good friend, the Congressman from
Maryland, Mr. Trone.
Representative Trone. Thank you, Chairman Beyer, and
Ranking Member Lee for holding this hearing. And thanks to the
witnesses for joining us.
I want to talk a little bit about equity. Professor
Hamilton, it is clear that COVID had a disproportionate
negative impact on our minority-owned businesses. And during
these difficult times, many Americans have had to make really
impossible decisions about how to support their families, and
keep their companies afloat.
We have been working with our colleagues to find solutions
to support these struggling businesses. The Paycheck Protection
Plan literally saved 50,000-some jobs in my district alone. But
when you looked at the numbers, it was clear that Black,
Hispanic, women-owned businesses in Maryland's Sixth District
were disproportionately excluded from this important program.
That is why we helped lead efforts to increase the outreach
to small business, people of color, women, with the Jobs and
Neighborhood Investment Act, which was an almost $18 billion
investment to provide eligible community development, financial
institutions, and minority deposit institutions with capital,
liquidity, operational capacity to expand the flow of credit
into low-income and minority communities. In recent months, the
vaccine is beginning to work and more people are getting
vaccines and we are returning to a new normal. So in this new
phase of this pandemic, how do we best support minority-owned
businesses?
Dr. Hamilton. Thank you for that. You know, the biggest
preexisting condition of them all is what we are talking about
today, and that is wealth. Minority businesses were under-
capitalized to start with. Those with capital are better
protected during a pandemic. Those with capital are better
positioned to benefit from government policies that are
enacted. And the PPP provided an example.
My colleague, Professor Brown, has pointed out that because
of existing banking relationships certain businesses were
better positioned to benefit than others. So we need to do
things to redress this.
And let me also point out some of the good things. We saw
with the PPP, it was effectively grants, not just loans, it was
distributed in the form of loans, but they were forgivable
loans. We need only look at history to show that government can
direct capital in a way to provide a foundation so that
businesses can flourish.
I think what we need to be cognizant of is that we need to
be intentionally inclusive based on race and gender in pursuing
these capital finance products. So what does that mean?
It means to recognize that if we are going to do it through
banks, that some businesses will have better banking
relationships than others. There is no reason that we cannot
establish the right to an account not only for every American,
but every business. In a modern-day 21st century, we can do
things like that. So, you know, I would argue that we need to
see more providing capital to these businesses, and
distributing it in a way to recognize the history of ways they
have been excluded, and intentionally be inclusive going
forward.
Representative Trone. I agree. The lack of capital is a
major, major issue here. Let's jump over to Professor
Baradaran--I am sure I got that wrong--quickly here, how can we
ensure investments in the American Families Plan, the American
Jobs Plan, can be targeted at these long-standing racial wealth
gaps that we have in this country?
Professor Baradaran. Yes, thank you for the question. Ba-
rad-a-ran. You know, I think if we want to target them through
the communities, we can just do it directly. You know, the
redline map leaves racial gaps, and they were not created
accidentally.
The FHA mapping of this country, the way that these
policies were created were not race-neutral. They were not
color-blind. And they were explicit about if there were Black
people that live in this neighborhood, we will not lend to that
neighborhood.
And that was true through racial covenants, and they were
very, very explicit. Now obviously we cannot be very explicit
anymore, but those explicit racial exclusions still remain.
Those effects remain. And so you really do have to target those
places and bring up that meaning here, right. I mean the same
thing with the PPP loan. If you kind of throw water in a
valley, it is going to accumulate at the bottom. And so any
program we put atop an unequal system, you are going to have
unequal results until you change the playing field, the
topography of the country. And that is what we need to do.
Representative Trone. It makes a lot of sense. Mr.
Chairman, I yield back.
Chairman Beyer. Thank you, Mr. Trone, very much. I now
recognize the good Senator, Mr. Cassidy.
Senator Cassidy. Thank you, Mr. Beyer.
Mr. Rowe, do the reparations effectively address the wealth
gap?
Mr. Rowe. I am much more of a fan of encouraging
entrepreneurship in the Black community, because we have a rich
history of doing so. But as the others have said, getting
access to initial capital is part of the big problem.
So how do we actually----
Senator Cassidy. I accept that. I accept that. But that is
not reparations. So I just have limited time. I don't mean to
cut you off. And I don't know quite how it is supposed to be
structured, but is there financial literacy pervasive enough in
the African-American community that could, if given a large
lump sum of money, an individual or a family would be able to
handle that money wisely? I say that not pejoratively, but just
because financial literacy is so important to do so.
Mr. Rowe. Well I think financial literacy is important for
people of all races. It is not just----
Senator Cassidy. Absolutely. Absolutely.
Mr. Rowe. So one of the interesting things that is
happening is that there are many new models emerging around how
to encourage entrepreneurship, particularly in the Black
community.
Senator Cassidy. I am going to cut you off, because I have
some questions. I will note that financial literacy--I spoke to
a man yesterday who was very engaged in creating it within the
African-American community, but again folks, particularly who
are lower socioeconomic, typically have poor financial
literacy. So just to point that out. I am not quite sure--Dr.
Hamilton.
Dr. Hamilton. Well simple choice can help there, too,
because there are great schools that are teaching financial
literacy. We in our own schools----
Senator Cassidy. Hang on. I'm sorry, I am coming back to
you. Dr. Hamilton, are you really opposed to school choice?
Dr. Hamilton. I am opposed to diverting resources from
establishing a public school system that entitles every
American to a high-quality education.
Senator Cassidy. Dr. Hamilton, let me stop you for a
second. So during the pandemic, teacher's unions would not
allow public schools to open, but private and parochial did.
And many charter schools did.
Now should we have kept the resources in the public schools
that did not open? Or should we have allocated them to the
schools that actually opened? Because we know that people in
poverty, and children of color, were particularly impacted by
not having in-person experience.
So over this last year, should we have just given
everything to the public schools that did not open? Or should
we have given some to those that did?
Dr. Hamilton. So I have got two quick responses. One is,
going back and saying financial literacy is practically useless
for families with no finances to manage in the first place.
Going back to the----
Senator Cassidy. I will come back to that, but if you would
answer the question I asked you, please?
Dr. Hamilton. Sure. I think the pandemic posed some nuanced
questions that require a more nuanced answer than a simple yes
or no to the question you posed.
Senator Cassidy. It was not a yes or no. Should the money
have stayed in a public school system that did not open and did
not serve the children of poverty who are disproportionately
affected by not having an in-person experience?
Or should it have flowed to benefit those children even if
they are attending a charter, private, or a parochial school?
Dr. Hamilton. I think in a global pandemic with grave
health risks, first and foremost we need to protect people and
make sure they are not at risk----
Senator Cassidy. They are not----
Dr. Hamilton [continuing]. Answering the question--I am
answering it directly.
