Recovering Opportunity

Alan Jenkins | August 17, 2009

When he signed the American Recovery and Reinvestment Act of 2009 (ARRA) -- the economic stimulus package -- President Barack Obama promised it would "begin the process of restoring the economy and making America a stronger and more prosperous nation." The act invests some $787 billion in unemployment assistance, tax cuts, support to cash-strapped state governments, job creation, job training, education, and infrastructure.

Less noticed but just as important is the act's commitment to securing more equitable opportunity for all Americans. In its text and in its implementation, the act holds the potential for a transformative shift toward greater equity in our economy. But fulfilling the potential of this little-noticed mission of equal opportunity will require vigilance, activism, and innovation.

With an African American president, it is tempting to think that racial and ethnic barriers to opportunity are largely a thing of the past. More prominent in progressive circles is the idea that modern racial inequality flows almost entirely from class inequality, and therefore class-based fixes will inevitably advance racial equity. Unfortunately, research and experience prove otherwise. While we've made significant progress in our country when it comes to race relations, racial barriers to opportunity continue to hold back millions of Americans and, in so doing, hurt our economy.

Consider, for example, the exploitative sub-prime lending practices at the heart of today's economic crisis. Federal data show that African Americans and Latinos were more likely to be marketed high-interest, sub-prime loans than were similarly qualified whites, irrespective of their income. Indeed, the racial gap in sub-prime lending was greatest among higher-income borrowers. This problem has both historical and contemporary causes -- from redlining and forced segregation in the past, to the paucity of banks in minority communities and discriminatory, predatory lending practices that continue today.

Similarly, research shows that people of color still face subtle but persistent bias in job selection. Resumés with "white sounding" names like Brad and Cindy, studies show, receive more callbacks from employers than do identical resumés with "black sounding" names like Jamal and Lakisha. Whether this discrimination springs from intentional bias or subconscious stereotypes, it's clear that these practices combine with systemic barriers like under-resourced schools, inadequate public transportation, and a dearth of health-care facilities in communities of color to diminish opportunity based on race.

Other systemic factors place particular racial and ethnic groups in a disadvantaged posture that warrants a more particularized approach. Federal mismanagement of American Indian trust funds, for example, has cost the native population billions of dollars. American Indian tribes also hold a sovereign status commensurate with the 50 states under our Constitution but have seen that sovereignty persistently ignored and eroded, with devastating economic consequences. In 2007, American Indians were three times as likely as whites to live in poverty. And unemployment rates on some reservations top 80 percent.

For these and other reasons, even the socioeconomic improvements of the boom years do not reliably translate to more equitable opportunity. According to the Bureau of Labor Statistics, in May 2007, before the current economic downturn, the unemployment rate was 3.9 percent for whites, 5.8 percent for Latinos, and 8.5 percent for African Americans. All three figures roughly doubled over the next two years, but the racial gap remained about the same. The pre-recession economy also included stark racial inequality in wages and assets. In 2007, African Americans earned only 75 cents for every dollar earned by whites, and Latinos earned only 73 cents. Families of color held just 15 cents of "wealth" (assets minus debt) for every dollar held by white families, making it profoundly more difficult for them to survive a downturn without becoming further mired in debt.

Because we are all part of an interconnected economy, the need to address these gaps in opportunity is an economic as well as a moral imperative. The United States cannot stage a full or lasting recovery without addressing these gaps. Moreover, if the American Recovery and Reinvestment Act merely restores the economy to the inadequate and unequal conditions of 2007, the nation will remain on a long-term path toward sustained economic insecurity.

How can ARRA catalyze a period of greater and more equitable opportunity? The seeds are there, but they need cultivation and care.

First, a number of provisions in ARRA invest in initiatives that have proved over the years to serve all Americans while offering communities of color more access and opportunity. For example, the act invests in improving and expanding community health centers across the country. These centers are known for providing quality care to diverse and low-income communities, addressing cultural and language differences, and controlling costs. A robust system of community health centers in inner cities and rural areas can create jobs, improve health and productivity, and lower the daunting cost of care for diverse communities. Similarly, ARRA's $2 billion to expand Head Start and Early Head Start programs supports an initiative with a track record of serving all kids well and helping, in particular, to boost the preparedness and achievement of children of color. At the same time, it will create jobs in disadvantaged communities and aid working parents who cannot afford child care.

Second, the act recognizes that different communities may require different types of investment in economic participation. It shores up tribal governments and reservation communities -- just as it aids struggling state governments -- with investments in reservation roads and bridges, public transit, housing improvement, tribal law enforcement, and efforts to end violence against women.

