|Initial Agreement: The Racist Roots of Historical Inequality
To begin with, there is virtually no dispute that prior to the Civil Rights Movement, blacks were heavily discriminated against, and suffered economically as a result. This can clearly be seen in the following chart from the report, which shows blacks with an income in 1947 that was barely half that of whites:
From 1947 to 2005, the median income gap narrowed in terms of percentage--falling from gap of 48.9% to 39.8%--even as it widened in terms of absolute dollar amount, more than doubling, in fact, from $11,453 to $23,530.
Thus, there is no doubt about the structural foundations of the black/white income gap in the segregation era. But there is ambiguity since then: there has been clear progress by one measure--income percentage, while there has been a widening income gap by another measure--absolute dollars. And the widening is not trivial.
Beyond the figures, moreover, there is a deeper dispute: many conservatives argue that there are no more barriers blocking blacks economically, and that any remaining disparities are purely a matter of their own individual inadequacies. Furthermore, they have used such rhetoric consistently to foster racial hostility, and divide the working class, as well as pitting middle-class whites against poor and working-class blacks.
The Rise of Class Inequality In The Modern Conservative Era
Traditionally, the American Dream has most often been described in terms of each generation sacrificing to provide a better future for their children. This has come about though two distinct, but connected phenomena. First, each successive generation of a given population is, on average, more educated, more skilled and more productive than the one before it. One can think of this in terms of moving from one income group to another--from the bottom decile (10% of the population) or quintile (20% of the population) to the next, for example. New immigrants come in on the bottom, and each generation climbs up the relative income ladder.
Their incomes rise for two reasons, however, not just one. First, their incomes because they have a higher skill level than their parents (call it a skill bonus). This is the result of being in a higher income decile or quintile. Second, their incomes rise because everyone with that higher skill level makes significantly more than those at that skill level made in the previous generation (call it a generational bonus). This is the result of the entire decile or quintile making more money.
You can think of it like climbing an escalator. You step up to the next decile on your own, gaining more skills, more education, becoming more productive. But the escalator is also moving up at the same time, taking you higher regardless of your own efforts.
This was not, of course, true of African Americans. During most of our history from colonial times to the present, they were predominantly slaves, and after that they were predominantly locked into a system of sharecropping that kept them tied to the land, and subject to legal and economic restrictions that kept them from advancing, while new immigrants quickly advanced over them.
With the end of legal segregation in the South, and legal discrimination throughout the nation, it was assumed by many that this unique dynamic would end, and blacks would advance similarly to other low-income groups. The following two charts clearly indicate one reason why this did not happen. As can be seen, the very well-balanced economic income growth from 1947 through 1979 was replaced by a pattern of income growth highly concentrated at the top. As a result, even those blacks that did substantially increase their skill levels over that of their parents did not receive the full benefit that others had received before them. They received a skill bonus, but only a very meager generational bonus. The escalator no longer took everyone up at a nearly equal rate. Instead, it virtually stopped for those at or near the bottom, it slowed significantly for those in the middle, and it only really kept working for those at or near the very top.
The result of this altered dynamic was quite clear: those who had been kept off the escalator in the past, and thus were toward the bottom, would not benefit as much as those who got on the escalator before them, or new immigrants who entered at a higher level to begin with.
While America had always valued both individual effort and community cooperation, only liberals had routinely embraced both values. Of course, conservatives gave lip service to community, they poured just as much energy, if not more, into lambasting liberals as threats to community. This was particularly true of the era initiated by Nixon's election in 1968. The inertia of several decades continued for a few years with broad income gains before the oil shocks of the 1970s gave rise to a new political dynamic, and business increasing took a hard line against workers--a stance that toughened dramatically once Ronald Reagan was elected in 1980.
Such was the politics behind the dramatic difference between the two charts above. But that politics also included a very specifically racist subtext as well: Demonizing blacks by identifying them with an impoverished urban underclass, and demonizing liberals for supposedly coddling the underclass and favoring blacks generally with unfair "reverse racism" in the form of "quotas"--which had actually been explicitly outlawed by the Supreme Court in 1977.
Thus, the interactions between race, class, and the emergence of a new, one-way, top-down class war were all key to the rise of a conservative hegemony that stymied broad economic growth, and dramatically lowered expectations across the board, defining a new era of American politics.
The following chart presents another view of the same divide illustrated above. It does not break out the different quintiles. Rather, if shows the divergence of family incomes as a whole from the growing productivity, whose benefits increasinhly went to capital alone.
