GOVERNMENT POLICY DESTROYED BLACK NET WORTH

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Posted on 3rd August 2011 by Administrator in Economy |Politics |Social Issues

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I discussed the net worth of blacks and the average American last week, but Thomas Sowell nails it. Barney Frank, Chris Dodd, and even our beloved President Bush pushed and threatened lenders into making mortgage loans to poor blacks and poor whites so they could own homes. It didn’t matter they were a bad risk. This government policy contributed to the 100% rise in home prices over the course of five years. When the housing market collapsed, what little net worth blacks and the poor in general had was cut in half. Sowell goes on to destroy the entire idea of welfare and the truly poor. The storyline of the extreme left is false. The Heritage report on the “poor” matches exactly with my observations along the 30 Blocks of Squalor. Again, there are two sides to the decline of the American empire. Wall Street and the ruling elite wealthy are raping and pillaging the middle class from above and the “poor” are sucking the system dry from the bottom. You are in the middle getting screwed. 

 WEALTH 

Misleading Words

by Thomas Sowell 

Many years ago, the Saturday Evening Post was one of the best-known magazines in America. But somehow I learned that the Saturday Evening Post was actually published on Wednesday morning. That was a little disconcerting at first. But it was one of the most valuable lessons, that words do not necessarily reflect reality.

Recent statistics on the average wealth or net worth of blacks are a painful reminder that rhetoric favoring blacks does not mean that politicians using such rhetoric are actually helping blacks. The media seized upon the statistics published by the Pew Research Center to show that whites averaged far more net worth than blacks, and that this disparity was now greater than it was in years past. But what is even more revealing is that the net worth of blacks in 2009 was less than half of what it was in 2005.

 

What happened to cause such a sharp loss in such a few years? After all, the Republicans controlled both the Congress and the White House in 2005, and the Democrats had control by 2009. There was now a black President of the United States, with much of the media celebrating the beginning of a new era in race relations.

What happened was that the political words had no relationship to the economic reality. But few people judge any administration’s effect on blacks by what actually happens to blacks under that administration.

A finer breakdown of the data on the net worth of blacks shows that the most drastic loss of net worth was in the value of the homes owned by blacks. This occurred after years of both Democratic and Republican administrations pushing policies designed to enable more blacks to buy homes.

 

Much of the media rallied behind the idea that there should be more home ownership by blacks. Editorials rang out across the land, denouncing statistical disparities between rates of home ownership by blacks and whites as showing racial discrimination in the private sector that needed to be corrected by the government.

Even when it was shown that blacks, on average, did not meet the same financial standards as whites, both politicians and the media denounced those standards as too stringent.

The St. Louis Post-Dispatch, for example, called for “fairer mortgage-lending standards” and declared that “lending institutions are being far more conservative than they have to be in determining the creditworthiness of minorities.” The Federal Reserve Bank of Boston likewise declared that “unreasonable measures of creditworthiness” were not “appropriate to the economic culture of urban, lower-income, and nontraditional consumers.”

 

The New York Times reported that “even within the same income group whites are nearly twice as likely as blacks to get loans.” Many in the media treated that as proof positive that racial discrimination explained differences in mortgage loan approval rates. They were not talking about racial differences in net worth in those days – much less taking note of the fact that blacks in the same income brackets as whites had far less net worth.

Racial discrimination was where it was at, as far as liberal politicians and most of the media were concerned. And the familiar “solution” was massive government intervention in the market. Government agencies, from the Department of Housing and Urban Development to the Federal Reserve leaned on lenders to lower lending standards, and the Department of Justice threatened prosecutions for discrimination if the racial makeup of people approved for mortgage loans did not match their preconceptions.

 

It worked. In fact, it worked so well that many blacks got loans that they could not have gotten otherwise. Now the statistics tell us, belatedly, that blacks lost out, big time, from this “favor” done for them by politicians.

These lowered lending standards applied to many others besides blacks. Everybody lost out when the resulting risky mortgages led to a collapse of the housing market, followed by a collapse of the economy. Lofty words led to bitter realities.

The same mindset that led to these disasters is still prevalent in Washington. Indeed, the very people who spearheaded those political crusades – Congressman Barney Frank and Senator Christopher Dodd – crafted new legislation offering the same kind of “solution” to our current problems, namely more massive government intervention in the economy. Words triumphed again.

If there were a contest for the most misleading words used in politics, “poverty” should be one of the leading contenders for that title.

 

Each of us may have his own idea of what poverty means – especially those of us who grew up in poverty. But what poverty means politically and in the media is whatever the people who collect statistics choose to define as poverty.

This is not just a question of semantics. The whole future of the welfare state depends on how poverty is defined. “The poor” are the human shields behind whom advocates of ever bigger spending for ever bigger government advance toward their goal.

 

If poverty meant what most people think of as poverty – people “ill-clad, ill-housed, and ill-nourished,” in Franklin D. Roosevelt’s phrase – there would not be nearly enough people in poverty today to justify the vastly expanded powers and runaway spending of the federal government.

Robert Rector of the Heritage Foundation has for years examined what “the poor” of today actually have – and the economic facts completely undermine the political rhetoric.

Official data cited by Rector show that 80 percent of “poor” households have air-conditioning today, which less than half the population of America had in 1970. Nearly three-quarters of households in poverty own a motor vehicle, and nearly one-third own more than one motor vehicle.

Virtually everyone living in “poverty,” as defined by the government, has color television, and most have cable TV or satellite TV. More than three-quarters have either a VCR or a DVD player, and nearly nine-tenths have a microwave oven.

As for being “ill-housed,” the average poor American has more living space than the general population – not just the poor population – of London, Paris and other cities in Europe.