Third, and perhaps most significantly, the White House has explicitly directed federal agencies distributing ARRA funds to uphold established equal-opportunity, anti-discrimination, and labor protections. That's a marked departure from the Bush administration, which sought to waive those provisions in Gulf Coast rebuilding efforts after Hurricane Katrina.

This body of protections cuts across employment, housing, education, transportation, criminal justice, and environmental protection, and mandates that the benefits and burdens of federally funded projects be nondiscriminatory in practice as well as intent. It requires equal opportunity based on race, ethnicity, and, in some sectors, gender, religion, age, language ability, disability, and familial status. (Protections based on sexual orientation remain a gaping hole in existing equal-opportunity laws.)

Yet there is no certainty that the promise of an equitable recovery will be realized. Doing so requires transparency, coordination, and political will.

Watchdog groups have noted the lack of practical transparency surrounding stimulus spending. That is especially true regarding the information necessary to assess and ensure equal opportunity. Although the president promised in signing the ARRA that "the federal government will be held to new standards of transparency and accountability," spending decisions on the ground have proved very difficult for affected communities to track or participate in. The federal government's economic recovery Web site, Recovery.gov, contains some useful bits of information -- for example, the fact that $72 million has been allocated to improve public housing in Louisiana and $441 million disbursed by the Department of Transportation as of June. But it lacks the specificity, demographic, or geographic disaggregation necessary to assess the impact of ARRA investments on greater opportunity. State and municipal stimulus tracking sites vary widely in information and transparency, and few if any provide adequate data or analysis.

While the nation's equal-opportunity laws are well established, the infrastructure for monitoring and enforcing them is badly atrophied after a decade of neglect by the prior administration. And truly effective interagency coordination of those laws has been lacking since, at least, the Nixon administration. Experience shows that without monitoring, technical assistance, and rigorous enforcement, the opportunities and burdens created by ARRA projects will not be equitable. Rather, as we saw in the flawed rebuilding of the Gulf Coast, they are likely to deepen existing patterns of inequality. In doing so, they will fail to achieve the robust and lasting economic recovery that is ARRA's chief goal.

Finally, equitable implementation will require mustering significant public and political will. Contemporary barriers to equal opportunity are not well understood by the public, and few states or municipalities have a robust system for addressing them. Entrenched special interests and political influence may overtake fairness in funding decisions. And investment targeted toward disadvantaged communities may draw conservative backlash.

Despite these challenges, there are a range of things that the president, Congress, state and local officials, and civil society can do to promote a widely shared economic recovery.

The president should immediately integrate equal-opportunity monitoring and coordinated enforcement measures into the administration's stimulus implementation. An interagency task force could establish a protocol for collecting data on the distribution of funds by geography, race, gender, and other demographics, monitor projects on the ground, and provide technical assistance to federal-fund recipients to encourage their compliance. Requiring Opportunity Impact Statements from funding applicants can help to quickly select among shovel-ready projects and incorporate public input.

The White House must also greatly improve Recovery.gov by providing more project-specific and demographic data, as well as information on the equity measures attached to approved projects. And the president must use the bully pulpit, as he did so eloquently during the campaign, to explain to Americans why equal opportunity is crucial to our shared prosperity.

Congress should provide rigorous oversight of stimulus spending as it relates to equal opportunity and require regular reporting by the White House. It should also close gaps in existing law by prohibiting employment discrimination based on sexual orientation and restoring individuals' ability to challenge discriminatory policies in court.

State, municipal, and tribal governments should adopt public equal -- opportunity policies, detailing how they'll ensure equitable benefits and burdens from stimulus-funded projects. They should seek public input on spending decisions, engage community groups in implementation, and report their impact, including the facts and data behind them.

Nonprofit organizations also have an important role to play in monitoring stimulus spending, holding local governments accountable to equal-opportunity standards, providing job training and other support services, and helping to shape projects that can expand opportunity for all.

In order to be successful, the American Recovery and Reinvestment Act must not only stimulate the economy but also instigate a new era of opportunity. While the law itself provides an important starting point, the hard part lies ahead.

Ailing States Face Bleak Outlook in Next Fiscal Year

By Keith B. Richburg and Ashley Surdin
Washington Post Staff Writers
Tuesday, August 11, 2009

NEW YORK -- As states across the country grapple with the worst economy in decades, most have cut services, forced workers to take unpaid days off, shut offices several days a month and scrambled to find new sources of revenue.

The good news is that much of the pain this year has been cushioned by billions of dollars of federal stimulus money, which has allowed states and localities to avoid laying off teachers, prison guards, police officers and firefighters.