And Injury To Injury--Helping The Affluent Gain Even More
As if it weren't bad enough that income growth slowed to a crawl for the bottom 60-80% of the population, the government made matters even worse by targeting the substantial majority of it's help for income mobility--money that helps people grow richer, rather than simply making up for lack of adequate income--on the most affluent members of society. "The State of the Dream" discusses this in some detail, but it relies on data from a report issued last year by the Urban Institute and the Pew Trusts, "How Much Does the Federal Government Spend to Promote Economic Mobility - and for Whom?" This was a typically impressive product of liberal think tanks that was totally unsupported by the sort of media blitz that the right routinely mounts on behalf of totally garbage reports. So if you never heard of it, join the club.
I had no idea that anyone had done this sort of analysis. What the study did was look at programs designed to build wealth or wealth-generating capacity, as opposed to programs that merely maintain or supplement income. Such programs can be generally regarded as enhancing income mobility. While income maintenance programs tend to be skewed toward lower income Americans, income mobility programs have precisely the opposite skew, they are dramatically skewed toward the more affluent. This is, quite naturally, the exact opposite of what conservatives have forever claimed that liberal big government does. Surprise, surprise! Once again, conservatives have been lying to us!
In the introductory section, the authors wrote:
Our findings are as follows:
- A considerable slice of federal funds has been aimed toward programs promoting mobility at some level. In 2006 alone, about $212 billion or 1.6 percent of gross domestic product (GDP) in direct spending and another $534 billion or 4.1 percent of GDP in tax subsidies went to programs aimed at promoting mobility, for a rough total of $746 billion. (The measure itself is rough because of the inevitable issues of categorization, and because one cannot strictly sum tax expenditures together.)
- Roughly 72 percent of this $746 billion in mobility expenditures, or $540 billion, is delivered mainly through employer-provided work subsidies, aids in asset accumulation, and savings incentives. This spending flows mainly to middle- and higher-income households and often excludes lower-income households or provides them comparably little in benefits.
- The remaining 28 percent, or $205 billion, of the mobility budget is channeled through programs that favor lower- to moderate-income individuals.
Got that? Roughly 72 percent of mobility expenditures--or $540 billion--"flows mainly to middle- and higher-income households and often excludes lower-income households", while a measly 28 percent--or $205 billion--is channeled through programs that favor lower- to moderate-income individuals.
Here's what that breakdown looks like in chart form:
At the end of the report, the authors conclude:
The federal government plays the economic mobility game in spades. Or at least, it so appears, absent effectiveness studies by the federal government on its own programs. We estimate that approximately $212 billion in direct spending and $534 billion in tax subsidies, or more than $6,000 per household, was invested in 2006 toward federal programs aimed, at least in part, at promoting mobility....
Although the federal government attempts to promote absolute mobility among the middle and upper classes, the poor are often excluded. In addition, those with higher incomes are granted the lion's share of benefits in many programs, including pension subsidies, incentives to acquire employee benefits, and most homeownership subsidies. Of the $746 billion roughly estimated to be spent on programs that, at some level, aim to enhance mobility, well above $500 billion goes to enhancing the mobility of those in the top two quintiles of income-people who already possess substantial private command of financial and human capital. The only major categories of mobility spending that reach or target the poor-those who might benefit most from mobility-enhancing programs-are education programs like Pell grants, child health and well-being programs like SCHIP and children's Medicaid, and the work support portion of TANF.
Here's what the mobility spending looks like in comparison with income maintenance and general spending on public goods:
Naturally, the "entitlements" that have Peter Peterson and other "non-partisan" elites' panties all in a twist don't have anything to do with income mobility. Those parts of the budget are sacrosanct.
And here's a further breakdown which shows how dramatically the distributional patterns vary with the realm of income mobility expenditures. Some of it--the Earned Income Tax Credit, for example--is actually targeted to those who really need it. Other stuff--the preferential tax rates on capital gains and dividends, for example, not so much.
What all the above shows quite clearly is that black economic development since the Civil Rights Era has been effectively thwarted by conservative political dominance, which has disproportionately favored affluent white populations that previously benefitted from "universalist" programs that blacks were effectively excluded from--notably, various New Deal programs, including mortgage support, and labor laws that excluded domestics and agricultural workers, as well as the GI Bill, which blacks were technically eligible for, but could not readily utilize--and that benefited from an era of broadly-shared economic gains that came to an end just as blacks finally began gaining much broader access to the workplace.
At the same time, blacks have demonized throughout this period for supposedly gaining unfair advantages, and grabbing the lion's share of federal benefits, when, in fact, the benefits they have received are disproportionately not those that help to build capital over time, but rather those that simply allow one to keep treading water.