Jack & Jill Politics

There’s a consistent theme among many of the speakers here at the Color of Wealth conference being held by the Insight Center for Community and Economic Development. That theme is: “Thank AIG.” Representatives Melvin Watt and Keith Ellison both expressed this sentiment, arguing that AIG’s exorbitant renention bonuses had finally woken the American people up to the problem of income inequality, and the amount of government support exhibited on behalf of the powerful even as the poor and middle class are asked to pull themselves up by their bootstraps.

“American workers have been working harder and harder, productivity has been up, pay has been flat,” Ellison said. “But executive pay has gone up. Which means that someone else has been taking the cream of your crop.”

The wealth gap is huge, according to Insight, which finds today the average family of color holds only fifteen cents worth of assets to the white family’s dollar. One of the big reasons is debt: because people of color were more likely to get predatory loans regardless of income or credit rating and be reliant on housing equity for wealth. Our neighborhoods are also more likely to have a dearth of reputable lending institutions.

With costs of living increasing and earnings remaining relatively flat, savings are down and families have relied on credit to pull them through. Which puts them at risk of being charged high penalty rates from credit card companies, being charged high fees for overdraft loans they may not even realize they are taking out, and being charged high interest rates from payday loans. With penalty rates, consumers can be charged high interest on credit card debt previously acquired, rather than the debt they accumulate from that day forward, often without being explicitly notified. Legislators are considering fixes for some of these problems, in particular penalty rates.

Some, but not all of these problems can be solved by better regulation, Representative Melvin Watt of North Carolina said.

“The challenge is putting the right people in there to regulate,” Watt said. “People tend not to do the kind of regulation they should be doing when things are going well.”  Representative Chaka Fattah of Pennsylvania emphasised the need for financial literacy in communities of color, arguing that we should be using public schools to educate students about how to be responsible with their finances. Fattah also said wages were less important to building wealth. “You don’t build wealth from a salary,” Fattah said.  ”We should be supporting corporations involved in profit sharing.” 

Representative Ellison struck an optimistic tone at the end of his speech, arguing that current economic conditions provide an atmosphere for cooperation between Americans of different ethnic backgrounds for effective reform, making it less likely that “playing us against each other.”  

“Being an average middle class white person isn’t exactly living it up. Everyone is fighting to make it nowadays. This gives us a chance. This allows us to come together like we haven’t before.”