For nearly as long as the blue social model has existed, one of its strongest selling points has been its potential to improve racial equality in America. Programs like food stamps, affirmative action, Head Start and subsidized housing are aimed at poor and minority communities. Over time, the thinking goes, these will help put these communities on an equal footing and facilitate their rise into the middle class. Nearly fifty years later, however, the results of many of these programs have been much less than advertised, ranging from dubious to destructive. The Washington Post reports that, four years into the subprime housing crisis, black families have been hit the hardest:
A Pew Research Center analysis last year found that the wealth of blacks plunged 53 percent during the recession, driven by falling home prices. The average net worth of a black household in 2009 was $5,677, according to the study, the lowest of any racial group. After years of record prosperity, homeownership rates among black Americans have plunged to the lowest level in 16 years. Unemployment has reached levels not seen since the 1980s.
Worse than this, however, is the damage to their credit scores:
During the recession, credit scores shifted downward for many consumers, regardless of race. According to a FICO analysis , nearly 50 million people saw their scores fall by more than 20 points during the height of the financial crisis. Lenders also tightened the spigot of credit, with the total volume of loans to consumers falling 9 percent over 2009, according to government data, though lending has rebounded somewhat.
Research by VantageScore found that the two biggest contributors to consumers’ deteriorating credit were the fall of home prices and unemployment. Activists say the demographic that has borne the brunt of those head winds are black Americans.
This is huge. Credit scores are poorly understood by most but extremely important to all. They determine one’s ability to buy a home, take out a college loan, and, increasingly, to get a job or receive a promotion. As these scores fall, many black families will be forced to put off major life events, including education for their children. It is possible to rebuild a broken credit score, but the process takes years, and the effects of this lost time will be felt long after the crisis has passed.
The mix of well-intentioned social engineering and Wall Street creativity that gave us the housing bubble and that put millions of blacks (temporarily) in homes that they couldn’t afford is one of the big disasters of American social policy history. That mix is quintessential blue model policy. When subprime loans were created, they seemed win-win: social engineers gained a program that would ostensibly improve the lot of the less fortunate while Wall Street earned large profits. As the mortgage crisis has shown, things rarely work out this way in practice. But policy makers continue to stick to this type of thinking (which is one of the reasons pensions are in such trouble).
The recession and the economic problems of the last four years maybe doing more damage to long-term prospects in black America than the Great Depression.