Transcript
David Jackson: My name is David Jackson and I'm a senior adviser in Community and Economic Development. Next slide, please. CED at the Atlanta Fed works to advance data-informed practices and help improve economic mobility and resiliency in the Southeast. We do this by conducting research, creating data tools, and convening partners to uncover the barriers to and opportunities for improved economic mobility.
In June, Atlanta Fed president Raphael Bostic penned a dynamic essay titled "A Moral and Economic Imperative to End Racism." In this essay, he stated that one way the Atlanta Fed could contribute to a more inclusive economy lies in the foundation of promoting maximum employment by addressing the economic inequity that persists in this country. This also implies to economic recovery. This Inclusive Recovery series is an example of that commitment. It'll give us an opportunity to speak with practitioners and researchers and policymakers to talk about and learn about how recovery can be more inclusive. And that conversation starts today with this webinar.
We're going to start out with Dr. Michael McAfee, president and CEO of PolicyLink. This video with Dr. McAfee was recorded last week because he couldn't join us today because of another commitment, but he wanted to be sure to add his voice to this conversation. I'm not going to take the time to read Michael's very impressive bio, but we're going to drop it in the chat for you to read. Also, you can share questions in the Q&A and vote up the ones you'd like most answered. We'll address questions at the end of the discussion.
But first, let me give you the Fed disclaimer. The comments you're going to hear today are mine and that of the speakers alone and do not represent the Federal Reserve System or the Federal Reserve Bank of Atlanta. And with that, let's hear from our conversation with Michael McAfee. Michael, thank you so much for joining us today.
Michael McAfee: It's a pleasure to be here, David.
Jackson: Let me start out by asking a question about how PolicyLink has always been at the leading edge of thinking about equity and inclusion in this country. Right now, we're experiencing unprecedented economic, health, and racial shocks and stressors. I'd like to talk about what are the challenges and opportunities you see as we work to address these conditions and move toward recovery?
McAfee: I see the challenge and opportunity as one and the same. It starts with the original sin of this nation being founded on genocides, stolen land, and slave labor. The anti-Black racism that was a result of all of that still runs through our DNA. And in fact, it's harming folks who aren't even Black now. I want you to hold a number, 100 million plus. That's one in three folks in this nation who are economically insecure. They were economically insecure before we came into 2020. They were economically insecure before we got into this pandemic. They were economically insecure before they lost their jobs and were unable to pay their rent and now face eviction in large numbers.
That is our challenge in this nation, our inability to want to fully reckon with our past. And not that it's a past that is something that we're still not dealing with, it's a design challenge in this nation that is still very active. You think about our economy. That 100 million has been locked out of it. You think about housing. Black and Brown folks have been locked out of it. You think about racial wealth gaps. It's created because Black and Brown folks have been locked out of being able to access jobs and housing in ways that would increase their wealth over the years.
You've seen banks recently get their hand slapped again for discriminating. You're watching leaders in the South and all over this country try to thwart people's ability to vote. Our grandmothers should not have to stand in line for 8 and 10 hours to vote. That's by design. That's what I mean when I say that this is a design challenge. Aspects of this nation are working overtime to make sure that that 100 million can't influence the political economy and that the structures that they interact with are oppressive. That is, quite frankly, the challenge, but it's also the opportunity. That is the liberating work that we must do for our generation.
We must compel our institutions to love the things they've never loved, which is Black folks. Loving Black folks would go a long way to then transforming our institutions so that they work for everyone and we would realize the promise of equity. And here's the reality. Until you love Black folks, until you center the 100 million, it really doesn't matter how many trillions of dollars you put out there, because you're putting them in the world in an unaccountable way. You saw this happen with PPP [Paycheck Protection Program]. You couldn't even see the humanity of small business owners that were struggling, and you didn't even know that many of them didn't bank with the large banks. You didn't even know that the major banks were going to just go to concierge service and block them out. You didn't know that because you didn't see their humanity.
Opportunity Zones is another example. You use their name to pass Opportunities Zones and then you act startled when you discover that all the Opportunity Zones really did was once again, gentrify community and give those of us who already have means even greater means. There were greater returns on our investment. It didn't fundamentally change the lives of that 100 million. It's time for us to be able to ask one fundamental question with our policy and our deployment of our capital, and that is, who is better off? When we answer that question, it's got to be the 100 million or we must stop the behavior and the activity that will follow because it will not hit the mark. It will be inefficient, and it will be unaccountable.
Jackson: That's powerful, Michael. Thank you. We know that minority populations, specifically, Black, Latinx, and Native Americans, are disproportionally likely to be affected by COVID-19 and unfortunately, die from the disease. In addition to these distinct health outcomes, we know that the economic burden of the pandemic has hit communities of color the hardest. Can you share with us why we're seeing this, and why COVID-19 has specifically started to magnify these inequities?
McAfee: Well, this goes to that design challenge. You know, I think it was Rolling Stone magazine did an article in some of the early days of COVID. That article overlaid the redlining maps, it overlaid the poverty map, it overlaid the frontline worker map, and it overlaid the COVID map. And they lined up beautifully. They lined up beautifully. This is what I mean when I say it's the design challenge. Folks who are afraid to disaggregate the data by race because what they were afraid of is what we saw happening.
The more we saw that it was really poor folks, Black and Brown people who were being impacted by COVID-19, they were afraid that the nation would just want to move on, open back up, and you started seeing that happen. Think about it.
Health professionals afraid to actually use that data best practice because they know the power of anti-Black racism. And so, they're afraid to actually disaggregate the data because this is one time where they knew people would want to move on. They would want to go back into that individualistic state. These folks have some type of problem. They haven't taken care of themselves. The whole world shouldn't suffer because they're lazy, they're poor, they haven't taken care of their health. That's a tragic indictment on where we are in this nation, and that's what I mean when I say we don't see each other's humanity. That's why you're here. We've created a world that is actually too toxic for that 100 million. And quite frankly, and here's the little dirty little secret, white America is beginning to understand that it's too toxic for them as well.
