In his first 100 days, President-elect Obama plans to pass an economic stimulus package that will create or save 2.5 million jobs. Economists estimate that this may require almost $1 trillion in government financing, yet, across the political spectrum, they largely agree that doing so would represent a wise investment in our country’s economic future. As McCain economic advisor Mark Zandi testified last month before the Senate Budget Committee, every dollar spent by the government on rebuilding highways and schools, aiding state governments, and providing food stamps, and related investments generates $1.50 or more in economic activity—by contrast, tax giveaways generate no such “multiplier effect,” because that money may be saved or spent on goods made outside the US.
I’ve argued before in this column that any stimulus package should not only jump-start jobs in the short-term, but also invest in expanded opportunity that will be structural and lasting. As the intermingling flood waters of recession and globalization continue to rise, stimulating greater and more equal opportunity remains crucial not only to our short-term rescue but to our long-term prosperity. While the “Opportunity Multiplier” may be more difficult to calculate, it will ultimately prove priceless.
The current financial crisis has shown with a vengeance that, when it comes to the economy, we’re all in it together. It’s in our nation’s interest for everyone to have economic security and the opportunity to move forward. Yet achieving that goal requires a twin focus on improving economic security and mobility for everyone while bridging the gaps in economic opportunity that still too often break along lines of race and ethnicity.
Despite the real progress we’ve made in our country, there is still a racial gap
in economic opportunity that must be addressed if we’re to move the nation’s
economy forward. Too many communities of color are disconnected from opportunity in structural ways that require proactive dismantling.
Some of those barriers spring from contemporary racial bias in our financial and business institutions. Research shows , for example, that people of color are far more likely to be offered high-interest subprime loans than are white borrowers with the same income. Indeed, the racial divide in subprime lending is larger among upper‐income borrowers than among lower‐income ones. Predatory lending—a subset of sub-prime lending—has also long been targeted at communities of color.
Another comes from mapping by the New York City Comptroller’s Office showing that neighborhoods with high concentrations of working class people of color—particularly Central Brooklyn, Southeast Queens, and large swaths of the Bronx—have few or no bank branches, and also large numbers of home foreclosures.
Other barriers are rooted in past discrimination, such as the exclusion of people of color from the suburban migration of the 1950s and ‘60s, and the intentional segregation of low-income housing far from jobs and public transportation hubs.
The results of these and other barriers to unequal opportunity were felt across our economy, even before the current financial crisis. In 2002, $7,932 was the median net worth of Latino households, $5,988 for African‐American households, and $88,651 for white households. This translated to 9 and 7 cents, respectively, for every dollar of net worth held by white households. And the foreclosure crisis has hit minority communities especially hard, exacerbating inequality and putting millions of households at risk.
Put another way, closing the racial gap in economic security and mobility would greatly expand our overall economy, from investment, to small business enterprise, to jobs, to consumer spending. And we have the power as a nation to do it.
Some solutions involve better enforcement of fair lending, fair housing, and other human rights laws. Others involve targeting credit and business counseling, as well as job retraining, to previously marginalized communities.
Still others require affirmative attention to where and how infrastructure projects like highway and school construction are performed. Without oversight and direction, these projects are likely to replicate existing patterns of inequality, from segregated jobs, to old-boy-network procurement, to separate and unequal schools and transportation.
Recovering from this financial crisis demands new rules for a 21st Century
economy that connects all communities to economic opportunity. Stimulating opportunity in the first 100 days is an important place to start.