Senator Cassidy. It is well established that transmission
was not occurring in school settings. And public, private, and
parochial--excuse me, charters, private, and parochial reopened
and there was not in-school transmission. And public schools
kept taking it as a dodge, and we had a whole year of life lost
for these children who lacked that education.
Should the money have been diverted to those schools that
were actually open, to benefit those children?
Dr. Hamilton. The answer is, the money should have been
directed in a way to make all schools open safely.
Senator Cassidy. Let me stop you there. My wife is involved
with a public charter school, because clearly, clearly you do
not want to answer that question----
Dr. Hamilton. No, I----
Senator Cassidy [continuing]. Because I can tell you, those
kids have been penalized. They have been penalized, and we
supposedly are advocating for them, but, no, it is more about
teacher's unions than it is about those children.
Let me just say this. My wife is involved with a public
charter school for children with dyslexia. We can look at Black
and Brown children, 50 percent of them do not read on grade
level by grade 3. Now many of them are dyslexic. They are not
diagnosed.
Should the African-American mamas who choose to send their
children to that charter school have the right to send their
children to a charter school which addresses their children's
dyslexia, or, no, should they be stuck in a school which does
not address it?
Dr. Hamilton. Well, as Representative Peters pointed out,
there is no empirical evidence to suggest that charter school
outcomes en mass lead to better outcomes than public school
outcomes----
Senator Cassidy. But when they shut down--that is the other
nice thing about them. If they fail, they close. Whereas a
public failing charter--a public failing school remains open.
So I will concede that point, but also point out that, but
nonetheless go back to my question: Should the African-American
mother have the right to send her child to a school which is
open, seeing kids, and which addresses her child's dyslexia, or
should she not?
Dr. Hamilton. I think the premise of your question limits
the choice of a scarce response that does not recognize the
more structural approach that we can do to address the problem,
which is to ensure that every American has access to a quality
and challenging curriculum throughout all public schools en
mass.
Senator Cassidy. So I guess, since public schools are not
offering specialized curriculum for dyslexia, the only way to
access it would be through a charter school. But I am not sure
I am going to get you to agree with that.
With that, Mr. Chair, I yield back. Thank you.
Chairman Beyer. Thank you, Senator, very much. Do we have
Senator Klobuchar or Senator Warnock, please?
[No response.]
Both have been bouncing among other hearings. If we are
not, we have come to the conclusion of the questions for our
various participants. I just want to thank all of you very much
for this. We got steered to an interesting conversation about
charter schools, which may not be the most central piece of our
discussion on overcoming the gap in race, but----
Mr. Rowe. But it is an important one.
Chairman Beyer. Yes. It is important that we talk about
everything from banking, to baby bonds, to changing the law and
the tax structure. I learned an amazing amount today, and I am
really grateful for all the different perspectives that you
offered.
And we have a lot to follow up on that we will be looking
at. So Elizabeth Warren has a bill on postal services and
banking. I would love to look at the 21st century Homestead
Act. And every time I talk to Professor Hamilton, my list gets
a lot longer. So we are very grateful for all you have done.
So let me just formally say----
Mr. Rowe. May I make one final comment about financial
literacy?
Chairman Beyer. Yes, please.
Mr. Rowe. I just wanted to give another example of
something that we do in our schools, and could be emulated.
Starting in our pre-K with our 4-year-olds, we set up college
savings accounts of $50. The parents would set up, and we would
match every single year. And what was really interesting for
our 4-year-olds, they had now a college saving account in their
name.
And what our parents told us was it changed their dinner
conversation about the future. And it is just so--even though
they were small amounts of money, it changed the way that young
people looked at their future and their level of ownership. And
this idea of college was something that was really important.
So I think there are ways, even in extremely--in extreme
poverty, to introduce this idea of saving, financial literacy,
delayed gratification, all of these things are future
orientation that can be very powerful.
Chairman Beyer. You have made a pretty good case for baby
bonds. We will get you to come testify for that.
Mr. Rowe. We should talk about baby bonds.
Dr. Hamilton. Just a quick response to say that I am all
for assets going toward children, but the reality is that those
savings accounts as described as structured, when that child
becomes a young adult and is ready to go to college, they will
not nearly have enough resources so that they can afford that
child a debt-free college education, despite the reorientation.
This issue centers on capital.
Mr. Rowe. I would love for this to go on, but this is so
great.
Chairman Beyer. I will tell you, as a long-time
businessman, too, it is always more fun to count your own money
than somebody else's. And it ratchets up your financial skills
greatly when you have something to actually count.
So let me formally say that wealth, as we discussed today,
is an enabler of opportunity. It places the promise to the
American Dream within reach for generations. But the
persistence of the racial-wealth gap gets in the way of this
promise and hinders our Nation's economic growth.
And Congress must think about ways in which we can help
Black and Brown families bridge this wealth divide. So thank
you to our legal scholars, Professor Brown, Professor
Baradaran, for helping us understand how public policy and our
tax laws continue to perpetuate the existing racial disparities
in credit, banking, and wealth. Your equity analysis and focus
on solutions help us to think more creatively about how the
Federal Government can help bridge the gap.
And thank you, Mr. Rowe, for sharing your expertise in
education. Good luck with Vertex next year. And thank you for
reminding us of the importance of delivering a quality
education.
And thank you to our economist, Dr. Hamilton, for helping
us see how the stratification of our economy affects the wealth
of Black families. Seeing the deterministic role that wealth
plays in a range of outcomes helps us to know where to begin.
I thank all of my colleagues for joining us in this
important discussion. There is so much we can do to right our
wrongs, to make the tax system more equitable, to facilitate
banking services and credit, and to grant every child an
opportunity to build wealth and follow their dreams.
So we have our work cut out for us. We hope we will be
working with all of you closely again, year in and year out.
Thanks for your participation today.
The record will remain open for three business days. And
with that, the hearing is formally adjourned.
[Whereupon, at 11:44 a.m., Wednesday, May 12, 2021, the
hearing was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Hon. Donald Beyer Jr., Chairman, Joint Economic
Committee
This hearing will come to order. I would like to welcome everyone
to today's hearing focused on the racial wealth gap.
I want to thank each of our distinguished witnesses for sharing
their expertise today. We have an all-star panel and I am excited to
hear what they have to say.
wealth enables opportunity
As everyone here knows, wealth, and the accumulation of wealth,
enables opportunity. Wealth makes it easier to pursue education, buy a
car or a home, even to take a chance on an idea and start a business.
Wealth is security. Having some financial cushion allows families
to absorb financial blows like those experienced because of COVID-19: a
medical emergency or the loss of a job.
Wealth begets more wealth. It is often passed on from one
generation to the next. Indeed, our tax policies have made these
transfers much easier to execute. Our estate tax provisions enable
couples to pass along up to $23 million tax-free to their heirs--23
million dollars.