You can't run away from it. You can't wall yourself off from what we've designed. And sooner or later, it's going to affect your family, and that's where we're at as a nation right now. Inextricably bound, yet still fully refusing to see the humanity of the folks that are our salvation. You saw the problem of what's going on with Black and Brown and indigenous folks, you set a course for this nation to continue to be strong and prosper in many years to come.
Jackson: You start to lift up a conversation to talk about data and how it's important to disaggregate data to look at all populations. When we look at the data from the last recession, we can see that the racial wealth gap persisted and even widened. Why is it that that happened, despite the fact that there were extensive recovery packages that were passed during the last recession? Why do these inequities continue to persist?
McAfee: Well, think of it this way. Just be street smart. That money didn't go to the 100 million. It didn't go in their pockets. And see, this is that design challenge again. We've just put out trillions of dollars in this pandemic. It didn't go to people on the street. We think so little of that 100 million, we can't even give them 300 damn dollars right now. Think about that. Our Congress couldn't even pass a second stimulus bill, yet they will give airlines trillions of dollars to do what they've already told you they're going to do, which is to lay off folks come October and going into the future months, but you can still give them trillions of dollars.
See, when you behave this way, you actually forfeit the right to look at data and expect that the numbers are going to change. The racial wealth gap is caused because you use public policy to build the white middle class, the GI Bill, FHA [Federal Housing Administration], land zoning, land use public policy. You built the white middle class with public policy; you didn't build it with charity. And yet, somehow you try to solve the racial wealth gap of Black and Brown people with charity. It ain't going to happen. If you want to solve the racial wealth gap, begin to think about how do you actually help people get money in their pockets and build wealth. We know how people build wealth; they have built it from stocks. They have built it through land. They have built it through homeownership.
If you really don't want to have transformative public policy around those things that would make it easier for folks to access those streams of wealth, it is not going to happen in this nation, and it doesn't matter whether the Business Roundtable wants to jump on the bandwagon, banks want to jump on the bandwagon. This is an important point for us all to realize now. You can be an ideologue on the political spectrum and you just will not solve any problem. We all have to choose right now. Do we want to be ideologues, or do we want to transform this nation for the better? Because the reality is, the scale of the problem is so significant that you can't solve it without public policy.
We need to stop lying to ourselves and launching initiatives and putting all of our hopes and aspirations in data for which we have not the commitment to really do something about.
Jackson: Michael, you've done a great job of helping us see how the design challenge really sets us up for failure. We can pump a lot of money into the programs that already exist, and they're not going to help get to the point where we can remove race as a predictor of the outcomes. How might we do this in a way that changes that outcome and ensures that we're able to reach people of color, Latinx, anybody that really needs assistance for a good recovery?
McAfee: Yeah. The first thing I would say is we need to distinguish between what is charity, providing short-term relief for folks, which is needed and good and what would be liberatory at. Charity won't really change a person's life trajectory all the time. Sometimes it does, but it keeps opportunity really still too random for most of us. Charity looks like me getting a few more interventions than my sisters, and I make it and my sisters are still trapped in poverty. That's what I mean when I talk about charity. Few folks would, but generally the majority of folks are still going to stay trapped in their circumstances. If we really want to tend to these issues, we need to begin to remake our institutions so that they serve. This gets to the design challenge, the user experience challenge.
If you and I fell into hard times, we would not ask to run the gauntlet of 20 nonprofits or 20 governmental agencies. That's not what we would ask. We would say, "Give me money in my pocket so I can keep my lights on, I can keep some gas in my car, I can keep my cellphone turned on, and I keep navigating the community and finding my way." That's what we would ask for. And yet, that's not what we give people today. They run the gauntlet of all these agencies and then we discover, like what we discovered in Florida, that the unemployment insurance system was designed to fail intentionally because of that Black racist trope of the Black welfare queen. We know that that is not true, but it works. It worked in Florida where they used taxpayer dollars to design a system to intentionally not work. Think about that for a moment. And that's what I would recommend that we do right now. That until we can get our systems to stop being hostile to that 100 million, you go to direct cash transfers.
Jackson: I know that PolicyLink works throughout the country and with partners to help change these outcomes. Are there any promising practices that you've seen?
McAfee: I'm seeing white America step up and that's how we have this multiracial coalition right now, whether we're talking about Black Lives Matter or the transformation of some of our institutions. I'm watching white leaders do that. I never thought I would see that. We're in a moment that is very messy, but I'm immensely hopeful because of what I'm seeing on the ground. This nation has always had a revolutionary spirit. Democracies are experiments about how we will relate to each other. And what you hear me really signaling that it is time for people of color and white folks to fully step into this experiment and make this nation be what it can be, but that is the work, whether we're talking about a recovery or no recovery. To me, it doesn't really matter.
The north star of equity holds steady. Poor people don't know a political season. Poor people don't know a pandemic or a crisis. It just means that they're going to suffer worse, so let's just be street smart and commonsensical about it. We are evolving to a place where we are fully participating in this democracy and we are remaking it. You're seeing leaders on the ground pass strong tenant protections across the country. You're seeing advocates on the ground pass strong police use-of-force requirements. They're transforming these institutions.
The conversation that I'm having is how do we honor that imagery from the street in a way that will be transformative, and how do we use our purchase to accelerate it? How do we accelerate this work so that we actually don't have to wait for another 20 or 50 years for things to get better for that 100 million? We can do that right now. We could do that right now if we shifted our gaze a little bit, if we asked ourselves what would we want right now, if we asked ourselves what do our institutions need to be, to be all that they should be for a multiracial democracy that centers something other than whiteness? That's the work for our generation, and I see people stepping into that work, and that's why I'm excited.
