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Healing America’s race divide with economic opportunities

Written By | Jul 10, 2016

WASHINGTON, July 10, 2016 — In 2008, American voters elected their first African-American president. They believed that Barack Obama’s election signaled the end of racism; any American could reach for any job for which they were qualified, regardless of race. They hoped that Obama’s election would promote new harmony in race relations.

Instead, things have gotten much, much worse.

The Washington Post estimates that 258 black people were killed by policemen in 2015; of those, 40 were unarmed. So far 123 have been killed in 2016.

The Black Lives Matter movement was started as a reaction to one such killing in Ferguson, Missouri, where the police officer was found not guilty.  Perhaps as a reaction to publicized killings this year, a crazed man who was African-American killed five police officers who were simply trying to protect a peaceful Black Lives Matter protest. He killed them because they were white.

The Ferguson lie and the murders in Dallas

Demonstrations have taken place in cities around the country, including Washington, Dallas, Atlanta, Ft. Lauderdale and Baton Rouge. The hope is that they remain peaceful; the fear is that they will not. In the next few weeks, the major parties will hold their national presidential nominating conventions. Protesters will be present at both.

Why have race relations worsened under the Obama administration?

One clear issue that fuels the racial divide is the lack of economic opportunity for all Americans, regardless of race. Lack of opportunity breeds frustration, which breeds anger. Some protestors have time to protest because they aren’t working. And often the protesters turn to looting, as we saw in both Ferguson and Baltimore.

President Obama was first sworn into office in the midst of a severe recession. The economy was in free fall and businesses were cutting workforces in response. Obama’s first priority should have been to stimulate economic growth. It was not.

Congress passed and Obama signed a trillion-dollar stimulus package, but it did little to stimulate growth because it was designed to cure perceived social injustices. Spending went for projects the president deemed important, like energy conservation and developing new energy sources, which the market simply didn’t want. And there were no “shovel ready” projects.

Obama’s next major achievement was to tackle the problem of 15 percent of Americans not having health insurance. The Affordable Care Act reduced that figure to about 10 percent, but it also put a drag on economic growth by reducing the disposable income of the previously insured, who began paying for the health care of the previously uninsured. Cutting incomes was the opposite of what we needed to boost economic growth.

Black lives, privilege and poor, white trash

Obama wanted to cure the perceived social injustice of big banks taking advantage of the average American. He encouraged Congress to pass the Dodd-Frank bill to eliminate predatory lending. The problem was that it significantly reduced all lending. That made it difficult for some businesses to get financing, another drag on economic growth that rendered monetary policy ineffective.

Obama wanted to cure the perceived social injustice of the highest income earners not paying their “fair share” of taxes. Someone who earned more than $415,000 per year paid 36 percent in federal income tax plus state income tax, which could be as high as 13 percent, but Obama said that is not a fair share. So he pushed Congress to raise the top federal income tax rate to nearly 40 percent.

He wanted to cure the perceived social injustice of low tax rates on capital gains, so he raised that rate from 15 percent to almost 24 percent. That reduced the amount of new capital available to the economy. That tended to slow economic growth.

He wanted to cure the perceived social injustice of people not earning enough to sustain themselves. Instead of giving them opportunity to increase their earnings, he simply made it easier for them to collect food stamps, welfare, unemployment compensation and free health care. This reduced the incentive to work, reduced the labor force participation rate and slowed economic growth.

Obama wanted to cure the perceived social injustice of people working hard but earning low wages, even though low wages were a result of workers not having skills. So he pushed to raise the minimum wage, which, regardless of what anyone tells you, ends up slowing economic growth and creating resentment from those who have gotten a raise in wages by earning it.

It is no wonder, then, that President Obama will be the first president in recorded history to serve a term in office without having at least one year where economic growth exceeded 3 percent. His best was about 2.6 percent, and his average is close to 2 percent.

Without growth, there are few opportunities. So we could see two people seeking just one opportunity. One gets it, the other doesn’t. The one who doesn’t looks for reasons. The easiest to see often appears to be skin color.

The one who doesn’t get the opportunity is forced to accept government handouts, which usually result in resentment, frustration and eventually anger. It also leaves free time to express that anger, many times leading to an increase in crime.

We hope that the next president concentrates on economic growth rather than trying to cure perceived social injustices. Most of the economic problems would be eliminated and, since there would be opportunity for almost everyone, there would be no reason to blame someone else for lack of opportunity. This would tend to significantly reduce racial problems.

Michael Busler

Michael Busler

Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.