Unfortunately, the inverse is also true.
With minimal or negative wealth, avenues of opportunity are too
often closed--a problem that is perpetuated from one generation to the
next.
the problem
Our Nation is plagued by persistent and growing income and wealth
inequality. This inequality is particularly tenacious along racial
lines. According to the most recent data from the Federal Reserve, in
2019, the median White family had wealth of 8 times the wealth of the
median Black family.
The absolute differences are far greater if you look at the average
or mean. One other statistic helps to shine a spotlight on the
inequities-25% of white households have a net worth in excess of $1
million, compared to just 4% of Black households.
The racial wealth gap disadvantages Black and Brown families,
individuals and communities, as persistent inequities in wealth
manifest in all kinds of ways.
For example, Black students generally take on much higher levels of
student debt than white students and are much more likely to see that
debt grow as they enter the workforce.
And Black families have much lower homeownership rates-fewer than
one half of Black Americans own their homes compared to about three-
fourths of white Americans.
Even Black families who own their homes face disadvantages. They
face lower home values than those of white families, about a third
lower.
Beyond the damage the racial wealth gap does to Black and brown
communities and families, the racial wealth gap also constrains the
U.S. economy as a whole, limiting our growth and productive capacity.
the cause
How did we get here?
Much of the racial wealth divide today is explained by the
inability of Black families to transfer wealth from one generation to
another. This is the product of decades of systemic racism and
exclusion in our country, with policies such as redlining, restrictive
covenants and other forms of housing discrimination playing a role.
The racial wealth gap is also the result of a tax code that
disadvantages Black Americans in the ways it exempts gains on home
sales, its treatment of income for married couples and even the tax
incentives provided for employer-sponsored retirement plans.
The gap is also the result of dramatically unequal access to credit
and financial services. Black Americans are more likely than white
Americans to lack access to these basic services.
proposals to make progress
The racial wealth gap is pernicious-and making real progress
requires a sustained, multi-pronged effort. There are lots of good
ideas that we'll hear more about today from our expert panel.
Baby bonds to provide each child with an interest-bearing account
at birth. This would ensure that when anyone turns 18, they would have
assets to use on education, to start a business and for other
productive uses.
We need to do more to improve access to education with strong pre-
K-12 opportunities married with improved access to affordable post-
secondary education. Tuition-free community college is a part of that.
Student loan debt forgiveness is also a piece of the puzzle.
But we need to acknowledge that education is far from a panacea.
The typical Black family with a Bachelor's degree has less wealth than
the typical white family with a high school degree.
Disparities persist even after accounting for income or family
structure, reminding us that we need to be intentional about asset
building.
acknowledging the country's history
The House passed out of committee legislation (H.R.40 after the
failed promise to provide former slaves with 40 acres and a mule) that
calls for creating a commission to study reparations.
This is an important step to face up to our Nation's past and to
begin the process of providing compensation and restorative justice.
We have a long way to go in this country to close the racial wealth
gap. And we're only going to get there if we dramatically intensify our
efforts.
And this is why I look forward to the testimony of our witnesses.
Now I would like to turn it over to Senator Lee for his opening
statement.
__________
Prepared Statement of Hon. Mike Lee, Ranking Member, Joint Economic
Committee
Good morning and thank you to Chairman Beyer for convening today's
hearing.
At the heart of the American Dream is the ability to build a
productive and happy life for oneself and one's family. Necessary to
that endeavor is, of course, the opportunity to build wealth.
Unfortunately, while average wealth for all American households has
risen in recent years, it remains a fact that Black and Hispanic
households have consistently held less wealth than White households.
Wealth is built through the accumulation of assets, including
homes, savings, and inheritances. But accumulating assets requires
income and income requires opportunity.
The crucial question, then, that we must ask to address the racial
wealth gap is this: how can we increase opportunity for those with less
wealth so that they can build more? And what are the things that get in
the way of opportunity and upward mobility?
As Martin Luther King wisely observed, ``a productive and happy
life is not something you find, it is something you make.'' But it is
something you make with other people. Indeed, supportive relationships
and institutions are vital to facilitating opportunity.
The Social Capital Project of the Joint Economic Committee has for
the past few years studied the health of families, communities, and
civil society, documenting changes in social capital over time and its
uneven geographic distribution across the country.
Often historical injustices have far-reaching consequences for
future generations. One of the Project's striking early findings was
that there is a connection between counties with large enslaved
populations in 1860 and the counties with the lowest rates of marriage
and intact families today.
Slavery stole agency from Black Americans for generations, tearing
apart one of the most vital supports for human flourishing--the
institution of the family. This horrific legacy, as well as the
horrific legacy of racism, has undoubtedly led to far-reaching
consequences for Black opportunity.
But other policies have also weakened social capital and
opportunity.
Many Black Americans have paid the price for government-sanctioned
redlining, lack of lending resources for homes and businesses, and
union job discrimination that their parents and grandparents faced.
These policies made it that much harder to build intergenerational
wealth.
Today, there are still other policies that present barriers to
opportunity--enduring policies that lock so many out of affordable
housing, a quality education, and job opportunities.
For example, unequal access to quality education plays a large role
in upward mobility and economic success. Unfortunately, because of
public school zoning and residential zoning policies, many minority
children from low-income families are required to attend lower-
performing public schools. As a result, they are less likely to do well
on standardized tests, graduate high school, and move on to college.
They are more likely to end up unemployed, or in lower-skilled jobs
with lower earnings.
Occupational licensing laws are often a needless barrier to work,
particularly for disadvantaged Americans. Many states have onerous
requirements for jobs that can be done with little risk to workers and
those that they serve--including jobs performed by florists, hair
braiders, and barbers--and those requirements make it hard to earn a
living.
Similarly, zoning and land-use regulations prevent the formation of
home-based businesses that would allow for more Black entrepreneurship.
And zoning segregates Americans by race and by class.
Our current safety net programs include disincentives for both work
and marriage, keeping many minorities trapped in a cycle of dependence
and poverty, and preventing wealth accumulation and stable family
formation.
Family stability also plays a key role in affecting long-term
opportunity. White children are nearly three times more likely than
Black children to be born into married households, and children born
into married households are less likely to be in poverty, and more
likely to achieve upward mobility. In fact, one study found that the
greatest predictor of young Black children's ability to move up to a
new income class is the presence of Black fathers in their
neighborhoods.
In these, and other policy areas, we have much room for improvement
to address existing barriers and enhance opportunity. But it's
important to add that, as far as we have to go, we have made progress,
too. Personal agency is not lost; and many Black Americans have
advanced and flourished in spite of the barriers and discriminatory
legacies they have faced.