I love and care about white America the same as I care about my own people. And the things that you're hearing me describe, I'm saying to white men the same way I am to Black men because I don't want white men dying because their mortality rates are increasing because of a toxic world. I don't want that to happen. I don't want Latinx folks left behind, unable to participate in an economy that is still for many doing quite well. I want them to be able to access that. This is a moment where you start taking the steps by doing your own work and then doing the work in your institution and then finding the moment where you can then do the work that the nation requires. That's the journey that you hear me talking about right now.
Doing the work on myself because this is an awakening moment for me just as it is for everybody else, doing the work on my institution, and then finding moments where I can influence how this nation will respond to the challenges and opportunities that are in front of us.
Jackson: Dr. Michael McAfee, president and CEO of PolicyLink, thank you for joining us today.
McAfee: Thank you, brother. I appreciate you.
Jackson: That was a powerful discussion we had with Michael McAfee, and I think he really set out some points for us to think about as we move toward this panel discussion. And we have a really dynamic panel, so let me introduce them. Again, I'm not going to read their bios. We'll drop them in the chat so you can read them. Today, we have Solana Rice, who's with Liberation in a Generation, Marcela Montes with the Urban Institute, and Ed Sivak from Hope Enterprise Corporation. I'm going to start out with a question for Marcela. Marcela, Michael spoke about a design challenge with the systems facilitating past recoveries. He also mentioned how there were clearly disparate impacts on people of color. The Urban Institute has studied past recoveries. What does the research tell us about disparities in these outcomes?
Marcela Montes: Well, first of all, David, thank you so much for inviting us to participate today and putting together such a thoughtful and inspiring panel. Urban Institute is a Washington, DC–based policy studies organization. When we're invited to these type of conversations, the expectation is that we come in to set the stage and remind people with numbers and facts how awful or how urgent the situation is, and that's a fair and important use of data. But after hearing Michael's comments about this being a design challenge, it strikes me that what I want to emphasize about our inclusive recovery research is not the disparities and outcomes that we observed, but that our research findings are very aligned with Michael's assessment.
Our current systems were not created for the benefit of people of color and in many cases, have been working actively against people of color. Let me tell you about our inclusive recovery research. It looked at 274 cities with more than 100,000 people over a period of 40 years and found fundamentally that economic recovery does not automatically result in inclusion. Instead, what we learned was that places that made progress in indicators of racial and economic inclusion did so because local leaders in those cities made a deliberate decision to center their change efforts in racial and economic inclusion. You'll see that on the screen we've pulled up a definition, a very specific definition of inclusive recovery. This definition came out of our research, both our review of the literature and our effort to come up with metrics that measure economic inclusion and racial inclusion and that related to measures of economic health.
I think the key component of this definition is that if our outcome is inclusion, if our outcome is equity, we really need to be looking at economic growth alongside those measures of economic inclusion and racial inclusion. In other words, we really do need to be taking into account those 100 million people that Michael mentioned. We can't ignore it. I'm actually going to stop there, so we don't need the other two slides in there. I think that's probably a good start.
Jackson: Yeah. No, that's a wonderful start. Now, I want to turn to Solana. Solana, we know policies and the systems created to implement them are an important part of any recovery. We have already seen in this recovery how well-intended policies land right into existing systems that did not seem to be able to service everyone. Why do you think this happens?
Solana Rice: David, that's a great question, and thank you for hosting this conversation because it's so timely. I feel like we're at a real crossroads moment and we have been for a little bit. I'll say it's three reasons. One, it's exactly what Michael was talking about. Again, systems are broken and also what Marcela just said, systems are broken, and they are designed to not work for Black, Latinx, indigenous, Asian, Pacific Islander people. The second reason is that our advocacy infrastructure needs more support and more investment. I'll say our third is that we're at the point of thinking about restructuring. This was also a theme that Michael brought up.
I'll talk about the systems are broken. Our systems for delivering health care, our systems for getting unemployment benefits. As soon as the unemployment numbers rose, people were filing for claims and having the hardest time in states throughout this country. Our system of housing is broken. All of those things and more, but specifically those things, have created a tremendous vulnerability around COVID-19 and around what an economic recovery is. I have to say, to take it one step further, that these systems have been broken because it is purposeful, it entrenches white supremacy. If we're working on an equitable, inclusive recovery, we have to embrace racial justice because there is no economic justice without racial justice and vice versa.
We live in what we call at Liberation in a Generation an oppression economy, one that thrives from theft, exclusion, and essentially exploitation. We've created a whole economic system that is able to "other." These are echoing the words of Michael as well. We can't talk about inclusion without confronting that our economic systems are inherently racist, and they have been, not inherently, they have been designed to be racist, I should say. I also want to just emphasize that it's broken because we're putting good money into bad, bad systems, and we cannot necessarily undo that without an advocacy infrastructure, without the people and grassroots leaders, in particular, and the people who are most impacted, black, Latinx, Asian, indigenous, Pacific Islander people, calling out and building a new way forward.
We have to identify where the money is. We have to make good decisions about where that money goes. We have to be able to hold the policymakers accountable, but we can't do that without real investment in an advocacy infrastructure that marries the power that grassroots leaders are developing with the...into the systems of how we design these policies. I'll just say again, to echo Michael, I mean, what a great conversation you all had, that this is not a moment about just responding. This is a moment about restructuring, and that takes imagination because we are going for an economy that we have never, ever, ever experienced or seen before.