The bad news is that for the next fiscal year, beginning in July, the picture looks even bleaker. Revenue is expected to remain depressed, even if the national economy improves. There will be only half as much federal stimulus aid available, and many states have already used up their emergency reserves.

Most states have just approved a budget for the fiscal year that began July 1, and their legislatures have adjourned for the summer. But in a dozen or more states, those budgets have already gone into the red less than two months into the fiscal year, by a total of about $24 billion. More than 30 states are projecting deficits for next year, according to the Center on Budget and Policy Priorities, a Washington-based think tank, and other expert estimates.

The economic picture in state capitals has looked bad since last fall, when the national economy first went into freefall and many governors called their legislatures into emergency sessions to make drastic mid-year cuts for such things as health-care services and support for public colleges and universities. But as legislatures have just completed their regular budgeting process, the extent of the fiscal disaster is only now becoming clear -- and some are already talking about additional special sessions this fall, with more painful cost-cutting ahead.

Maryland, with a $1.9 billion budget, faces a $700 million gap, according to the Center on Budget and Policy Priorities. The District has a new $650 million budget with a $150 million shortfall. Virginia, with a $1.8 billion budget, also faces a new deficit, but the size has not been determined.

For the next two fiscal years, the states face a combined budget shortfall of $350 billion, according to the center and the Council of State Governments, using roughly the same projections.

"I think that states are going to have to look at revenue and programs across the board, or they're going to have to raise revenue in an anemic economic environment," said Chris Whatley, deputy executive director of the Council of State Governments. "Either way you look at it, it's going to be about tough decisions in state capitals."

Already, in California, the epicenter of the states' fiscal meltdown, domestic-violence shelters have been turning people away because state funding was eliminated, and some shelters have shut down.

State funding has also been eliminated for several programs run through California's office of AIDS, and for a black infant health program that helps 6,000 African American pregnant women and new mothers statewide. "This is the worst I've ever experienced, and I've been with the County of Sacramento for 23 years," said Sharon Saffold of the county's health department.

State offices across Michigan were closed Friday, but not for a holiday. It was the fourth of six furlough days for more than 37,000 state workers, with two more shutdowns due before Labor Day.

New Jersey Gov. Jon S. Corzine (D), struggling in a reelection campaign, recently signed a new $29 billion budget that was $1.5 billion less than the first budget he signed as governor four years ago. But even that was not enough to stop Moody's, the Wall Street rating agency, from downgrading New Jersey's credit outlook to "negative," citing the state's huge debt and the use of one-time budget gimmicks.

Even with the national economy showing signs of improvement -- joblessness for July had the smallest monthly loss for a year -- conditions for states and localities are likely to remain dire for some time, economists and experts said. The depressed value of housing will continue to mean lower revenue from sales taxes and property taxes. Also, continued high unemployment will mean reduced income-tax receipts, more expenditures for unemployment claims and more demand for "safety net" services.

Unlike the federal government, most state governments are barred by their constitutions from running a deficit or borrowing money to cover operating costs. Their only choices are to cut services further -- although most say programs already have been pared to the bone -- or to raise revenue in the form of new taxes or fees, something legislatures are loath to do in a recession.

Already, to balance their fiscal 2010 budgets, governors have increased fees, raised sales taxes and imposed new taxes on high-income earners. New Yorkers will pay more for licenses to drive, hunt, boat and fish. New Jersey has raised taxes on cigarettes, wine and liquor. Other states are said to be considering expanding sales taxes to include such services as landscaping, pest control, cable television and diaper delivery.

This year, the federal stimulus package signed into law by President Obama in February served as a lifeline. For all the intense partisan debate in Washington over whether the stimulus so far has worked, in the states there is little question that federal cash has staved off catastrophe.

According to the General Accounting Office's July report, by June 19 the federal government had disbursed $29 billion to the states, with 90 percent of that money going to Medicaid, to help states maintain coverage levels, or to help them stabilize budgets and avoid layoffs.

"The stimulus has had a tremendous effect in forestalling some of the worst cuts," said Elizabeth McNichol, a senior fellow with the Center on Budget and Policy Priorities. It's absolutely worked for the states."

Whatley, of the Council of State Governments, said state deficits would be 40 percent worse if not for the stimulus funds. The federal funds have given states "breathing room," he said, but he added that "the stimulus cushioned the blow of the state fiscal crisis, but it didn't blunt it."

The stimulus money "is helping California weather the worst fiscal crisis in recent memory," said H.D. Palmer, spokesman for the California Department of Finance. But Palmer said the crisis is far from over: "We hope that the worst of this recession is behind us, but whoever is the next governor will face continuing fiscal challenges."

