How decades of US welfare policies lifted up the white middle class and largely excluded Black Americans

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A look back at US welfare policy shows how white Americans have greatly benefited, while Black Americans have been largely excluded or discriminated against. Robert F. Bukaty/AP Images
  • Financiers, business leaders, and regular folks are increasingly calling on political leaders to reshape capitalism and address rampant racial inequality in the US.
  • As policymakers try to address the coronavirus pandemic, experts point to the ways past US policies boosted quality of life for white Americans while leaving Black Americans behind.
  • Researchers agree that white Americans greatly benefited from New Deal programs and post-World War II policy, while Black Americans were discriminated against; then, when Black Americans started to access welfare benefits at a higher rate starting in the 1970s, there was backlash among conservatives.
  • These policies have had a cumulative effect over generations and help explain the massive wealth gap between Black and white Americans and the reason Black Americans are overrepresented in welfare programs.
  • Visit Business Insider’s homepage for more stories.

When President Donald Trump met with the Congressional Black Caucus in 2018, the topic of welfare reform came up. One member of the caucus told Trump that enforcing stricter rules would be detrimental to her constituents, “Not all of whom are Black,” according to NBC News.

The president is said to have replied, “Really? Then what are they?” apparently assuming that a welfare recipient couldn’t be white.

In fact, far more white people have benefited from US welfare programs over the years – reflecting their greater share of the population – while Black people and other people of colour have been denied them in various ways, multiple historians and researchers tell Business Insider.

The coronavirus pandemic has exposed the underbelly of American inequality in many ways, with people of colour disproportionately likely to be laid off, to be on the financial brink, and to die from the virus. That has helped prompt a growing chorus of financiers, business leaders, and regular folks to call for a reimagining of American capitalism and for moves to end racial inequality. Some top economists are calling for a “New New Deal” specifically targeting inequality, a platform to which the Democratic presidential candidate Joe Biden seems open.

If the country is to move forward in trying to lift Americans out of unemployment and poverty, policymakers might consider who has benefited most from past welfare policies and how such policies have helped produce today’s world.

Business Insider talked to four economic researchers and historians, and analysed the past 90 years of welfare policy, when considering the question of who the status quo actually benefits.

Sanford Schram, a political-science professor at CUNY Hunter, who wrote “Disciplining the Poor” and “Hard White,” puts it bluntly: “I do think the federal government has been complicit in the perpetuation of race-based discrimination that has led to African Americans lagging behind whites. No question about it.”

The New Deal brought jobs to Americans, but different kinds of jobs for different races

The US government has spent trillions of dollars trying to prop up its economy during the coronavirus pandemic, but it has stopped short of a “wartime economy“-style mobilisation or the kind of massive public-works program that some experts have said is badly needed to stem double-digit unemployment.

But the Black Lives Matter movement – given new urgency after George Floyd’s killing by the police in Minneapolis in late May – has exposed a separate problematic legacy of the New Deal, the series of policies enacted by President Franklin D. Roosevelt to get the US out of the Great Depression of the 1930s. It was introduced in an era defined by segregation and explicit racism.

It’s true that Roosevelt appointed several Black leaders to prominent leadership positions within his administration, known as the “Black Cabinet,” and his policies helped make thousands of jobs newly available to Black Americans, but as Ibram X. Kendi points out in “Stamped from the Beginning,” policies enacted at the time reflected a racist culture.

When the New Deal got Americans back to work, white Americans got the first pick at jobs, and when Black Americans did get jobs, they were given lower wages, according to the University of Houston’s Digital History Project.

“State and local governments administered almost all federal New Deal programs, and many of these state and local government leaders, especially in the South, were virtually all white … and racist,” Gary Orfield, a professor of education, law, political science, and urban planning at the University of California at Los Angeles, told Business Insider.

Great depression
State and local governments administered New Deal program benefits — an obvious problem in the South, which was segregated at the time. Bettmann/Getty Images

Also, Black people were excluded from key benefits created during this period. The Social Security Act of 1935, for instance, prohibited domestic and agricultural workers (an outsize number of whom were Black or Latino) from receiving benefits.

