Anti-Reparations Argument #1 - Even if we gave reparations to blacks they would just spend the money anyway on cars, video games, weed, and gambling so what is the point?
Kryptonite - Beside the fact that this is blatantly stereotypical, and some would say racist, it also shows a pure ignorance of economics.
Let’s say for example $1 Billion was the amount of reparations given in the form of cash (the number is just for the sake of mathematical ease). It is well known that blacks are a high spending population, meaning that the likelihood of us spending money versus saving money is much higher than the national average. So let us say for argument sake, even though in reality it would be much lower, that out of that Billion, $900 Million or 90% is immediately spent on consumer goods. In other words 90% of the income is spent the exact way that folks who argue against reparations say it would be spent.
Like I said, that is probably high but let’s plays along.
What that means is the other 10% is divided along two lines - $50 Million to Assets (savings accounts, homes, etc.) the other $50 Million to small business development.
$1 Billion in Reparations = $900 Million in consumer spending, $50 Million in Assets, $50 Million in Business Development.
So let us go in reverse, and demonstrate how each of these categories not only benefits blacks, but also benefits America as a whole.
1. $50 Million in Business Development - remember the core of any economy, local or national, is its ability to create profitable business, and thereby create jobs. In fact 80% of all new jobs added to the economy annually are created not by mammoth corporations but by small business owners. . I was the executive director of Omaha Small Business Network in 2004. During my tenure, between my predecessor and me, in a year’s time we lent out $1 million dollars to high risk and start up business in the inner-city. The result of this lending was approximately 42 jobs created. So if we use that as a representative sample of what $1 million dollars in capital used for start up amongst urban blacks (non-urban blacks I am lumping in as well for ease of understanding) then -
$50 Million = 2100 Jobs
Remember this is job creation, so 2100 people who were previously unemployed, or underemployed will now be employed. This reduces tax payer burden from welfare, reduces poverty and the ills that go with it, and improves personal esteem and sense of well being, things which contribute to health.
Now that same $1 Million that we lent also helped start 21 small businesses. Let’s do the same math
$50 Million = 1050 Businesses
What this means is that 1050 businesses now existed where there previously weren’t any, adding to the tax base of the local economy, generating community wealth, providing for neighborhood stability and hiring the individuals mentioned above.
So in summary, $50 Million in reparations invested in small business improves blacks & America by providing inner-city employment, reducing welfare, decreasing poverty, increasing wealth, increasing community stability and cleanliness, and contributing to the tax base.
2. $50 Million in Assets Growth (savings, home ownership, investment) - Right now blacks inherent $100 dollars from family members on average while whites inherent $10,000. Blacks in general have between 5 to 7 times less wealth than whites (wealth is how much you own in assets minus how much you owe). What does this mean? It means that in economic downturns and crisis events, those families with less wealth have a greater degree of ‘bottoming out’ or not being able to recover, because they don’t have assets to be able to financially bridge the troubled time. Secondly it means that individuals, as indicated in the first sentence, will not be able to leave their children much inheritance, thereby making it more difficult for the child to ‘get on’.
An increase in $50 million in assets in the black community reduces the ‘bottom out’ effect, and thereby keeps individuals off welfare roles, increases homeownership, which is proven to stabilize communities, increases community cleanliness and reduce crime. Also from a national perspective, investments create economic opportunities for other Americans. When you invest in a savings account the bank lends that money on the back end for profit. When you invest in the stock market you are actually funding other companies. When you own you home you are helping to employ real estate agents, and sustaining the banking industry and its employees by paying the interest rate spread and fees, which is how they make money.
PS. I didn’t even include purchasing education as an asset but it most definitely is. Human capital baby.
3. $900 Million in Consumer Spending - Consumer spending is the bed rock of American economics. In fact I have read some economist go so far as to argue that saving is actually bad for the economy (in fairness others poo poo’d them). Why is spending so important? It is important because the amount of times money exchanges hands within a given community is the amount of wealth that that community ultimately has. For example, if I make $7 and buy from my brother something I need for $7 and he does the same, and they do the same, etc. each of us have increased our wealth by $7 and used it to purchase something we need. That keeps the economy moving.
Truly if $900 Million or 90% of all Black reparations money would be spent in the consumer market place it is obvious how that would benefit industries that cater to things blacks would like to buy. Duh. But think about the ancillary effects of this. Businesses target demand, therefore more businesses would target the areas where blacks demonstrate increased demand. Many of these businesses would open around black neighborhoods, and therefore create community stability and employment. Those who did not locate around the community would probably increase the diversity of their staff for PR purposes as well as competitive intelligent purposes, thereby increasing black employment.
In addition, based on the same principle, more blacks would create businesses based upon the increased demand created by $900 million dollars, thereby increasing black business in the black community as well, and creating all the benefits that we saw in point one. In conjunction with that, the number of times $$ would circulate the black community would increase and therefore so would the overall wealth levels of the black community.
From an American perspective, new employees would be hired, not just blacks, companies would be willing to expand and grow, and the tax base would be contributed to from both a sales tax side, and an income and corporate tax side.
…we blacks would still get our cars, jewelry and mink coats that the stereotypers complain about. Sounds like a win/win to me.
The reality is we would probably spend MORE on business development and asset purchasing as opposed to pure consumption and this would benefit us more than my devils advocate division of the wealth above. Playing it conservative for the sake of argument though, even if the break down was 90% Consumption, 5% Asset, 5% business development it still would be a net national benefit and a specific great benefit to decreasing black poverty, welfare reliance, and in creating wealth parity.
Where would we get the money in the first place? Carve it out of some of the pork that the government waste money on already, like say those $900 hammers.