As my friend and colleague Sen. Tim Scott recently said:
``Just before COVID, we had the most inclusive economy in my
lifetime. The lowest unemployment ever recorded for African Americans,
Hispanics, and Asian Americans. The lowest for women in nearly 70
years. Wages were growing faster for the bottom 25% than the top 25%.
``That happened because [we] focused on expanding opportunity for
all Americans.''
Together, I believe we can continue working to expand opportunity,
to help all Americans build a happy and productive life for themselves
and their families, and thereby make savings and wealth accumulation a
reality for all.
Abraham Lincoln, in his message to Congress on July 4, 1861, wrote
that the leading object of government was ``to elevate the condition of
men; to lift artificial weights from all shoulders; to clear the paths
of laudable pursuit for all; to afford all an unfettered start and a
fair chance in the race of life.''
It is my hope that this hearing will help us do the same.
Thank you.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Response from Professor Brown to Question for the Record Submitted by
Senator Klobuchar
Housing is an important driver of generational wealth, and Black
families are much less likely to own a home compared to white families.
There are many historical causes for this disparity in ownership rates,
and policies that prohibit the development of new housing help sustain
this disparity.
How would eliminating artificial barriers to housing
production, including exclusionary zoning, help increase homeownership
among Black families and shrink the wealth gap?
Exclusionary zoning and other artificial barriers to housing
production play a limited role in wealth building among black families.
Research described in my book ``The Whiteness of Wealth'' shows the
much larger problem is how the valuation of homes disadvantages
prospective black buyers along with current black homeowners.
__________
Response from Professor Brown to Question for the Record Submitted by
Representative Beatty
Representative Beatty. Thank you so much, Mr. Chairman.
I know I am over my time, but if I could ask all of the witnesses
to give me a written statement on their opinion of the direction we
should be looking at at the Tulsa map, 100 years ago with the Black
Wall Street that deals directly with today's topic, I would be
interested in any of their thoughts on how we move forward. Thank you.
And I yield back.
My advice is to ensure that any reparations payments are tax-free
to those receiving them. Just like the reparation payments were tax-
free to Japanese-Americans in the 1988 statute.
__________
Response from Professor Brown to Question for the Record Submitted by
Senator Kelly
topic: latino-owned small businesses
Professor Brown, Small businesses are the foundation of Arizona's
economy. We are home to more than 99 percent of Arizona's businesses
are considered ``small.''
More than 100,000 of Arizona's small businesses are Latino-owned.
In the American Rescue Plan, I worked to include a provision that
would create Community Navigator programs to help small businesses
access COVID relief. We also made sure these programs would be
accessible to both English and non-English speakers.
Obviously, our support of Latino-owned small business can't stop
here. Research shows that Latino-owned businesses start smaller and
stay smaller.
What can we do from the Federal level to make sure these
small businesses are able to grow, expand, and thrive?
Gaining access to COVID relief programs is a huge first step. But
post-COVID the approach to all governmental services targeted at small
businesses should include those best practices you describe that were
included in the COVID relief package.
My tax research has uncovered one specific problem in the Latino
community that I would like to highlight here, and that is access to
employer-provided retirement accounts. The Latino community has the
lowest participation rate in employer-provided retirement accounts when
compared with other racial and ethnic Americans. Figure 23 in the EBRI
document cited here paints the picture in graphic detail. Employment-
Based Retirement Plan Participation: Geographic Differences and Trends,
2013 By Craig Copeland, Ph.D., Employee Benefit Research Institute Oct.
2014 No. 405
topic: native american homeownership
Professor Brown, the rate of homeownership for Native Americans is
56 percent. For white Americans, it's 74 percent.
For many Native Americans, the housing stock isn't adequate. Forty
percent of on-reservation housing is considered substandard.
And yet, nearly a quarter of Native households pay 30 percent or
more of their household income for housing.
Could you speak to how damaging this is to building and
holding wealth?
Most Americans hold a significant proportion of their wealth in
their homes and this is particularly true for the middle class. While a
majority of Native Americans own homes, their inability to buy homes
not substandard or in need of repairs will forever prevent them from
building wealth the same way as their white peers. This is a
significant problem that needs to be remedied. I argue in my book ``The
Whiteness of Wealth,'' that one solution should be to remove the
Federal tax subsidies that prop up a system that disadvantage so many
homeowners of color.
__________
Response from Dr. Hamilton to Question for the Record Submitted by
Representative Beatty
excerpt from the forthcoming color of wealth in tulsa, ok, report
by ofronama biu, grieve chelwa, darrick hamilton, christopher
famighetti, kate richey, and damario solomon simmons
The Institute on Race and Political Economy at the New School, and
the Justice for Greenwood Foundation, Inc., are producing a report on
the racial wealth gap in Tulsa, OK. The first section presents the
Black-White racial wealth gap based on data from National Asset
Scorecard for Communities of Color (NASCC), proceeded by a narrative
that describes the 1921 Tulsa Race Massacre and the modern-day
implications for Black wealth.
Recommendations to address these findings can be found in two
papers. In Neo-Liberalism and Race (Hamilton 2019) and The Political
Economy of Education, Financial Literacy, and the Racial Wealth Gap
(Hamilton and Darity 2017), the authors describe why the neoliberal
perspective and its focus on individuals achieving their own social
mobility via education and financial literacy is insufficient in
addressing the racial wealth gap. Instead, structural solutions are
needed, such as reparations for slavery, sharecropping, and
``whitecapping''; Baby Bonds; and a Federal jobs guarantee.
black-white racial wealth gap from the tulsa--national asset scorecard
for communities of color (nascc)\1\
---------------------------------------------------------------------------
\1\ The NASCC project was seeded with a grant from the Ford
Foundation under the leadership of the co-principal investigators,
William Darity, Jr. and Darrick Hamilton. The authors of this report
are solely responsible for its content and conclusions.
---------------------------------------------------------------------------
The first wave of the NASCC survey was administered in the Boston,
MA; Los Angeles, CA; Miami, FL; Tulsa, OK; and Washington, DC
metropolitan areas.\2\ The NASCC Tulsa sample was collected primarily
in 2014.\3\ Close to 400 surveys were completed in Tulsa--of those 400
households, 89 are identified as White and 66 identified as Black; the
remaining households included those identified as Mexican and Native
American descendants with Cherokee, Creek, or Other tribal affiliation
and as well as those without a tribal affiliation (a forthcoming report
in June 2021 will include detailed asset and debt information of not
just Black and White residents of Tulsa, but the other groups listed
above as well).