We can see that when we push checks out to people, we missed whole bunches of people. We missed people who are immigrants to this country. We missed unbanked people. When we're trying to deliver health care, we're missing too often, we're missing people that have historically been left out, whether they be unemployed or just not have access, physical access. With Liberation in a Generation, I'll just say we're a movement support organization, and we're actually incubated by PolicyLink. We've been working to support those grassroots organizations to reimagine and we're helping...we really think that there is a need to build organizations who are connecting grassroots and policy advocacy with a racial economic justice lens.
We're so pleased to look out into the ecosystem and see groups like the Southern Economic Advancement Project, and the Action Center on Race and the Economy, and the Partnership for Southern Equity. I mean, these are groups that are doing the work to support that connectivity, and I think that's key to that reimagination, that advocacy infrastructure, and that real acknowledgment that we're dealing with broken systems is absolutely necessary in this next year.
Jackson: Yeah, you know, Solana, you raised a number of really good points. One of the things that we talked about a lot internally as we were planning for this is, we know going into this pandemic that there were many people who were disconnected from systems. Just getting back to normal, what people call it, isn't good enough. We need to leapfrog the old normal to a new normal that's much more inclusive.
And Ed, we know organizations like Hope play an important role in turning the policies that service recoveries into action. We also know that Hope works with clients that are often locked out of mainstream financial channels. What have you experienced and what could provide insight into how to implement a more inclusive recovery that lifts people up that have been locked out of others?
Ed Sivak: Well, David, thank you for having me here today. It's a privilege to be on this panel with both people and organizations that I've admired and followed for many, many, many years. Over our 26-year history here in the Deep South, we've encountered a number of recovery opportunities and challenges. Hope is a 36,000-member, Black-owned, women-owned financial institution. Whether it's in response to the Great Recession, which was spurred on by predatory loans for rebuilding the Gulf Coast and New Orleans after Katrina, Hurricane Katrina, one of the things we talk about often is while we are a financial institution and we do make loans, Hope was really created to ensure that factors such as race, gender, place of birth do not stand in the way of getting the economic opportunities that everyone looks forward to, deserves, and should enjoy equitably in this country.
Certain themes have a way of being ever present, and one of the themes that we see in almost every disaster is the need for speed and urgency, but I think we need to interrogate this value because speed often dictates that we run resources through existing programs. We already heard Dr. McAfee reference design challenges and both Ms. Rice and Ms. Montes also referenced the issue with existing structures. Implicit in this view is that when we run programs through existing systems, systems that were biased in times of recovery, we're going to arrive at a recovery that is ultimately not inclusive. I think Hurricane Katrina offers a number of lessons on that front.
If you look back to 2005, 2006 in Mississippi, most of the damage on our Gulf Coast was caused by record-level storm surge. And in its haste, the state created an incredibly inequitable recovery grant program. It made grants that were available for homeowners that did not live in a flood zone that experienced storm surge damage and had property insurance. Individuals that met these characteristics were eligible for up $150,000. In contrast, the same homeowner living outside a flood zone experiencing storm surge, but without property insurance, someone who was also more likely to be low income, initially would only qualify for grants of up to $50,000.
At the time, there were arguments that were made about personal responsibility, about having property insurance, about not wanting to create a moral hazard for future disasters, but I'd argue that we flunked the moral hazard test on that moment when the recovery program was created. When the choice was made to compensate low-income people, predominantly people of color, less than, not to mention reduce the likelihood that they could rebuild where they lived, through the grant program. And ultimately, through the heroic work of advocates, the lower amount was increased to $100,000, but not at parity. So again, that's just an example of what we've seen when there are design flaws with the programs that are developed in response to disasters.
It's with this backdrop that I think we also must look at the racial equity or lack thereof of our nation's recovery effort. The fact of the matter is, the single largest appropriation for COVID-19 relief was for a business loan program that was run through the banking system. This is a banking system where 77 percent of white households are fully banked, 46 percent of Black households are fully banked. This is a system where 29 percent of loan applications from Black applicants for mortgages are denied, in contrast to 16-1/2 percent for white folks, for white households. You need to look no further than the Federal Reserve Bank of Atlanta's Small Business Credit Survey to see that white entrepreneurs report receiving most of what they request on loan applications for small business credit at much higher rates than Black entrepreneurs.
It should come as no surprise as the returns from the first round of the Small Business Administration Paycheck Protection Program came in that we heard story after story after story of Black-led businesses and Black-led nonprofits that could not get a loan through the program. This includes a barber, a barber who survived Hurricane Katrina, who had been in business for 27 years and called on his bank—one of the largest banks in America—for help only to never have his call returned. He was simply seeking $7,200. Hope Credit Union made that loan. This is another example. In Little Rock, there was a social service organization that was approved. They qualified for $266,000. They called their bank. By the time the bank got back to them, they said they had stopped taking applications. They reached out to another bank. The bank shared that the program had closed down.
This is a program that provides management and trauma therapy to children and teens in the juvenile justice system, youth who were in the system who were released early as a precautionary measure taken by the correctional facilities to prevent a mass outbreak of COVID-19. These were services that were critical. Again, the banks didn't step up and meet the moment. Hope Credit Union made that loan. This is a nonprofit organization that is run by a Black woman. We won't even go into the limits of the program to support sole proprietors, which make up 95 percent of Black businesses in America. Since April, Hope was able to process 7,300 Small Business Administration Paycheck Protection loans. We ultimately approved 2,900, supporting well over 10,000 jobs. The majority of these borrowers or businesses owned are led by people of color, women, many turned away by traditional lenders.
We can offer story after story like the ones I just shared, but I also think it's important to point out that it wasn't just limited to the borrowers that I shared. It included a historically Black college. It also included many other large nonprofits, Black doctors, Black dentists. We can't just say this is an income or class program, we have to be explicit about race and structural racism in the system here, which was the Paycheck Protection Program. I think this underscores some points that I'll make later in the conversation about the critical importance of minority depositories, the community development financial institutions, institutions that have long been on the frontlines of serving people in communities of color, particularly when it comes to the moment and approaches the year we close the racial wealth gap. Thanks, David.
