Just a year ago, Bill Frist replaced Trent Lott as Senate Majority Leader, and we heard many calls for healing and inclusiveness towards minority groups from Republicans. But the rhetoric of concern conflicts with the reality of conservative policy agendas in many areas – particularly economics.
Despite some major gains during the 1990’s, blacks and Latinos remain concentrated in the bottom third or so of the American economic ladder. Indeed, poverty rates among minority groups are still 2-3 times as high as they are among whites. Median family income for blacks and Latinos is near $35,000 – or only about twice the poverty line for a family of four in the U.S. unemployment rates among blacks continue to run over twice as high as those among whites.
Minority families will receive hardly any of the capital gains or dividend tax cuts enacted by Congress last May, and very little of the pending cuts in the highest income tax brackets passed in 2001 and 2003. But minorities and other lower-to-middle income workers are highly vulnerable to the budgetary pressures created by revenue losses when these cuts are enacted.
For instance, the federal budgets pushed by the White House and passed by Congress over the past few years call for significant cuts in areas that benefit minorities and the poor, such as job training for disadvantaged adults and youth. House Republicans are refusing to extend federal unemployment insurance benefits to those who exhaust their current benefits and remain unemployed, despite continuing weakness in the nation’s job market; blacks and other high-unemployment groups will lose eligibility for benefits and suffer the most. The White House has also refused to endorse significant federal aid to the states, even though tax increases and service cuts at the state level will fall most heavily on lower-income and minority populations.
These trends will no doubt continue over time, as the federal budget is increasingly squeezed by the demands of homeland security and defense plus tax cuts. At a minimum, any potential initiatives to increase health insurance coverage for the uninsured or preschool programs become much less likely in this fiscal environment. If the President gets his way and the high-income tax cuts become permanent, the fiscal constraints over the long term will be especially severe.
But the potential harm does not stop there. Some Republicans are emboldened by their success in passing controversial Medicare legislation – which provides modest prescription drug coverage to the elderly but also threatens the overall integrity of the Medicare program, by increasing the ability of high-income and healthy seniors to drop out of the traditional program and obtain private care. Conservative Republican proposals for privatizing Social Security are also gaining momentum. Any scheme to privatize Social Security will reduce benefit payments for minorities and lower-to-middle income workers more broadly. With the current Social Security surplus being spent on tax giveaways to the affluent, it will be harder to maintain benefit payments to this group under any scheme once Baby Boomers begin retiring at the end of the decade.
Proposals to flatten the income tax are also frequently advocated in conservative circles. Any flattening of the income tax would clearly mean higher shares of federal taxes being paid by those in these income categories. And growing attacks on the Earned Income Tax Credit in conservative circles could threaten a major program that provides income support to many millions of working families, both white and minority, earning up to $30,000 a year. Even though this program has clearly helped roughly draw 2 million low-income mothers off welfare and into the workforce, it continues to draw fire from the Republican Right.
Finally, the president’s call for permanent tax cuts threatens to generate huge budget deficits over the next decade and beyond, which in turn would mean higher interest rates and lower economic growth. A booming economy helps everyone, but especially those closer to the bottom of the economic ladder. Reckless fiscal policies that harm economic growth pose their greatest threats to minorities and others who are most in need of a boom.
Of course, all of these policies that reward the wealthy at the expense of lower-to-middle income groups ultimately threaten more white than minority families. Their true harm lies in the potential threats they pose to all such families, irrespective of race.
But when some Republicans are working so hard to demonstrate their party’s sensitivity to the needs of minority communities, the effects of that party’s proposed economic policies on those communities deserve a closer look. And the potential threats to these groups that we find as we take this look are quite alarming.
Harry J. Holzer is professor in the Georgetown Public Policy Institute at Georgetown University, and a senior affiliate of the Northwestern University-University of Chicago Joint Center for Poverty Research, a national fellow of the Program on Inequality and Social Policy at Harvard University, and a research affiliate of the Institute for Research on Poverty at the University of Wisconsin at Madison. He served as chief economist in the Department of Labor prior to joining Georgetown University in 2000.