---------------------------------------------------------------------------
\2\ The first iteration of the NASCC data was collected by Center
for Survey Research (CSR) at the University of Virginia directed by
Thomas Guterbock.The vast majority of efforts to examine household
wealth in the United States have defined ethnic groups broadly,
reporting collective data on Black, White, and, to a lesser extent,
Latinx households. In these aggregations, Asians and especially Native
Americans are often omitted or combined into the nebulous ``other''
category. In contrast, the NASCC survey collects asset and debt
information on key subgroups within broader categories. For example,
within the broad category of Native Americans, NASCC collects data on
those who are Cherokee, Creek, or Other tribal affiliation and those
without a tribal affiliation. Prior to the NASCC study, little had been
known about the asset positions of these Native subgroups, especially
in a localized context--see, for examples, The Color of Wealth in Miami
(Aja et al., 2019), The Color of Wealth in Los Angeles (De La Cruz-
Viesca et al., 2016), and The Color of Wealth in the Nation's Capital
(Kijakazi et al., 2016), and The Color of Wealth in Boston (Munoz et
al., 2015).
\3\ Samples drawn from targeted ZIP codes on the basis of billing
address; and the use of surname-based lists targeting specific national
origin groups. See, for example, The Color of Wealth in Los Angeles for
a description (De La Cruz-Viesca et al., 2016).
---------------------------------------------------------------------------
Net worth (or wealth), the sum of the value of total assets minus
the value of total debts, provides a summary of household financial and
overall economic well-being (Table 1). Our analysis reveals the tenuous
financial circumstances faced by Black household especially in
comparison to White Households in the Tulsa metropolitan area. The
$8,000 median net worth estimate for Black households amounts to only
six percent or six cents for the typical Black household for every one
dollar for the typical White household. Black households have
dramatically fewer resources to deal with financial emergencies and
make longer-term investments. In essence, Black households are
financially insecure, and the narrative below provides a historical
link of this contemporary economic vulnerability to the unjust Tulsa
Race Massacre which occurred 100 years earlier.
Table 1. NASCC-TULSA Comparison of Black and White Household Median Wealth
----------------------------------------------------------------------------------------------------------------
Black household percent
Median Wealth (U.S. of White household
dollar) median Wealth
----------------------------------------------------------------------------------------------------------------
White......................................................... $145,000
Black......................................................... $8,000*** 6%
----------------------------------------------------------------------------------------------------------------
Source: NASCC survey, authors' calculations.
Note: The difference in the figures of nonwhites are compared with the figures of White households was
statistically significant at the ***99%, **95%, *90% level.
the tulsa race massacre of 1921\4\
---------------------------------------------------------------------------
\4\ This section was written by Kate Richie of the Justice for
Greenwood Foundation, Inc.
---------------------------------------------------------------------------
The Tulsa Race Massacre of 1921 began on May 31st of that year and
lasted well into the following day. In short, members of the Tulsa
Police Department, the Tulsa County Sheriff's Department, the National
Guard, other city and county leaders, and members of the chamber of
commerce formed a large, angry mob of White Tulsans that overwhelmed
the approximately 40-square-block community with violence. One of the
worst acts of domestic terrorism in United States history decimated
Tulsa's thriving, all-Black community of Greenwood. However, much like
other mass atrocities, what was set in motion during those hours in
1921 changed the face of a community irreversibly and birthed a
structural inequity pernicious in its persistence.
Hundreds of Black residents were killed, thousands more were
injured, and 1,500 homes and businesses were looted and burned to the
ground.\5\ This brutal and inhumane attack was not an isolated event,
as the same perpetrators spent the subsequent days, weeks, years and
even decades ensuring the permanent erasure of Greenwood and the
wholesale seizure of its former residents' assets. The economic ruin of
Greenwood robbed Black Tulsans of their rightful inheritance and denied
successive generations the wealth, financial security, and tangible and
intellectual property that might otherwise have sustained, enabled, and
enriched the quality of life of an entire community.
---------------------------------------------------------------------------
\5\ See Okla. Comm'n To Study The Race Massacre Report Or 1921,
Race Massacre Report (Feb. 28, 2001): www.Okhistory.Org/Research/Forms/
Freport.Pdf. Hereafter referred to as Race Massacre Report.
---------------------------------------------------------------------------
White Tulsans and local government officials began an
obstructionist campaign against rebuilding Greenwood virtually
immediately.\6\ Many Greenwood residents lived in internment camps for
over a year in squalid conditions while awaiting reconstruction and
some used what was left of their meager resources to fight uphill
battles against local officials seeking legal recognition of their
right to rebuild from state courts.\7\
---------------------------------------------------------------------------
\6\ Plan to Move Negroes Into New District, Tulsa Tribune, June 3,
1921.
\7\ The Oklahoma Supreme Court eventually struck down the racist
zoning ordinances enacted by obstructionist White Tulsa officials
immediately after the Massacre to prevent Greenwood from rebuilding.
---------------------------------------------------------------------------
Hundreds of thriving Black-owned businesses and organizations lined
the streets of Tulsa's celebrated Greenwood district before that day in
1921. Among them were regionally celebrated destinations like the
upscale Stratford Hotel and the state-of-the-art Williams Dreamland
Theater. The Tulsa Star is widely acknowledged as the first American
Black-owned newspaper with a weekly national circulation. At least one-
third of those businesses destroyed never reopened and today none of
the businesses operating in Greenwood before the Massacre still
exist.\8\
---------------------------------------------------------------------------
\8\ It should be noted that there are at least 20 White-owned
businesses that existed at the time of the Massacre that are still in
operation, ``Find out which businesses have survived at least 100 years
in Tulsa'', TULSA WORLD https://tulsaworld.com/business/photo-gallery-
find-out-which-businesses-have-survived-at-least-100-years-intulsa/
collection--df4bc18f-31b0-5a05-86ee-d24caef926ce.html
---------------------------------------------------------------------------
The interference with rebuilding and investment in Greenwood and
North Tulsa that began after the Massacre has never relented and is
ongoing. Before the Massacre, the percentage of Black and White
residents of Tulsa that owned their own homes was relatively the
same.\9\ After an entire Black neighborhood of homes was destroyed
overnight, a deficit of adequate and code-compliant housing plagued
life in the aftermath and a racial gap in homeownership began to
balloon. Local government officials refused to enforce housing codes
for Black residents and abdicated their municipal duties in myriad ways
which made houses prone to rapid deterioration and led to substandard
conditions and blight that threatened the health, comfort, and safety
of the Greenwood neighborhood and community.\10\
---------------------------------------------------------------------------
\9\ According to the U.S. Federal Reserve, homeownership is one of
the key ways we build wealth in the U.S. The Federal Reserve reports
that the average homeowner in 2016 had a household wealth of $231,400,
compared to the average renter having a household wealth of just
$5,200. Federal Reserve Bulletin, Changes in U.S. Family Finances from
2013 to 2016: Evidence from the Survey of Consumer Finances, Vol. 103,
No. 3 (September 2017), https://www.federalreserve.gov/publications/
files/scfl7.pdf.
