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How Obama, minorities and low-income Americans are scapegoats for the economic downturn
BY VALERIE WILSON
(Excerpt from this month's Ebony magazine. Be sure to pick up your copy!)
It has been well documented how African-American communities are disproportionately impacted during recessionary times. When America catches a cold, Black America catches the flu. This recession is no different. Until now, however, minorities and low-income borrowers have never been blamed for actually creating the downturn. And never has an American president, who came aboard well after the start of an economic downturn, been blamed for its impact.
But as we enter 2011, these two errant—if not dangerous—streams of thought have taken hold. Despite the overwhelming evidence to the contrary, conservative pundits and activists continue to overtly and covertly push the notion that minority and low-income borrowers caused the subprime mortgage crisis that led to the recession, and that spending undertration has slowed the recovery by creating out-of-control deficits while generating little benefit to taxpayers. Neither could be further from the truth.
According to Home Mortgage Disclosure Act data, although minorities and low-income borrowers received a disproportionate share of subprime loans—Black borrowers were more than twice as likely to receive sub-prime loans than White borrowers—the vast majority of subprime loans went to White and upper-income borrowers. In 2006, non-Hispanic Whites had more subprime rate loans than all minorities combined. Furthermore, some 60 percent of subprime rate loans were originated in largely White census tracts, and the number of 90-day-plus delinquency rates of lower-income neighborhoods accounted for only about one-fifth of all households—a number much too small to be a major con- tributor to the national foreclosure crisis.
Enter President Obama. Despite the fact that he and his administration have taken a lot of heat over the bank bailout known as Troubled Asset Relief Program, this program was actually created by his predecessor. President George W. Bush had already committed nearly $300 billion to the bailout before President Obama ever took office. Either way, it is well documented that the money prevented a total economic collapse, and, according to Treasury Secretary Timothy Geithner, 90 percent of it will be returned to taxpayers.
Although the midterms have been cast as a referendum on deficit spending, it is misguided to point to the $787 billion stimulus as the cause. While it did add to the deficit, the recent sustained growth in federal deficit spending can be more accurately attributed to the unfunded Bush administration tax cuts of 2001 and 2003, the Bush-era spending increases tied to the wars in Iraq and Afghanistan, as well as the expansion of entitlements such as the Medicare prescription drug program and the significant loss of federal revenues tied to the current recession. It has been estimated that only 7.6 percent of the increase in the deficit can be attributed to the president’s stimulus package. And it can be argued that a single-digit increase in the deficit was a small price to pay for the estimated 2.7 million to 3.7 million jobs created by the stimulus package. In fact, a number of notable economists have suggested that the size of the stimulus was not large enough.
But in making the case that irresponsible minority or low-income homebuyers created the subprime crisis or that the policies of President Obama are responsible for the nation’s record deficits and slow recovery, why let the facts get in the way? There’s no doubt that the metrics by which his critics would have us to measure the success of the Obama administration seem to be a perpetually moving target. But in the end, only two questions need to be answered: Where did he start, and where did he finish?