Jackson: Thanks, Ed. And thank you for all the work that Hope does in the community, because we know there's a lot of people and actually governments that would be locked out if Hope wasn't stepping up with their financial tools. We hope you stay in this space, continue to grow, and do that good work. One of the things you lifted up, I didn't hear this in the prep, Ed, is these twin imposters of recovery, the value or lack thereof of a speed of urgency and the moral hazard premise. I think that very often public policies embed those things, and it really is important for us to interrogate whether those dual mandates or dual purposes help us with recovery.
I know that research shows us that recoveries may lack a lens on racial equity and are not likely to produce inclusive outcomes. How do we change that? Are there specific data, policies, and program solutions that can help eliminate race as a predictor of recovery outcomes? I throw this question out for all of our panelists to address.
Montes: Well, I can start from a global research perspective. But like I did before, I want to take it up a level and look at the foundational pieces that are critical to begin addressing the way our systems, structures, and policies have been designed and hopefully, could help us harness that creativity that Solana was referencing to. Because I think there are certain definitely programs and policies that I could talk about, about affordable housing to keep people from being displaced, direct cash transfers like Michael mentioned at the beginning putting cash into people's hands, but I think one of the key things that our analysis allowed us to do was compare economically recovered cities to their peers on inclusion metrics during a given recovery period.
We did a series of case studies in just cities, and I don't have the time to go through all of those case studies, but what I do have the time is to highlight eight building blocks that our researchers identified based on those case studies. These building blocks are mutually exclusive to each other. Really, you can see them. There can be instances where two or three can be present. In the interest of time, I'm going to focus on two quick city examples of cities that I think illustrate or have illustrated some aspects of some of these building blocks that I've highlighted here on the slide.
At Urban, I sit at a very specific place called the Research to Action Lab, so the name says it. It's very obvious. It's really about taking research into the ground and into the hands of decision makers. The main program that I manage is called the Shared Prosperity Partnership and it's a national partnership that works in eight different cities, helping advance efforts focused on inclusive growth. The two cities that I want to quickly highlight are Fresno and Memphis. Fresno is very far away from our southern friends today. They're in California, but they’re in the Central Valley agricultural region of California. They're a really interesting city. They're one of the largest cities in California, but one of the poorest cities in California.
Folks there will tell you that they've actually never had an economic boom, that they've been constantly in this place of economic recession and are aspiring to their economic recovery and growth. What I'm going to point to is something called the DRIVE [Developing the Region’s Inclusive and Vibrant Economy] Initiative. The DRIVE Initiative is actually a cross-sectoral effort that has come together over the last couple of years. It has philanthropy, nonprofit, government sorts of different people representing different sectors, which speaks to one of our principles, which is cross-sectoral partnership. They developed in 2019 a strategic plan detailing 19 initiatives that collectively call for $4.2 billion of investment across three major areas: economic development, human capital, and neighborhood revitalization.
This plan has garnered attention from the governor of California, has garnered philanthropic investment. If you ask them about what has put them in this position and granted, they're in their early days, this is early days, it's really been about establishing the shared vision and bringing the partners to the table. But not just any old shared vision, this actually has been really hard work for them. They are in the middle of really grappling with reckoning the racist policies and practices that have brought them to this place. There's a really interesting article that was in the Stanford Social Innovation Group Review that was released on this process about two weeks ago, and they highlight some of those lessons. I'd encourage you to check that out because it's really explicit about the importance of centering race and equity, of being brave enough to say, "We're not going to, we're going to invest in shared prosperity," but going beyond that and saying, "What we mean by that is that we're going to invest in closing the racial wealth gap for Black people in our city."
They're a work in progress but a good example of a city that's coming together to do something different, to try to do something creative. The other example that I will point to real quick is Memphis. They are in their own collective impact process and in early stages as well, but one of the things that I've loved watching about Memphis is that they've been very unapologetic about the role of community voice, about the role of people who have not been at the table, to both share their voice and make decisions, whether it be in policy or resource allocation. One of the things that I want to point out that recently I saw come out of Memphis is an open letter to community leaders and decision makers from 100 nonprofit leaders. It was a letter calling to push the system to do something different. It's a brave letter and it's also a letter that even lists an initial agenda for people to consider. It asks people to do something different, asks corporations to sign a Living Wage Pledge. I think there's a link in the chat.
But I give you all those examples because although I think the research and the data are important, I think we really are in a moment where we need to act differently and be intentional about hardwiring inclusion into our policies and practices.
Jackson: Thanks, Marcela. That's great. Anybody else want to dive into this question?
Rice: I can share and I'm really liking the questions that are coming into the chat. One of the questions was actually about policy and policy solutions. At Liberation in a Generation, we've been thinking a lot about these policies. I'll say right off the bat, the policies that we're looking at are not new, they're not brand-new ideas. Someone asked should we be forming and baking these policies and then bringing the most impacted people along, or should we be including the most impacted people in the development of these policies? I will say it's the latter. We have started to think about these policies as guidelines and some basic structures, but the details, I think, have to be figured out in partnership with grassroots organizations, activists, and advocates.
I offer this policy platform more as a library to start thinking about what are these big, and these are all...we're really looking at federal investments because we think that something like closing the racial wealth gap or really driving an inclusive economy really starts with federal investment. The federal government has the power of the purse. Cities and states have to balance budgets, the federal government doesn't actually have to balance its budget. We think with the amount of money that we need to really make an inclusive, equitable economy work, it's got to be from a federal perspective, so we've been focusing most of our policy work around that.