Black workers were also excluded from progressive labour regulations passed during that time, Paul Moreno, a history professor who is the dean of social sciences at Hillsdale College, told Business Insider.

Many unions had explicit clauses in their constitutions that said that only whites could be members. So you could have a situation where an employer was forced to bargain with an exclusively white union and he’d have to fire all of his Black employees.

The National Labour Relations Act of 1935 – commonly known as the Wagner Act for Sen. Robert Wagner, who proposed it – bolstered the strength of worker unions, but many major unions of this era either excluded Black workers or discriminated against them.

“Many unions had explicit clauses in their constitutions that said that only whites could be members,” Moreno said. “So you could have a situation where an employer was forced to bargain with an exclusively white union and he’d have to fire all of his Black employees.”

Because discrimination was still legal when it came to jobs, Black Americans were routinely denied well-paying positions and were much more likely to be hired for low-wage work, according to Orfield, the professor at UCLA.

“A lot of policies were designed that simply left out Black Americans who were sharecroppers and were doing low-wage work, which was excluded from some of the labour regulations,” he said.

New Deal, 1930s
A young boy in Greendale, Wisconsin, a greenbelt community constructed by the US Department of Agriculture as part of President Franklin Roosevelt’s New Deal. Universal History Archive/Getty Images

Elsewhere in the economy, interpretation of New Deal policies wound up hurting Black Americans. The Federal Housing Administration was created in this era, with the goal of creating affordable housing for as many Americans as possible. But local interpretation of this mission resulted in “redlining,” a policy in which mortgage credit was denied in majority-Black neighbourhoods.

The FHA continued to encourage racist policies into the postwar era, when the American suburbs were being built. In 1948, the Supreme Court outlawed “restrictive covenants” – a clause that essentially prevented Black Americans from buying property from white owners – yet the FHA still encouraged builders to write them into their agreements well past 1948, according to Orfield.

Racist sign, 1940s
White tenants protesting African Americans moving into the Sojourner Truth Homes, a federal governmental housing project, in Detroit in February 1942. Corbis via Getty Images

White veterans of World War II were given zero-down-payment, 30-year guaranteed mortgages under the GI Bill.

“With zero cash, you, white veterans, could get into owning a brand-new home,” Orfield told Business Insider. “That door was not open for Black and Latinos.”

A house someone bought at the time for $US12,000 or $US15,000 in mortgage payments, he said, might be worth $US300,000 decades later.

“That’s a gigantic wealth creator and a gigantic middle-class escalator,” he said, one Black Americans missed out on and couldn’t pass along to their children.

Welfare reform greatly benefited Black Americans – and was almost immediately unpopular for it

One of the largest government programs in the post-New Deal era, President Lyndon B. Johnson’s “Great Society” sought to remedy the racial wealth gap. During the 1960s, the median Black family income rose 53%, while Black employment doubled in professional, technical, and clerical occupations, and average Black educational attainment increased by four years, University of Houston history professors write. The proportion of Black people below the poverty line went from 55% in 1960 to just 27% by 1968.

President Lyndon Johnson
President Lyndon Johnson speaking with students from Public School 192 who were beneficiaries of his Head Start program, in Harlem, New York, in 1968. Afro American Newspapers/Gado/Getty Images

Even at the height of the Great Society, Black Americans constituted only about 27% of all welfare recipients, according to Sundiata Keita Cha-Jua, an associate history professor at the University of Illinois at Urbana-Champaign. Most recipients were white Americans.

“From the Great Society moving forward, one could say that white people, because of their numbers and percentage of the population, have always constituted the largest number of people” on welfare, Cha-Jua told Business Insider, adding that “Black people, Latinx, American Indians, because of their oppressed condition, have constituted a much greater percentage than their per cent of the population.”

But as the anti-discriminatory practices from Johnson’s presidency were enforced and Black Americans were allowed to participate in new benefit programs, there was a dramatic shift in public perception about government subsidies – to the negative.