\10\ A Concise Review of Housing Problems Affecting Negroes in
Tulsa, Tulsa Urban League (1958), http://
digitalcollections.tulsalibrary.org/digital/collection/p16063coll1/id/
5358.
---------------------------------------------------------------------------
There is still no viable public infrastructure in these
communities. In every major category that undergirds individuals and
households in their wealth-building endeavors over a lifetime
(employment and educational opportunities, the availability of safe and
affordable housing, a healthy environment and access to primary
healthcare, etc.), Black Tulsans face shocking disparities.\11\ These
disparities are fueled by racist underfunding of public structures and
deliberate and ongoing structural violence enacted by government
entities whose choices impoverish the chances of Greenwood's
descendants into 2021. Meanwhile, White Tulsans enjoy these resources
in abundance, provided by the very same public structures and
government entities that have inflicted a shameful legacy of
intentional deprivation onto Tulsa's Black citizenry.
---------------------------------------------------------------------------
\11\ The findings of the Tulsa Equality Indicators Annual Reports
document the disparities created by the 1921 Race Massacre and how they
continue to hinder and harm Black Tulsans and the Greenwood community.
See Tulsa Equality Indicators (2019) https://www.tulsaei.org/wp-
content/uploads/2019/07/Tulsa-Equality-IndicatorsReport--2019.pdf. It
should be noted that, in response to the City of Tulsa's 2018 Equality
Indicators Annual Report, the NAACP Legal Defense Fund and over 50
local community, elected, and religious leaders sent a letter (the
``LDF Letter'') to Tulsa Mayor Bynum and the Tulsa City Council
demanding reforms be immediately implemented. The LDF Letter stated,
``It is simply unacceptable to acknowledge racial inequities in City
report and do little to nothing to address them.'' To date, none of the
reforms requested in the LDF Letter have been implemented.
---------------------------------------------------------------------------
While the exact date and time of the beginning of the destruction
of historic Greenwood is well-established, we have no timestamp for
when the Massacre will end. Wealth once stolen is made permanently
illusive by deliberate public policy choices that maintain an apartheid
regime of dichotomous ``development'' in the City of Tulsa. A twin
trajectory fueled by racialized logic divides Tulsa's past and its
future indefinitely: (1) thriving White communities, growing ever-more
insular and segregated, empowered economically and benefiting from the
lion's share of public investment versus (2) the Massacre's legacy of
unjust, violent, and inhumane treatment at the hands of public leaders
and institutions who are derelict in their duty to serve and protect
Tulsa's Black residents and to recognize their human right to self-
determination.
__________
Response from Dr. Hamilton to Question for the Record Submitted by
Senator Kelly
Arizona's population is about 5% Black--but the Black population is
expected to be the fastest growing in the coming years.
The Black consumer base is growing fast, the Black labor force is
growing fast, and Black-owned businesses are growing fast.
But Black-owned businesses are heavily crowded in only a few
sectors--health care, professional services, and social assistance.
These numbers are very concentrated--there are some sectors where there
are barely any Black-owned businesses.
The State of Black Business in Arizona report largely attributes
this to a lack of capital.
Arizona is buzzing with new investment and innovation. That should
not just be for some businesses.
What strategies should we take back home to ensure that
investment is getting to Black-owned businesses and entrepreneurs?
As described in the preamble to the question, the major issue as it
relates to limited Black entrepreneurship and Black business activity
writ large is capital. And the lack of capital in the Black community
is the result of our persistent racial wealth gap grounded in a history
in which Blacks have not been permitted to receive full access to
government-facilitated capital development, and, in the cases in which
they were able to develop enterprise, it never received the full
political protection from fraud, theft and even terror afforded to
White enterprise.
This also explains a lion share for the lack of variation in type
of business enterprise relative to Whites. Limited capital in the Black
community restricts them to enterprise that does not require capital
deepening.
The strategies to rectify these problems should be centered on how
best to facilitate access to capital to Black entrepreneurs--and this
access need not all come in the form of loans, especially loans with
subprime terms. In addition, the strategies should recognize that long-
established relationships (and preferential treatment) that have
benefited White firms relative to Black firms will require affirmative
action to rectify. Government procurement contracts can and should play
an essential role in this domain. Of course, other supportive services
around entrepreneurship start-up are beneficial as well.
__________
Response from Mr. Rowe to Question for the Record Submitted by Senator
Lee
Mr. Rowe, we know that many early occupational licensing and
minimum wage laws were designed to lock Black workers out of White
professions,\1\ current public school enrollment policies keep many
poor minority kids trapped in failing schools, many residential zoning
policies produce de facto racial segregation, and many welfare policies
systematically make work and family formation more difficult.
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\1\ Licensing Laws: A Historical Example of the Use of Government
Regulatory Power Against African-Americans. David E. Bernstein. https:/
/digital.sandiego.edu/cgi/viewcontent.cgi?article=1203&context=sdlr;
https://mises.org/wire/racist-history-minimum-wage-laws Race and
Medical Licensing Laws. Jeffrey Singer. https://www.cato.org/blog/race-
medical-licensing-laws. The Minimum Wage's Racist Roots. Jason Riley.
https://www.wsj.com/articles/the-minimum-wages-racially-discriminatory-
roots-11613517678
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It is a tragedy that government policy has institutionalized racist
attitudes in certain cases and created barriers to upward mobility for
minority Americans.
I know that you have recommended that we look to the
private sector and local communities for solutions to address some of
the problems we have discussed today--for instance, you've written
about organizations like Harlem Capital Partners and the New Voices
Foundation that provide venture capital dollars to minority and female
founders. I know that you are also the founder of Vertex Partnership
Academies, a network of charter schools in the Bronx. Can you tell us
more about why these private and community-based initiatives are
important and in what ways they have been more effective than
government interventions?
Entrepreneurship and innovation are critical toward the work to
create greater upward mobility. As a social entrepreneur myself, that
is why I have been attracted by public charter schools as a private,
community-based initiative to achieve greater educational opportunities
for kids.
For example, I am co-founding Vertex Partnership Academies, which
seeks to be the first-of-its-kind network of character-based,
International Baccalaureate public charter high schools, dedicated to
equality of opportunity, individual dignity, and our common humanity.
Vertex Student Scholars will be immersed in a culture of democratic
discourse guided by the four cardinal virtues of Courage, Justice,
Temperance, and Wisdom. With the first campus scheduled to open in the
Bronx in 2022, Vertex will empower each student scholar to choose
either: (1) the International Baccalaureate Diploma Program that
prepares them to enroll and thrive in premier colleges and universities
in the country or abroad; or (2) the International Baccalaureate Career
Program that prepares them to graduate with a professional credential
and directly enter the labor market with skills in a particular
industry.