One of the first things we look at is a set of principles. You'll see here, we've sort of talked about dismantling an oppression economy and that's based on four things. One is ending the criminalization of people of color. What we mean by that is things like banning private prisons, ending cash bail, demilitarizing law enforcement. The next big principle is ending the dual financial system. Ed spoke so great about this issue that we have done all kinds of investments and wealth building for mostly white folks—not the same. We've actually done the opposite of wealth stripping for black, Latinx, indigenous, other people of color.
Curbing corporate power. I mean, I think we have to talk about the fact that even in our financial sector, basically we're dealing with five big banks in this nation organizing and opening up and closing down whole lines of credit. We've been thinking about a wealth tax, making sure that workers are actually protected, especially in situations where we're dealing with monopolies and a lot of corporate concentration. We see all these issues with Amazon and Google and Apple and Facebook. They've all been brought to Congress recently. We've really got to think about our corporate forces and how much they are actually driving economic oppression as well.
I'll say at the end, ending political suppression of people of color. We are absolutely, I mean, I don't think we have to say any more about the political suppression of people of color after what we've seen in the last couple of months. Obviously, ending voter suppression, restoring voting rights for all, making sure that we're publicly financing elections. On the opposite side, we also feel like we're dismantling, but we're also building at the same time. The principles that we see here are making sure that our basic needs are met, all people of color have our basic needs met. All of this side of the platform are undergirded by a set of what we call guarantees, an Economic Bill of Rights, if you will; a guarantee to income, a guarantee to clean air and clean water, health care for all. These are so basic that sometimes when I say them, I'm like, "This is what we're asking for," but it actually is transformative because we haven't seen this delivered to all people of color in this nation ever.
The next principle is around finding safety and security, enacting a Homes Guarantee. There is a group called People's Action and they've been advancing this idea of increasing our social housing, up to 12 million new units of social housing. This is basically saying that we all deserve a place to live. And especially in a pandemic, we saw how critical that is. Guaranteeing intergenerational wealth. There are several proposals around what we call Baby Bonds, which is ensuring that every baby born in this country has an endowment for which they can grow an asset later in life.
Our next principle is that all people of color will have our contributions valued and compensated. This is also very basic, but we put in a guarantee to a job. Anyone who wants a job can get a job. A guarantee to a debt-free college, not just tuition-free, but debt-free. And family care and paid leave. The last principle is that essentially we have an economy where all people of color belong, where we aren't literally ICE-ing out immigrants out of this country, where we are not banning people that are formerly incarcerated from public benefits. I'll just say that this agenda is big, and it is a lot, and it's going to be costly, and it's what we deserve. Yes, it's costly, but so has the contributions and all of the things that people of color have provided for this nation over the entire history of this nation.
Those are some of the things that we are thinking about. And again, we offer those as literally offerings to grassroots groups to start thinking about, "Well, how do we do these policies in an equitable way and really shape them?"
Jackson: The concept of an Economic Bill of Rights is powerful. When we think about a recovery, Atlanta Fed president Raphael Bostic often talks about this less than recovery, a less than sign. An Economic Bill of Rights as a tool to help ensure that it isn't a less than, something to think about. Ed, do you want…
Rice: I want to credit my friend Darrick Hamilton for introducing me to that concept.
Jackson: It's a good one. It's a good one. Ed, do you want to add your voice to this question?
Sivak: I will. Thank you, Mr. Jackson. A couple of things and I believe I shared a couple of slides here. I want to just take a moment to talk about the critical importance of key wealth financial institutions and minority depositories. You'll see on the slide there the number of MDI, that's minority depository institution credit unions in the Deep South states by year. You see that from 2013 to 2018, we've lost well over 30, 40 credit unions. I think it's also important to point out that that represents a loss of $1.2 billion in minority-owned financial institutions. It's a huge loss. These institutions are becoming extinct. These include credit unions from three of the six districts, the Atlanta Fed's districts from Louisiana, Mississippi, and Alabama.
Why that's important is because Black banks and Black credit unions are in Black communities. The FDIC [Federal Deposit Insurance Corporation] did a report that shows that an estimated 6 out of 10 people living in the service area of Black-owned banks are Black. This is in contrast to 6 out 100 for banks that are not Black led or Black owned. Black businesses are also more comfortable applying for credit at CDFIs [community development financial institutions] and credit unions. A 2019 Federal Reserve survey found that Black firms are twice as likely to apply for financing at credit unions and three times more likely to seek financing at CDFIs and their like counterparts. Additional research shows that Black banks originate substantially higher portions of mortgages than small business loans. This matters.
I think it's critical to lift this up as a strategy for closing the racial wealth gap. If you move to the next slide, what you'll see is that the racial wealth gap for Black and white households, there's many different measures. The measure I used here is $13 to $1. For every $13 in wealth, assets minus liabilities, that the white household has, there's $1 that the Black household has. If we do that same calculation for white business owners relative to Black business owners, the gap shrinks to $3 to $1. It's not perfect, but it's much better than $13 to $1, so we know that we need to make sure that the institutions that are on the front lines, that are in Black communities, that are meeting the credit unions in Black communities have the resources, not just to stay alive and to remain viable, but to ensure that they can grow, we can grow and continue to meet the needs to grow wealth.
The point about getting behind policy changes to fix structural flaws is critical. We can talk about programs, products all day long, but if we do not fix the structural flaws embedded in our economy, in our programs, we're going to be stuck with the status quo. This means looking at the Small Business Administration. The 7(a) loan program is a program that's designed to expand access to credit promissory borrowers. It falls well short of meeting the needs for Black borrowers. I mentioned the issues with the Paycheck Protection Program earlier. Again, these reforms need to be made outside of an emergency moment so that when the emergency moment comes, we're not just reinforcing the status quo. CRA [Community Reinvestment Act] reform. Efforts have been under way to undo 40 years of CRA, and CRA was not perfect, and it didn't even look at race in the first place in the way that it needed to.
