A Mixed Legacy ... Black and White, Rich and Poor

[+ stevenkesslar]

While this post touches on politics I do not mean it to be primarily about politics, I mean it to be an observation of what happened to the poor and the middle class during the Obama years. With today's Supreme Court ruling, I think the major elements of that legacy are now in place, and they are decidedly mixed.

 

https://www.yahoo.com/politics/the-obama-legacy-on-race-president-barack-obama-122362581601.html

 

I, being liberal, am absolutely delighted at the SCOTUS ruling to uphold Obamacare. It will hopefully end the debate. It will also, hopefully, help the budget deficit. The political game that a negative ruling could have set up is the Republicans would play chicken with Obama on a bill that patched in the subsidies in red states (which is politically popular) but required him to kill the individual mandate (which is politically unpopular). As much as that may have made political sense for Republicans, who have every logical reason to see Obamacare as the political gift that keeps on giving, it would have been a budget disaster. Like it or not, the individual mandate is what has kept Obamacare on budget so far, and removing it would help spike up either insurance premiums, or the deficit, or both. Obamacare is already a victim of its own success, in that more people are signing up than expected, both for Obamacare and the Medicaid expansion, meaning that there is a growing likelihood that the subsidies will strain the budget. Getting rid of the individual mandate would blow a crater into the budget.

 

Here's an interesting and detailed breakdown of who has benefited from Obamacare:

 

http://www.nytimes.com/interactive/2014/10/29/upshot/obamacare-who-was-helped-most.html?_r=0&abt=0002&abg=0

 

Not surprisingly, as of when this article was written, rates of the uninsured had gone down across the board, but the biggest reductions came for the poorest, Hispanics, and blacks. What impact that will have in the long term remains to be seen. Black poverty went down by huge margins twice in my lifetime: first during LBJ's War On Poverty, and then again during Bill Clinton's Presidency, in part because of specific initiatives like the Children's Health Insurance Program (CHIP) which he claims lifted millions out of poverty. As of now poverty is basically flat during the Obama years - it spiked up in the first several years during the Great Recession, and now it is spiking down. Since every study I've seen shows that lack of health insurance and bankruptcy and debt based on medical bills is one of the key drivers of poverty, there is ever reason to think that eventually Obamacare or whatever it evolves into will gradually drive down poverty rates, just like LBJ's Medicaid and Clinton's CHIP Program did.

 

Meanwhile, news for the middle class, and especially the black middle class, is not so good:

 

http://www.businessinsider.com/us-black-middle-class-is-suffering-2012-10

 

What these articles suggest is that perhaps the biggest legacy of the Obama era is simply Obama himself. Even people who don't like Obama tend to agree that the fact that we have now elected and reelected our first black (or only half white) President is a sign of racial progress.

 

One of the saddest things about the Obama Presidency is that the black middle class, whose ascendant political and financial power helped elect him, has been torn to shreds. A few quotes from the article on that:

 

The Pew Charitable Trusts' Economic Mobility Project recently released a report projecting that 68 percent of African-Americans reared in the middle of the wealth ladder will not do as well as the previous generation.

 

In August, the National Urban League's State of Black America 2012 report found that nearly all the economic gains that the black middle class made during the last 30 years have been wiped out by the economic downturn.

The biggest reason for this is the homeownership bubble and subprime lending. While this is anecdotal, it tells the story of what happened:

 

Earlier this year, the Woodstock Institute, a Chicago-based nonprofit research group focused on fair lending issues, found that although 25 percent of homes in the Chicago area were underwater, about 40 percent of homes in predominantly black neighborhoods were. The average equity for mortgaged properties in communities that are more than 90 percent white is about $108,000. In communities that are 80 percent or more black, the average is $6,800.

 

From 2005 to 2009, the average black household's wealth fell by more than half, to $5,677, while white household wealth fell 16 percent to $113,149, according to the Pew Research Center. In 2009, 24 percent of black households had no major assets other than a vehicle, compared with 6 percent of their white counterparts.

 

Saving money for the future is especially difficult for blacks living paycheck to paycheck. The median annual household income for blacks declined by 11.1 percent (from $36,567 to $32,498) from June 2009 to June 2012, according to an analysis of Census Bureau data by Sentier Research. The decline for whites was 5.2 percent and for Hispanics 4.1 percent. Both groups started with higher incomes than blacks.

 

That is a very sad trifecta. To the extent that they had equity based on owning homes, blacks in particular saw it evaporate during the subprime meltdown. They are in a worse position than whites, based on income, to buy a home now. And they are in a worse position to save money for the future, also based on income.

