Money Matters: Economic Exacerbation of Social Issues


After 366 days, the summer Olympics, a Cubs World Series victory, three versions of the iPhone, Brexit, a precarious cease-fire to a six-year civil war in Syria, and a historic presidential election, 2016 is over—finally. Domestic and abroad, it has been a stressful year for the Democratic Experiment of the United States of America. And since its inception, the problems of civil rights and who gets them have been under discussion. The magnitude of everything that has happened in the past year notwithstanding, race relations still haunt the nation as surely as the Ghost of Christmas Past.

The Obama administration will make way for President-Elect Donald Trump this month, but the racial tensions of the country will remain largely the same, bad. Despite the fact that with the election of Obama in 2008, many thought race relations would improve as we moved as a country into a “post-racial era” where anyone could do anything. To be blunt, these hopeful souls were wrong.

According to Gallup polling in 2008, 70% of whites and 61% of blacks thought that race relations between whites and blacks were either somewhat or very good. By 2016 those numbers dropped to 49% and 55% respectively. Similarly, the percentage of Americans who worry “a great deal” about race relations has almost doubled, going from 18% to 35%. Clearly, at a bare minimum, white and black perception of race relations has taken a turn for the worse.

What changed? More specifically, how has the outgoing administration either failed to help or worsened race relations? Unsurprisingly, economic instability and The Great Recession of 2008 had a lot to do with it, but more importantly, the policies for the recovery are at the center.

In 2008, everyone was hit hard, but there was a racial disparity in the economic impact. While the upper class had greater absolute losses in wealth, the percentage losses were far worse for an already struggling lower class. When the economy began to recover, there was a rebuilding of wealth and income rose across the board. Unfortunately, during the recovery, the income disparity between races increased. Before the great recession, median household income for whites was 10 times that of blacks. In 2014, that multiple rose to 13.

The Obama administration’s answer to the crisis was the ARRA (The American Recovery and Reinvestment Act of 2009), the main purpose of which was to create jobs, and quickly. Did it do that? There is still no complete consensus, but most economists (about 80%) say it did succeed in the short term, but that long-term effects remain to be seen. What it did not address, however, was where jobs were created. The Act gave tax cuts to both individuals and businesses, but, in terms of businesses, failed to protect working class people (of any race) from layoffs. As a result, while blacks and Hispanics were disproportionally affected, working-class class whites were in the same boat. This led to increasing economic frustration in an increasingly divisive political climate. It was in this environment that #BlackLivesMatter was born. It was in this environment that David Duke and the KKK made national news, that led to police officers were sniped by a lone ranger in Dallas, and Charlotte declared a state of emergency during a riot.

So, what does public policy under the new administration Trump need to focus on to ease these tensions? Multiple studies have concluded that while economic factors are often not the instigators, they are key exacerbators of racial tension. If this is not expressly addressed, things will inevitably get worse. Trump has promised to work with stakeholders in urban centers to help give a much-needed economic boost directly to minority neighborhoods. Continued economic growth policies centered on creating working class jobs will also work to alleviate racial tension through economic prosperity.