As I describe below, Vertex partnership Academies is a creative
example of a school that is creating dual pathways to college or
directly into a career.
Mr. Rowe, attaining a quality education is key to achieving upward
mobility, and yet throughout the country, the neighborhood where a
family lives usually determines where its children are eligible to
attend school. This suggests that housing policy matters for
educational opportunity.
In fact, a Social Capital Project report on the topic of housing
and educational access found that ``major cities with more restrictive
residential zoning policy are less affective at providing high-quality
public education at a low, affordable price.'' \2\
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\2\ Zoned Out: How School and Residential Zoning Limit Educational
Opportunity. Social Capital Project, Joint Economic Committee. https://
www.jec.senate.gov/public/index.cfm/republicans/analysis?ID=E4DD88F7-
4D98-4FD4-B68A-20689CB4F94 C
What are your thoughts on how housing and housing policy
impacts educational opportunity for American children?
In your view, could we improve access to quality
education by expanding access to housing through residential zoning
reform?
As an educator, I advocate for a solution that allows widespread
school choice, so no matter the zip code within which a child lives,
they would still have the opportunity to access a good education. But
given the housing focus of this question, I would like to bring in the
work of my colleague Edward Pinto, who leads the AEI Housing Center.
Along with AEI Resident Scholar Stephen Oliner, Mr. Pinto created the
Wealth Building Home Mortgage, a new approach to home finance designed
to provide a more reliable and effective way of building wealth than is
available under existing policies. Mr. Pinto is already working with
Senator Scott on housing policy that can support upward mobility and
assess racial bias. Attached are:
Impact of Race and Socio-Economic Status on the Valuation
of Homes by Neighborhood (see slides 24-25 where we outline solutions).
FHFA Request for Input RFI on Appraisal Related Policies
Practices and Processes FINAL v2--in particular the first section
entitled: How Common Is Appraiser Racial Bias? (slides 3-28).
A Quarter Century of Mortgage Risk (link: https://
www.aei.org/research-products/working-paper/mortgage-risk-since-1990/)
Mr. Rowe, although obtaining a college degree is often
characterized as a path to the middle class, some college degrees do
not justify the cost, and some students are interested in alternatives
to college that serve their goals and interests better.
There are a wide variety of advanced non-traditional programs like
online courses, apprenticeships, or vocational schools available today
that offer paths to high-skilled, well-paying jobs. However, many of
these programs are not accredited the way traditional colleges are,
which makes them ineligible for Federal student aid.
Do you believe that the higher education system as a
whole is out of sync with the labor market's needs for skilled workers?
How can government ensure that students have access to a wider variety
of post-secondary educational options?
Young men and women who are not on the college track are
increasingly left behind in our economy and educational institutions.
In the 1980s, two-thirds of jobs were open to men and women with just a
high school degree. Today, only one-third of jobs are.\3\ With a wave
of new service sector jobs replacing a shrinking manufacturing sector,
many find themselves with less representation and fewer rights in the
workplace, reducing their access to dignified, supportive work
environments.\4\ A substantial minority of today's less educated men do
not have the education or experience that would prepare them for good-
paying middle-skilled jobs in technology, services, and health.
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\3\ Kenneth Adams et al., ``The Indispensable Institution:
Reimagining Community College,'' Opportunity America, June 2020.
\4\ David C. Yamada, ``Human Dignity and American Employment Law,''
University of Richmond Law Review 43, no. 2 (2009): 523-569.
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This problem is exacerbated by a ``college-for-all'' framework that
dominates our culture.\5\ Even though only one-third of men have a
bachelor's degree, our educational attention and dollars overwhelmingly
focus on the college track.\6\ Of the $150 billion our Federal and
state governments currently devote to higher education each year, only
$1.9 billion is devoted to vocational education in high schools and
community colleges.\7\
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\5\ Oren Cass, ``The Misguided Priorities of Our Educational
System,'' The New York Times, December 10, 2018.
\6\ Richard Fry, Ruth Igielnik, and Eileen Patten, ``How
Millennials today compare with their grandparents 50 years ago,'' PEW
Research Center, March 16, 2018.
\7\ Data Lab, USAspending.gov, ``Federal Investment in Higher
Education,'' Accessed May 2, 2021, https://datalab.usaspending.gov/
colleges-and-universities/; Institute of Education Sciences, National
Center for Health Statistics, ``Table 401.30: Federal on-budget funds
for education, by level/educational purpose, agency, and program:
Selected fiscal years, 1970 through 2019.''
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Moreover, our K-12 curricula and teaching practices are structured
to discount the potential of less academically minded children. Simply
put, schools are failing to offer these children the training and
skills they need to build flourishing lives. So, many young men and
women spend their years in school just getting by--struggling through
classes that do not capture their interests, instead turning to video
games, social media, and other activities for a sense of place and
purpose.\8\ After school, they tend to drift through low-wage jobs
without hope of upward mobility.
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\8\ Warren Farrell and John Gray, The Boy Crisis: Why Our Boys Are
Struggling and What We Can Do About It (Dallas: BenBella Books, 2018).
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But things do not have to be this way. Even today, hundreds of
thousands of quality, skill-based jobs are unfilled. Some schools
across the country have begun to address this gap, pursuing creative
solutions to workforce education. Countless career and technical
education (CTE) programs teach students real-world skills from coding
to car repairs.\9\ Take, for example, Career Academies, high school
programs that offer struggling students rigorous, career-oriented
courses.\10\ They also offer on-the-job internships and work-based
learning opportunities. Young men participating in these programs earn
more than similar peers who do not.\11\ Even more, these programs
confer dignity upon young men and prepare them for successful
relationships: research shows that young men who attend a Career
Academy are more likely to marry.\12\
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\9\ Catherine Gewertz, ``What is Career and Technical Education,
Anyway?,'' Education Week, July 31, 2018.
\10\ James J. Kemple, Career Academies: Long-term Impacts on Labor
Market Outcomes, Educational Attainment, and Transitions To
Adulthood,'' MRDC, June 2008.
\11\ Kemple, ``Career Academies.''
\12\ Kemple, ``Career Academies.''
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Policymakers should lean into the success of career academies and
other career and technical education models in the high school and
community college milieu. The goal should be designing a national
workforce education system that prepares one-third of adults for the
middle skills market--offering skill-based certificates and job
trainings with real value in the labor market. Such an approach would
demand that schools develop integrated networks with local employers
and continually update their educational models and resource allocation
to match the needs of local labor markets. Apprenticeships will also be
key. Many employers are willing to pay young adults even as they learn
a skill. Community colleges should leverage partnerships with these
employers.
