The Typical Black Family May Have Zero Wealth by the End of This Century
Despite what Trump says about black unemployment, the inequality gap is approaching the point of no return, according to a new report.
A protester is seen through a prop in front of the US Department of Justice during a rally against big banks and home foreclosures in Washington, DC, May 20, 2013. (Photo by JIM WATSON/AFP/Getty Images)
When America's housing bubble burst over a decade ago, black families were especially devastated. Given that they had been unfairly targeted for high-cost, subprime loans, which led to their household wealth being disproportionately tied up in home equity, they suffered more than any other demographic group once the market crashed. At the same time, Barack Obama was running for and winning the presidency on a platform of alleviating the most devastating effects of the housing crisis. That didn't really happen, even though a lot of the people invested hopes in him to, say, change bankruptcy laws so they could stay in their homes, or at least hold the bankers who put them in the position of potentially losing the roof over their head accountable. Some who felt burned by that experience seemed to either end up voting against Hillary Clinton in 2016 or else sitting out the election entirely as a fuck-you to Democrats, and a few analysts have convincingly argued the party's decision not to deliver on foreclosure relief was a big reason that election turned out in the shocking way that it did.
For his part, Donald Trump, of all people, has long promised to close the gap between people of color and their white counterparts. When the black unemployment rate registered as close to the white one as it ever had last January, the president tweeted, "Somebody please inform Jay-Z that because of my policies, Black Unemployment has just been reported to be at the LOWEST RATE EVER RECORDED!" He's repeatedly bragged about a growing GDP and the (at least until recently) burgeoning stock market, and his followers have used these metrics to argue that Trump can't possibly be racist given that his economic record has kinda, sorta, maybe benefitted some nonwhite people.
But according to a new paper released by the progressive think tank Institute for Policy Studies (IPS) this week, when you use a slightly more complex set of criteria than just measuring GDP growth, unemployment rates, and the health of the stock market, it becomes obvious that the difference between wealthy white people and minorities has reached a crisis point—and is in fact only going to get worse.
"Black unemployment is at historic lows, and median incomes have bounced up in the last couple years, but if we look at wealth and assets over decades, we get a picture of the multi-generational forces at work, which reveals a huge racial wealth divide," Chuck Collins, one of the report's authors and the director of IPS's Program on Inequality and the Common Good, told me. "This is where the discrimination in wealth building, such as the subprime mortgage crisis, really had an impact."
When digging into wealth, the IPS didn't count possessions, such as cars, that drastically reduce in value as soon as you try to sell them. According to their calculations, which leaned on Federal Reserve data, the median family in the United States owned $81,704 in wealth in 2016—about 3 percent less than they did in 1983. But everyone's financial health didn't decline equally. While the median white family saw their wealth skyrocket by about 30 percent, black families did not enjoy the same forward momentum. In fact, the median black family experienced peak wealth of $12,000 in 1995; by 2013, that number had crashed to a record low of $1,700, rebounding slightly to $3,400 by 2016.
While it's tempting to think that these numbers are skewed by the fact that some of the most wealthy people in the world—like, say, Bill Gates—are white, the data is based on median rather than average wealth, which means ultra-rich people aren't what's causing the enormous disparity. (If you were to count the 1 percent, white average wealth in 2016 would have been a whopping $930,000, Collins told me.)
That doesn't mean we should discount the fact that the gap between the 99 percent and 1 percent continued to widen in the past 33 years. The Waltons, the Kochs, and the Mars have seen their wealth grow by almost 6,000 percent since 1983, according to the IPS. That's in part because of the basic economic tenet that money begets more money: When people have wealth, they invest and pass it along while probably hiding a bunch of it offshore. And compound interest dictates that wisely invested money will grow exponentially over time. That means there's some sort of event horizon approaching—a point of no return beyond which there will be no hope for people of color to catch up.
It's already looking pretty grim. The proportion of black families with zero or negative wealth rose from 34 percent to 37 percent between 1983 and 2016, by the IPS's math, and if current trends continue, the median black family in this country will have reached zero wealth in 2082, they found. Even more head-spinning is the fact that it would take the typical black family 52 million years (and the typical Latino family 24 million years) to accumulate the same amount of wealth that the Walmart dynasty has now, according to IPS's calculations.
While the IPS report mostly focused on the Obama era, it noted that Trump's massively skewed 2017 tax cuts and other policies were likely already making things worse—and there was no reason to believe decades-long trends had suddenly reversed.
"The physics of inequality is compounding disadvantage for the have-nots and accelerating advantage at the very top 20 percent of households," Collins told me. "Basically, the longer this trend continues, the deeper the ruts of inequality get, and the harder it will be for any president or policymaker to do anything about it. I think the next decade is critical in terms of reverse these trends before we lead to further distancing and an even more rigid economic and racial apartheid economy."
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