It is often the case that economic centrists who call themselves “progressives” espouse so-called “third way/neoliberal” policies that disproportionately harm minorities for the benefit of the 1%. These policies are often disingenuously couched in identity-politics, or technological futurism, or anything on earth besides the economic message that the vast majority of Americans, in the face of yawning economic inequality and declining safety nets, are craving. This craving was witnessed with Trump, the most unpopular president ever elected, who still managed to sound more sympathetic to the plight of working people than you know who. But hear me well. The Democratic Wall Street Class, from Water Street to Bowling Green, is just as entangled with structural racism as it is with inequality. They just don’t want us to know it. The politics of most (but of course not all) economically centrist “progressives” (male and female) is based on Milton Friedman’s idea that consumers are rational and only the government can stand in the way of prosperity for all. It is divisive to the party. It is predicated on a value system that measures success based on how much money is in your bank account, regardless of how you got it or what happened to others as a result. It is the ideology that lead Corey Booker to support charter schools at the vast expense of public schools in Newark. And of course, these “centrists” are just another identity group. While headquartered in the Hamptons, the fact that they are so prevalent throughout the country is thanks to the disseminating power of the [supposedly-economically-progressive] liberal blogosphere.
The Great Recession ended [for the US] maybe, three years ago? So, why do folks (like me) keep bringing it up? Well, that’s because it was never actually solved. What was never solved, you ask? Hmm… let’s see. Wasn’t the economic meltdown caused by the repeal (by Bill Clinton) of Glass Steagal and the passage (again by Bill Clinton) of the Commodity Futures Modernization Act? skyrocketing consumer debt? Meaning the banks had to become more and more predatory in their lending practices in order to continue to make credit appear profitable to their shareholders even though it was being sold to highly leveraged consumers? Which led to greater systemic risk and ultimate meltdown?
Well, according to the New York Times, as of late May, “Americans [had already] borrowed more money than they had at the height of the credit bubble in 2008, just as the global financial system began to collapse.” See the graph on the right. That’s accurate. We are more indebted as a society than we were in 2008. Families are required to have two incomes because real wages have decreased for 85% of us since the 80’s, and the prices have sure gone sky high. What’s the solution? If you’re a lender, it’s “get out your credit cards!” And so we have.
The thing is, according to centrists, this simply shouldn’t have been able to happen. People have been cut off from easy mortgages, the banks all merged and Dodd Frank put a cop on the beat in the form of Elizabeth Warren Rob Cordray and the Consumer Financial Protection Bureau (CFPB).
But when we look into the actual makeup of this new resurgence in debt, we find that the Dodd Frank regulations have been successful in keeping mortgage debt lower (although it is starting to tick up again), and a disproportionate amount of the newer debt is student debt, something most people of the Baby Boomer generation never had to worry about thanks to Pell Grants covering all or most of their tuition. Bernie wanted to make all public colleges free because of this fact and the basic principle that education should be a right, not a privilege. Many centrists disagreed, arguing that Bernie was out of touch with the non-white needs of the party. Well how much of that student loan debt is non-white? According to the Brookings Institute, it’s actually quite a lot:
The moment they earn their bachelor’s degrees, black college graduates owe $7,400 more on average than their white peers ($23,400 versus $16,000, including non-borrowers in the averages). But over the next few years, the black-white debt gap more than triples to a whopping $25,000.
Similarly, you’ll notice that auto loans are making up an increasing share since after the crisis. Well, that’s because the powerful National Automobile Dealers’ Association (NADA) was able to carve out captive auto finance companies (like Nissan Motor Acceptance Corporation) and auto dealerships (who are the auto loan originators) from the supervisory authority of the CFPB. And because they were also able to carve themselves out from the regulatory authority of the Equal Credit Opportunity Act, we do not know for sure whether a disproportionate amount of this debt is non-white. But we do know that non-whites have been paying a lot more in “dealer reserves” (the kickback that the captive auto finance companies can offer to the dealers over the offering price plus interest based on a consumer’s credit worthiness). That is because the CFPB, Elizabeth Warren’s brainchild, has been bending over backwards and jumping through hoops to write rules and enforce them in order to find indirect ways to regulate this highly predatory industry, and has reached a series of penal settlements with some of the biggest auto-makers’ captive finance companies, proving that the lenders thought CFPB had a good enough case for disparate treatment of protected status groups, particularly AAs and Hispanics, to not risk going to court over it. So Elizabeth Warren, who is an economic populist, created an agency which has subpoenaed financial institutions backed by one of the most powerful lobbies in the country, the NADA, and only by virtue of that do we have strong evidence that a disproportionate amount of auto-loan debt is also non-white.
It would be nice if centrists could fix this rot at the core of our nation’s economy with their disingenuous promises to completely eradicate racism and provide a Guaranteed Basic Income to all. But to pretend it isn’t there is what gave us Trump in the first place.