“Public assistance was not as demonized until African Americans began to exercise their right to use it, ironically,” Schram said. “And that’s when welfare started to be seen as this inferior program for nonwhite people who didn’t play by the white middle-class rules of work and family.”

This shift was propelled forward by President Ronald Reagan, whose campaign speeches about the now-debunkedwelfare queen” stoked racist fear among white Americans.

Ronald Reagan
President Ronald Reagan ushered in a new era of welfare reform. REUTERS/Joe Marquette

“He really tightened the eligibility requirements,” Schram said. “He made it more difficult for you to get welfare even after you started to work.”

For example, Reagan cut spending to the Aid to Families with Dependent Children program, which provided cash assistance to low-income children whose father or mother was absent from the home, incapacitated, deceased, or unemployed. This forced struggling mothers and families further into poverty, research funded by The Ford Foundation found.

The social-welfare-policy researcher Sandra Edmonds Crewe, who is the dean of Howard University’s School of Social Work, described such policies by conservative policymakers as a direct response to Black participation in the system.

“There is always a backlash that comes after progression – always,” Crewe told Business Insider, likening the backlash against welfare expansion to the resurgence of white nationalism in response to Barack Obama’s presidency.

Instead of receiving an opportunity to be lifted out of poverty, many Black Americans remained disenfranchised.

Reagan’s legacy, however, was solidified by a Democratic president, Bill Clinton, who promised to “change welfare as we have come to know it.” By replacing the Aid to Families with Dependent Children program with a Temporary Assistance for Needy Families block grant, he dramatically reduced the size of welfare programs. “TANF really did change welfare as we knew it,” Schram said.

Bill Clinton
President Bill Clinton promised to change welfare ‘as we have come to know it’ — and he did. Ralph Alswang/Getty Images

Before Clinton, about 75% of people who were eligible for welfare were receiving it. But by 2000, four years after Clinton’s program was enacted, only about 25% were, Schram’s research found.

In other words, at a time when Black Americans were given significantly more access to public assistance, measures were enacted to make assistance harder to access.

“When we do get included in the welfare state, in the Great Society programs, we are stigmatised for it,” Cha-Jua, who is Black, said.

How this legacy is playing out today

The racial wealth gap in the US not only persists – it’s growing. For every $US100 in wealth held by a white family today, a Black family has just $US10, per research from the Federal Reserve’s 2017 “Survey of Consumer Finances.”

A recent analysis of homeownership by the Fed noted that homeownership by race seemed similar to the wealth distribution by race.

The difference in homeownership can also be seen at the geographic level, per research from the Urban Institute.

Today, white people still make up a plurality of those on welfare programs such as TANF or the Supplemental Nutrition Assistance Program. A Department of Agriculture report from November estimated that 35.7% of SNAP recipients in the 2018 fiscal year were white, 25.1% were Black, 16.7% were Hispanic, 3% were Asian, and 1.5% were Native American (0.8% were listed as multiple races, while 17.4% were listed as “race unknown”).

Enrollment by race for Medicaid and the Special Supplemental Nutrition Program for Women, Infants, and Children show similar enrollment as those in SNAP.

Black people make up just 13.4% of the US population and are therefore overrepresented in welfare programs. When asked why this was the case, Crewe of Howard University had a simple answer: “systemic inequality.”

Without more intervention, inequality will continue to reproduce itself, Crewe said. Orfield of UCLA agreed.

This is especially true today, as Congress decides whether to give Americans cash assistance after the temporary $US600 increase weekly unemployment benefits expired July 31.

Black and brown workers are more likely to report being in financial hardship right now.

A survey by the organisation Lean In with Survey Monkey in early April people found that Black women were twice as likely as white men to say they were laid off or furloughed during the pandemic. New analysis by the global advisory firm Stout Risius Ross found that only 26% of African American tenants said they felt highly confident they could pay their mortgage payments on time right now, compared with almost half of white Americans, CNBC reports.

“My view of this,” Orfield said, “is if you’re in a society that’s completely stratified by race and ethnicity, basically what you’ve got is a system that guarantees inequality unless you specifically decide to change it.”