 

Various attempts have been made over the years to depict Americans in poverty as “ill-fed” but the “hunger in America” campaigns that have enjoyed such political and media popularity have usually used some pretty creative methods and definitions.

Actual studies of “the poor” have found their intake of the necessary nutrients to be no less than that of others. In fact, obesity is slightly more prevalent among low-income people.

 

The real triumph of words over reality, however, is in expensive government programs for “the elderly,” including Medicare. The image often invoked is the person who is both ill and elderly, and who has to choose between food and medications.

It is great political theater. But, the most fundamental reality is that the average wealth of the elderly is some multiple of the average wealth owned by people in the other age brackets.

Why should the average taxpayer be subsidizing people who have much more wealth than they do?

If we are concerned about those particular elderly people who are in fact poor – as we are about other people who are genuinely poor, whatever their age might be – then we can simply confine our help to those who are poor by some reasonable means test. It would cost a fraction of what it costs to subsidize everybody who reaches a certain age.

But the political left hates means tests. If government programs were confined to people who were genuinely poor in some meaningful sense, that would shrink the welfare state to a fraction of its current size. The left would lose their human shields.

It is certainly true that the elderly are more likely to have more medical problems and larger medical expenses. But old age is not some unforeseeable misfortune. It is not only foreseeable but inevitable for those who do not die young.

It is one thing to keep people from suffering from unforeseeable things beyond their control. But it is something else to simply subsidize their necessities so that they can spend their money on other things and leave a larger estate to be passed on to their heirs.

People who say they want a government program because “I don’t want to be a burden to my children” apparently think it is all right to be a burden to other people’s children.

Among the runaway spending behind our current national debt problems is the extravagant luxury of buying political rhetoric.

August 2, 2011

Thomas Sowell is a senior fellow at the Hoover Institution at Stanford University. His Web site is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate web page.

6 Comments
  1. Welshman says:

    “Stuck in the middle with you” . Gotta love it. It was W. Bush who coined the term “Ownership Society”. Countrywide had 127 different types of loans to get these owners into their homes, and most likely 120 of the loan types were based on some kind of fraud.

    I love Sowell glasses, talk about grampa glasses. The story is right on the button.

    3rd August 2011 at 9:40 am

  2. Muck About says:

    Mr. Sowell has been telling the truth well for decades. There have been some ugly comments made by those of his race about him in his younger days – back in the 70s and ’80s – as an ‘uncle Tom’ and all sorts of sell-out accusations which rank him right up there in good the good guys along with Bill Cosby and a number of others.

    Cosby puts the blame squarely where it belongs while Sowell just simply and eloquently tells the truth without any frills. I think I’ve read every book he ever wrote and faulted none of them.

    MA

    3rd August 2011 at 11:36 am

  3. scott says:

    Barney Frank was on CSPAN last year and made a comment that, had he been a Republican, would have forced him out of office faster than you can say ‘Trent Lott’. Discussing the high rate of foreclosures amongst minorities, Frank blurted out that ‘loans were extended to peoples who did not have the necessary economic and social skills for homeownership’. No one batted an eye of course because it was liberal Frank stating the obvious truth of the matter.

    It is obvious something rather ‘distasteful’ is going on in the housing foreclosure problem in that we have had no ‘official data’ releases ( that I have seen) as to default rates by ethnicity though such data is compiled in the loan process as a matter of law and would be available with a few mouse clicks from HUD, FHA and the GSEs. I did see a study by the San Jose Mercury News from, maybe,
    2 years back that Hispanics made up over 2/3′s of foreclosures in that city though they comprised but 1/3 of the population. Of course minorities tend to be last in on bubbles but it is also the case that most of the brokers and realtors that preyed on these communities were of the same ethnicity.

    3rd August 2011 at 1:51 pm

  4. redneckcajun says:

    admin I live n the deep south I Know what i see all the time. Alot of people on the porch the same onses that expect sumething for nuthin. Admin I also went to school in pitts penns if u know what i mean an most people treated me as a redneck biased person and i may well b but they never walked a mile n my shoes… most northeerners dont even have a fathom of what we go thru n the south>

    3rd August 2011 at 11:35 pm

  5. L Gayden says:

    It is curious that Mr. Sowell’s argument completely omits the nefarious application of these “relaxed” lending standards in the disproportionate number of well-qualified Black and Hispanic borrowers who were fraudulently misled to high-risk sub-prime loans when they qualified for fixed- rate loans. And the argument that if people have cable, air-conditioning, and obesity that they aren’t poor; perhaps if this were a third world country, that would be valid, but since any wealth standard is comparative, and this is the wealthiest country in the world, that assessment amounts to smoke and mirrors.

    And to the earlier point about Cosby – he puts the RESPONSIBILITY for lifting Black people out of their condition where it belongs. The blame still belongs to the same owners – an America built on theivery and under/uncompensated labor. The metrics have not changed substantially from the time when most of us would agree that the tables where extremely tilted against Black people (though in the 1860′s AND 1960′s, White people thought that Blacks were being treated fairly) to now.

    As for Mr. Sowell being an Uncle Tom; the Uncle Tom character was the one who used his standing amongst White folk to protect his own people; it was the SAMBO character who used his skills and talent solely for the delight of White people, in the most self-deprecating manner possible. Now compare…

    10th February 2012 at 11:09 am

  6. Romney’s Stand and the Left’s Destruction of the Black Community » Choosing Life - God's Gift To The Unborn says:

    [...] rate spiked from 8% to 16.7% (and 19.1% for black males). Hoover Institution Fellow Thomas Sowell observes that although “many blacks got loans that they could not have gotten otherwise,” in the final [...]

    12th July 2012 at 1:18 am

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