Also critical to ushering in an elevated role for career and
technical education nationally: funding. Policymakers should start by
allocating one-third of current state and Federal spending on higher
education to skills-based workforce education in high schools and
community colleges. The funding should not be restricted, but rather
contingent on high school offcials and community college administrators
dramatically expanding the volume of high-quality vocational classes
and programs available to their students. This funding should be paired
with evaluation measures that track high school and community college's
successes in placing students into good jobs.
Mr. Rowe, household savings are a major component of household
wealth, and White Americans have greater average savings than Black
Americans, which enlarges the wealth gap. Unfortunately, under current
tax policy, saving is disadvantaged relative to spending, with the
exception of certain government-approved savings goals.
Meanwhile, the savings vehicles that we do have largely fail to
benefit lower-income and working-class Americans, in part due to the
many rules and restrictions on their use.
Universal savings accounts promote saving for any purpose
and over any time horizon without penalties, restrictions, or
paperwork. In your view, would it be helpful to provide Americans with
these more flexible savings accounts?
Outside of universal savings accounts, what other
policies would help to support saving at every income level?
Long-term success for families definitely involves policies that
promote greater asset building among low-income families, and policies
that compound the efforts of low-income Americans to save for their
future.
To address asset building, one tool Congress could incorporate into
Federal tax policy is flexible savings accounts that allow families to
save pre-tax dollars for a variety of family related expenses, such as
paid parental or family care leave, childcare or educational expenses,
a down payment on a home, or work-related expenses such as
transportation. The Federal Government could match savings up to the
amount of payroll taxes for families who fund these accounts. State
agencies would ignore families' savings (but not government match
funds) for the purposes of determining eligibility for other means-
tested benefits. Such policies could have the potential to reduce
wealth inequality in America and help more young men and women feel
financially prepared to enter into marriage. Importantly, they would
also encourage a future-orientation among young Americans. For many
low-income children, having a savings account with their name on it
could dramatically change the way they think about their future,
inspiring a new set of intentional behaviors around saving and laying
the groundwork for a life path that will maximize their chance of
success.
In the public charter schools I led for a decade in the Bronx, we
set up New York State 529 Savings Accounts for each student, beginning
in pre-K (or four years old). Our parents matched the initial $50
contribution, and annually contributed so we as a school could match.
While the accumulated amounts weren't massive, the anecdotal evidence
we had from families was that our savings program changed the nature of
the discussion at the dinner table. Because our students had a college
savings account in their name, and it was at least annually contributed
to, there was a future orientation that more prominently guided
behavior.
As I noted in my testimony, we must also move beyond pulling policy
levers. We have a moral imperative to encourage young people of all
races to adopt a new cultural norm around education, work, and
responsible parenthood. This is especially true because the research
suggests that marriage significantly influences wealth-building
behaviors among young couples and leads to greater wealth in the long
run.
The marital divide in wealth for adults in their 50s is
substantial. Married Americans have more than twice the average wealth
of divorced and never married Americans, even after controlling for
gender, age, education, race, ethnicity and scores on the Armed
Services Vocational Aptitude Battery, a standardized test that measures
mathematical, scientific, and word knowledge.\13\ On average, stably
married men and women have more than $640,000 in wealth, while the
remarried have more than $450,000 in wealth. By contrast, divorced and
never married Americans have only about $167,000 in wealth when they
reach preretirement years.
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\13\ Author's calculations from the National Longitudinal Survey of
Youth, 1979 (NLSY79), Round 27 (2016).
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What causes this divide in wealth? It is almost surely partially
the result of self-selection. Americans with more income and assets are
more likely to marry and to stay married. This is especially the case
today with highly educated men and women being more likely to be stably
married than less-educated Americans. But marriage and marital
transitions also appear to independently influence the accumulation of
wealth in America. Married couples, for instance, benefit from
economies of scale that allow them to share housing, food and utilities
and devote more of their household income to building wealth. Stably
married couples also avoid the substantial costs associated with family
instability, especially among parents--legal costs, child support and
moving to a different home, to name a few. Furthermore, marriage itself
appears to engender a responsibility ethic, where spouses set aside
money for an imagined future together. This translates to higher rates
of per capita savings and lower rates of spending per capita among the
married compared to their demographically similar but unmarried peers.
Because marriage makes it easier to save, reduces costs associated with
family instability and engenders a savings ethic, the significant
association between marital status and wealth looks to be at least
partly causal.
Accordingly, educators and philanthropists should develop evidence-
based curricula that help young people build agency by descriptively
(versus prescriptively) teaching the ``success sequence'' in schools
and organize social and mass media campaigns to normalize a new set of
behavioral expectations around family formation. Without these steps,
sending additional money to low-income young adults will do little to
meaningfully alter their chances to achieve the American dream in the
long run.
Please don't hesitate to reach out with any more questions.
__________
Response from Mr. Rowe to Question for the Record Submitted by
Representative Beatty
Representative Beatty. Thank you so much, Mr. Chairman.
I know I am over my time, but if I could ask all of the witnesses
to give me a written statement on their opinion of the direction we
should be looking at the Tulsa Massacre, 100 years ago with the Black
Wall Street that deals directly with today's topic, I would be
interested in any of their thoughts on how we move forward. Thank you.
And I yield back.
Congresswoman Beatty requested responses on how to approach the
teaching of information related to the events in Tulsa a century ago.
With that request, please see below a new curriculum unit that 1776
Unites has created called Tulsa Terror & Triumph that captures both the
tragedy of the massacre that occurred, and the resilient rise of black
Americans in the face of adversity.
https://1776unites.com/our-work/curriculum/download/
__________
Question for the Record for Professor Baradaran Submitted by Senator
Klobuchar
We have seen unequal patterns of Federal investment--often the
result of systemic racism and discrimination--lead to decades of
neglect in some communities, which exacerbates the racial wealth gap. I
support Representative Jim Clyburn's 10--20--30 plan, in which 10
percent of Federal resources are committed to communities where at
least 20 percent of the population has been living below the poverty
line for 30 years or more.
How much progress could we make on closing the racial
wealth gap if, over an extended period of time, we ensure that 10
percent of each agency's funding reaches communities dealing with
persistent poverty?
__________
Questions for the Record for Professor Baradaran Submitted by Senator
Kelly
topic: expanding latino homeownership
During our State work period last week, I visited the Market of
Dreams in Flagstaff, Arizona.
Market of Dreams is a 6-year-old micro-entrepreneurship center that
provides mentoring for microbusinesses, retail space, leadership
development, and more opportunities for entrepreneurs just starting
out.
It's located in an area that's 45 percent Latino, where 75 percent
of residents work multiple jobs and a majority of folks pay 50 percent
or more of their total monthly income on rent.
That rent statistic really jumped out at me. And we know it's not
unique to this one community.
Considering what we know about the possibility for
homeownership to help build wealth, how do we better make that a
reality for Latino communities?
Your testimony referenced the idea of a down payment
assistance fund. Could you expand on that?
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