This law needs to be reformed to focus banks on directing capital to the most underserved people and places. The Federal Reserve has an effort under way right now to look at the Community Reinvestment Act as we talk about the moment. The Federal Reserve needs to lead on making racial equity an explicit element of its community reinvestment exams. This is a moment. We need to use that law to expand Black entrepreneurship, Black homeownership to close the racial wealth gap. Ms. Rice mentioned corporate accountability. When the private sector benefits from government investment, it should be held accountable for hiring, for contracting, for procurement practices that advance entrepreneurship among people of color.
And finally, as gains are made, we must unceasingly fight for policies that protect Black, indigenous people of color from abusive financial practices, that stop the stripping of wealth and preserve any gains that are made by implementing any structural reforms.
Jackson: Thank you, Ed. Now we'll turn to our next question and I'm going to ask the panelists, after you weigh in, toss it to one of your other panelists so we can get to the questions. Our next question is, we'll soon have a Biden/Harris administration. How might this impact plans and actions necessary to bring about an inclusive recovery for all? Who'd like to take that first?
Rice: Yeah, I can jump in first. I just want to say that I think the pressure is still on. The pressure is still on for an inclusive economy and an inclusive recovery. What we are going to be, what we at Liberation in a Generation are bracing ourselves for at the federal level is a conversation about how much should the federal government spend in this moment? Our perspective is that we should spend as much as it takes to invest in people of color and the real needs and the real restructuring of people of color, that we have to shore up states and cities because they do have, as I mentioned, they do have to balance their budgets.
We should push back on these technocratic notions of and the economic speak of like, "Well, we have to be so afraid of the deficit and we have to be so afraid of inflation." I've been enmeshed in Stephanie Kelton's new book, The Deficit Myth. It will open your eyes to the idea that the Feds have the purse and that when we spend, we invest in ourselves, that the deficit is not something to be afraid of, that we have not reached close to inflation worries in a long time. We're still going to have to push any administration, but especially this one, that we have to spend the money.
What I am encouraged by, so far, is an explicit call out of racial equity and the administrative agenda and its explicit call out for health disparities in the COVID-19 response and creating an actual task force that looks at health disparities and how to undo those. Now, the next step is making sure that we're pushing from the outside to remind that getting to heath disparities is really going to change some, require some real change and power dynamics and that when we saw these small openings we saw, oh, we got direct cash. Okay, is that an opening to basic income? Oh, we're starting to realize that everybody needs health care. Okay, is that a start toward universal health care? We saw that oh, we're going to give people protections at work. Okay, does that mean we're going to start really investing in workers?
I think we've got this small window that we just need to kick open the door and say that this is the moment, that these are gateways, these are gateways to guarantees that we have in this moment.
Sivak: I can jump in there next. Regardless of who is in office, the systems are in place that need to be reformed and we need to hold folks accountable, whether they're our folks or whether they're other folks. The need for advocacy and accountability is still an important lens that we need to look through. We need to hold ourselves accountable to be better, frankly. One rule-making process I'll just call out and lift up is [that] Consumer Financial Protection Bureau is finally working to implement a law governing small business lending collection reporting data, the 1071. At the floor, we need to know who is lending and who is not to Black businesses so that we can hold institutions accountable for not making loans or turning people down and developing strategies that actually do close gaps.
We can't fall into the trap, this is...Ms. Rice, I'm going to channel you here. We can't fall into the trap that this is too hard or this is too expensive, because there is one thing that we know costs more than any regulation, and that's the racial wealth gap. Analysis conducted by McKinsey found that if we close the racial wealth gap by 2028, U.S. GDP [gross domestic product] would increase 4 to 6 percentage points. That's one to one and a half trillion dollars. This isn't about giving something up either. Let's be very clear about that. This is a recognition that when we all succeed, we actually all succeed.
Montes: Yeah. My two co-panelists are so wonderful and articulate that I'm not sure I have much more to add to what they've said, but I really do want to emphasize what they said, which is that a new administration is motivation to double down and to really make sure that we are committing. And again, from our research, we observed that the moments of economic distress can be opportunities, too and can be an inflection point. But beyond that, it's about choices. It's about choices about policy, about resource allocation, and a choice to be explicit about the principles of inclusion and racial equity and actually translate that into action.
When we're talking about equity and inclusion, we really mean that we are designing policies that are directed at building the wealth of Black and Brown people or that when we're trying to target policies and programs, we, for example, disaggregate data and really look at the impact that disparities are having on specific groups. I mean, to me, what I just have carried away from our conversation today and really undergirds the research that we did on inclusive recovery is intentionality about this.
Jackson: Thank you. That's really important. I'm going to call an audible. I originally thought I'd ask you for closing comments, but I've heard that the questions are so impactful, let's just go straight to the questions if you don't mind so we can get the audiences’ voice in this. I'm going to ask Jasmine to read out the top vote-getting questions.
Jasmine Burnett: We'll start with this one. Can you all share examples of state and local policies that are critical to undoing racist systems and advancing inclusive growth? What can this look like specifically in housing and other forms of wealth building? I'll tag on one additional subquestion, which is coming from someone in Flint. They ask what can we say to legacy cities, particularly those that are already struggling or have been struggling, perhaps even for decades, even before the financial crisis and before COVID-19? What specific steps can we take to create an inclusive recovery for them? Any of you all are free to jump in on that one.
