President Obama celebrated the inauguration of his second term on Martin Luther King, Jr. Day this January. Just a few weeks later, he delivered his first State of the Union address in the middle of Black History Month. Despite the symbolic and substantive reasons to confront race in the State of the Union Address, the President chose not to mention it. The closest he came was to say:
“It is our unfinished task to restore the basic bargain that built this country — the idea that if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, no matter what you look like, or who you love.”
Martin Luther King Jr. made a far more compelling case fifty years earlier that is still relevant today:
“Now is the time to make real the promises of democracy. Now is the time to rise from the dark and desolate valley of segregation to the sunlit path of racial justice. Now is the time to lift our nation from the quick sands of racial injustice to the solid rock of brotherhood. Now is the time to make justice a reality for all of God’s children.”
Racial wealth inequality remains stubbornly persistent. Wealth inequities drive a host of other racial social inequities. And perhaps most troublingly, the racial wealth divide has also dramatically worsened since the housing crash and resulting recession.
In 2010, the most recent year for which data is available, White families held more than six times as much net wealth as Black families and 5.7 times more net wealth than Latino families on average. The loss of wealth from the bursting of the housing bubble in 2007 through the beginning of our halting economic recovery in 2010 was stunningly unequal. The average net worth of Black families declined by 27.1 percent; Latino families lost a startling 41.3 of their average net worth; the average net worth of White families also declined but only by 6.7 percent.
Racial subjugation that is older than the nation itself is at the root of the racial wealth divide. White wealth was built through slavery and the oppression of communities of color that was justified by the doctrine of white supremacy. The divide has been carried forward through direct inheritance, informal practices, and official policies in the United States.
Current federal policies designed to help families build wealth rely heavily on homeownership as the path to wealth creation. Homeownership can have great benefits for families and communities. However, by tying wealth and asset building too tightly to homeownership, federal policy encourages families to take on mortgage debt leaving families and communities more vulnerable to downturns in the housing market and less able to access their wealth when they need it. Additionally, homeownership as a wealth building strategy does not help families and individuals for whom owning a home is not the best option.
As a result of the incentives in policies like the home mortgage interest deduction, many families sought to build wealth through homeownership. Home value comprises a dramatically larger share of Black and Latino wealth than it does of White wealth, making those communities even more vulnerable to market fluctuations. A better policy would separate homeownership and asset building policies to a larger degree.
Government policy should treat housing as a human right and ensure that the housing needs of all families are met. Asset building policies should be focused on delivering the greatest benefit to those who need it most. Our approach to ownership should encourage community wealth creation through cooperative development rather than individual savings and investment. And federal policy should not encourage taking out debt borrowed against the home to the degree that it has.
We cannot address the racial wealth divide by ignoring it. The country can make genuine progress toward achieving Dr. King’s dream only if we focus our policies toward eliminating racial inequities.
Tim Sullivan leads the federal policy work at United for a Fair Economy with particular focus on racial equity and tax advocacy. He joined UFE in 2006 after graduating as the valedictorian of his class at Roxbury Community College. He is a co-author of UFE’s 2012 and 2013 State of the Dream reports.