On Friday, Corzine, who has had little good news lately, was able to announce that New Jersey had received $10.5 million in federal stimulus money for homelessness prevention, and that the state's community affairs department would immediately start taking applications from nonprofit groups and local governments. The money can go to people on public assistance or victims of domestic violence.

In Los Angeles, that kind of help is desperately needed.

A heavyset, hazel-eyed woman, originally from Texas, described last week how she and her 8-year-old son spent two weeks wandering Los Angeles's streets looking for room at a shelter. She said they spent days at a McDonald's restaurant trying to stay cool, and nights sleeping on a hand-sewn quilt under the 110 Freeway in South Central Los Angeles.

The woman, who spoke on the condition that she would not be identified, said she was fleeing an abusive boyfriend who had beaten her for more than a year. She had hoped to move immediately into a shelter for abused woman but was regularly turned away. "They just didn't have room," she said in her Texas drawl.

The woman eventually found a place at the Jenesse Center, near South Los Angeles. But that shelter is now full and turned others away. With state aid eliminated, the Jenesse shelter lost 30 percent of its revenue -- money used to pay for diapers, baby formula, food, paint, and plumbing repairs. The staff, after layoffs, is nearly half the size it used to be at a time when the number of homeless people seeking shelter is growing.

"It's devastating to the survivors and the victims who need these services," said Adrienne Lamar, associate director of the Jenesse Center. She said she knew of at least three other domestic-violence shelters that have closed.

She added: "The potential outcome for this is deadly, just deadly."

Surdin reported from Los Angeles.

China Says Migrants Are Employed Again

By ANDREW BATSON

BEIJING -- China's government said most rural migrant workers have found new jobs after mass layoffs last year, indicating the effects of its stimulus are filtering into the job market. But the downturn is still being felt in weaker growth of household incomes, which could hold back consumer spending.

Less than 3% of migrant workers who have returned to cities in recent months are still looking for jobs, said Wang Yadong, a deputy director-general at China's labor ministry. He said 95% of migrant workers preferred to seek work in cities this year rather than go back to farming. He declined to give more detailed figures, and didn't explain how the estimates were made. Mr. Wang's report is the first official update since February on the migrant job situation.

Itinerant rural workers are the backbone of China's manufacturing and construction industries, with tens of millions crossing the country every year for work. Officials previously estimated that 18 million to 23 million of them -- about 13% to 15% of the migrant-worker population -- had lost their jobs as of January.

Since then, China's economy has pulled back from the brink, thanks to a huge expansion of government investment and lending from state banks. "Our economic stimulus plan has had a clear impact on employment," said Liu Yuanchun, an economist at Renmin University in Beijing.

He noted that while the job market is performing better than many expected a few months ago, the picture is cloudy because government figures aren't reliable. "The actual number of migrant workers who have returned to the cities and found jobs may not be as high as the official figures say," he said.

• China Journal: Fears of Migrant Unrest Have Faded

Yet there are other scattered signs of an improving job market. Recent purchasing managers' index surveys indicate many manufacturers added jobs in May and June. And the government's revenue from income taxes rose 2% in the second quarter, according to economist Stephen Green of Standard Chartered, which also suggests payrolls are expanding.

The International Monetary Fund says businesses such as consumer-durables manufacturing and infrastructure construction are absorbing the laid-off workers.

Mr. Wang said the government's estimate of the total migrant worker population had increased by about 10 million since the end of 2008, to 150 million people in June. That figure could be evidence that job opportunities are still drawing more people off the farm this year.

He said the government will continue measures to boost employment, as three million recent college graduates have yet to find a job. "China's employment situation is still very serious," Mr. Wang said. "There are still a lot of companies whose businesses are in trouble, and the risk of job losses is still high."

New jobs for migrants this year may not be as good as those they had before. Some scholars report that migrant workers have often had to accept lower wages to find new work in recent months. The southern city of Shenzhen, long a magnet for migrant workers, recognized this trend by cutting its average wage guideline for this year by 3.8%, to 2,750 yuan ($402) a month.

Official measures of income and consumption are still rising this year, although at a slower rate. The government's survey of rural households shows average income from migrant work grew 7.7% in the first half of 2009, down sharply from 19.6% growth in the same period last year.

Yet a central-bank survey in May found urban households' satisfaction with their income was at its lowest level since 1999. Mr. Liu, the Renmin University economist, said official income figures don't include commissions or bonuses, which are likely to be down sharply. "Many people feel their incomes are declining, and their expectations for future income are not so great, so they are cutting back on their daily consumption," he said.

Write to Andrew Batson at andrew.batson@wsj.com