Sivak: I'm happy to take a first run at it. I mean, so I think first, one policy that came to mind was even just the way the recovery dollars came down was particularly small cities and small towns, there was money made available for local governments to buy PPE [personal protective equipment] and to fund COVID-related response activities. The structure of this was based on a reimbursement. So, if you are a shrinking city, if you are a very small town, the ability to front the money to make those purchases to get reimbursed, that's a structural flaw in the program. I mean, so what local people did to get around that, that was to create a bridge loan program in partnership with Hope Credit Union and the Black Belt Community Foundation in Selma and then in Mississippi, the Foundation for the Mid South, so that the resources could be extended on the front end and then that would allow for the money to be reimbursed on the back end, but the expenses could be covered finally.The other thing that I think is really critical is down payment assistance. It's such an important resource for moving people into homes and it also is a critical, I think, strategy for closing the wealth gap that prevents people from getting into homes in the first place. Cities can implement those programs.
Rice: I think he's absolutely right. Yes. I underscore what he just said, and I think about both the dismantle and the build side anytime I'm thinking about whatever level, whether it be city, state, or federal. At the city level, there are a lot of things that we are funding in cities that need to be distributed toward a different purpose. I think you're seeing that across the nation, this call for defunding the police. On the dismantle side, there are cities that spend over a third of their budget on police and police enforcement. I think there are groups across the nation asking, could that money be better used on an investment side? So, for housing and for job creation. I think that's a first step and also thinking about fines and fees.
I mean, when Michael Brown was murdered [in Ferguson, Missouri], we saw huge investigations of Ferguson and found that a lot of their city budget was being funded off the back of Black people around parking tickets and traffic violations, so it requires a real analysis of our budgets locally and deciding where we should be allocating real investment and where there's discretion. Even here in the Bay Area, several cities are starting to look at the fines and fees that we're charging people that we don't actually…we're not actually to draw down. They're discretionary. They're supposed to fund the court system itself, but we can fund the court system in other ways if we actually need to. I think there's a real question about examining our state and local budgets, again, because they do have to be balanced so we have to prioritize. And I'll just, I'll leave it there.
Montes: I think the only thing I would add because I think everything that both Ed and Solana again have said is on point is this question of, again, of intentionality. This is not the moment to go to the status quo or to say that's too hard, that's too expensive. One example that I can think of is you have Washington, DC, who has passed legislation to raise the minimum wage a couple of years ago. In June, in the middle of the pandemic, they were scheduled to go to the $15 an hour and they stuck to it. There are places that have not stuck to it. The fact that they did, I think, has meaning. Acting on those commitments and sticking to them and moving forward is really important.
Burnett: Great. Thanks. We have time for one more question. Again, it'll be combined so I can get as much into this. Would you say that engaging stakeholders, especially those experiencing inequities during the design of theoretical programs rather than seeking feedback on an already developed proposal, would address the issue with pumping funding into an equitable sociopolitical landscape or will any new program not work until existing structures are fundamentally changed to be inclusive and equitable? And to tag on to that, we also had a question around how does the disability community fit into this conversation? They are one of the largest minority populations in the U.S., but often are not included in these types of conversations.
Rice: I really want to jump into this question because I think it's a really good one. The answer might be dissatisfactory, unsatisfactory because the answer is both that we have work to do in the existing systems. In my previous role, I worked on issues like asset limits. Asset limits basically means you can't save money and still be on public benefits, like if you save a certain amount of money, you get kicked off of public benefits. That is absolutely a discretionary decision that we just made, that some lawmakers made that does not need to exist at all. It's an example of in an existing system, the small things that we can change to open up possibility for Black and Brown people.
The more radical change is like what if we didn't need a safety net in the first place? What if we had all of the things that we needed without necessarily having TANF [Temporary Assistance for Needy Families] and SNAP [Supplemental Nutrition and Assistance Program] and a million programs that run people ragged running around putting applications in and reapplying every six months, etc. To me, I think it's the both and work. It's how do we make the best out of this situation, but how do we imagine a new situation and not take what we're in as a default?
Jackson: I want to add that the Federal Reserve Bank of Atlanta has done significant work on what you just brought up around benefit cliffs and how that could be a disincentive a lot of times and what the break point is for it to really be helpful instead of harmful. I think we're going to drop a link, if we haven't already, into the chat to some of that research around benefit cliffs because it's an important part of the pie of things that has to be brought together to help move toward inclusive recoveries.
I think we're just about out of time. We're going to do some work on the back end to think about how we might get more of these fabulous questions answered, so I'll be reaching out to our panelists to see if they can join me in partnering a way to answer more of these questions so that everyone who contributed can really get input. I'd like to pivot to closing, so I think we have a couple slides that we're going to put up. But while we get those slides, I want to thank our panelists. I think this was a dynamic and wonderful discussion to set out on a series where we're going to talk about inclusive recovery. We're going to take deep dives to look at family balance sheets, entrepreneurship, and community economic development finance.
In fact, this pairs nicely with our Racism and the Economy series. Our next Racism and the Economy series, which is across the board from the Fed, it's a national discussion, will be on November 17. We're going to follow closely behind that with our Small Business of Color Recovery Guide. That's an opportunity to take a deep dive into information around how small businesses are faring and what things they can do to recover. Additionally, there are a lot of tools that we've put together for people focused information: our Unemployment Claims Monitor, our Opportunity Occupations Monitor, and our Advancing Careers tools are available on the Fed website.
Additionally, there are ways for you to stay in contact with us and connect with us. I think on our slide you'll see that there's an opportunity for you to subscribe at Atlanta Fed Community Development and also to sign up for texts by texting FRBA to 33777, and, of course, follow us on all of the social media platforms. Thank you so much for joining us today. Ed, Marcela, Solana, and Michael, even though you're not here, thank you. You've really challenged us and charged us all to think about how we can have an inclusive recovery, what the components of it are, and I really appreciate your participation today. Thank you, everyone. Have a great afternoon.