 

I bring all this together because today is a good day to wonder whether Obamacare was simply a mistake:

 

http://www.realclearpolitics.com/video/2014/11/25/schumer_obamacare_wasnt_the_change_we_were_hired_to_make_in_2008.html

 

Schumer was correct that Obama was not elected primarily based on a promise to fix health insurance for the poor. He was elected primarily to help the middle class during the Great Recession. My view is that given that Mitch McConnell's whole strategy was to turn the US Senate into a "food fight," it's not clear that Obama could have done anything to create consensus. But asking Republicans to vote for Obamacare, which they ideologically despise, surely did not help matters.

 

There is also a lot of "pot, meet kettle" to Schumer's Monday morning quarterbacking. He, like Hillary Clinton and Bill Clinton, epitomize the part of the Democratic Party that is perfectly happy to stand by Wall Street. Wall Street got a huge bailout, middle class home owners didn't. Obamacare is partly a reflection of Obama's willingness to fight, and win, the "good fight" for the constituency that is at the core of his electoral coalition - poor people, and blacks and Hispanics.

 

My biggest hope is that the Supreme Court ruling will allow us to finally put the divisive issue of Obamacare to bed and focus on the contagion that is still raging - the festering sore of middle class stagnation, which is a problem shared by Americans of every race.

[+ WilliamM]

There is also a lot of "pot, meet kettle" to Schumer's Monday morning quarterbacking. He, like Hillary Clinton and Bill Clinton, epitomize the part of the Democratic Party that is perfectly happy to stand by Wall Street. Wall Street got a huge bailout, middle class home owners didn't. Obamacare is partly a reflection of Obama's willingness to fight, and win, the "good fight" for the constituency that is at the core of his electoral coalition - poor people, and blacks and Hispanics.

 

You are absolutely right about middle class homeowners suffering under the Obama Administration. There were well-meaning programs involving homeowner under water and mortgage servicers that sounded good, but just helped a few people.

 

The political philosphy that almost everyone can be a homeowener played to predatory lending. Even 20 years ago, it was difficult to remember when prospective homeowners applied to the bank they used in the community for their mortgage applications.

 

Yes, it's Pres. Obama's fault, but also Pres. Bush and Pres. Bill Clinton as well.

[bigvalboy]

You are absolutely right about middle class homeowners suffering under the Obama Administration. There were well-meaning programs involving homeowner under water and mortgage servicers that sounded good, but just helped a few people.

 

The political philosphy that almost everyone can be a homeowener played to predatory lending. Even 20 years ago, it was difficult to remember when prospective homeowners applied to the bank they used in the community for their mortage applications.

 

Yes, it's Pres. Obama's fault, but also Pres. Bush and Pres. Bill Clinton as well.

 

Exactly WilliamM. There is plenty of blame to go around, but I would add also that many homeowners are to blame as well. Buying over-priced property, hoping to capitalize on the ballooning real estate market. Some even pulling inflated equity of those properties. Unfortunately those that could least afford it were the victims when the market imploded. Many of those homeowners lost their means of employment during the recession, at no fault of their own, making it impossible to fulfill financial obligations. Add to that predatory lending and it was a perfect storm.

[+ WilliamM]

There is plenty of blame to go around, but I would add also that many homeowners are to blame as well.

 

I agree. I tried to help a few people refinance -- people who have good records on mortgage payment until a temporary crisis occurred. Some servicers were virtually impossible, lost paperwork that had to be resubmitted multiple times, phone messages that were never returned on and on. I understand that servicers were overwhelmed, including those who really wanted to help refinance the property. Really you could rightly blame the system. And many people stopped paying when foreclosure was continually delayed; others stopped paying when underwater. The phrase 'perfect storm' absolutely applies.

[+ purplekow]

I can remember my father starting his own business talking at the kitchen table to my mother and uncle about going to talk to Bill Hartman, a neighbor and an officer of the bank, to get a loan to start the business. My father was sure Bill would put in a good word with the bank and that would be that. And that was that. Bill came over for dinner a few weeks later, papers were signed and a small business owner was created. Now maybe it is naive to believe that a personal knowledge of a man and his reputation in the community is enough for bank to give a loan so a son of immigrants could start a business. But that method of doing business could not have done a worse job and the jumbled , paper shuffling, lie through your teeth method that was promoted by Wall Street big wigs, and which sent billions of dollars to billionaires and their off shore accounts and which sent poor people to the poor house.

 

Where is George Bailey when you need him?

[+ WilliamM]

But that method of doing business could not have done a worse job and the jumbled , paper shuffling, lie through your teeth method that was promoted by Wall Street big wigs, and which sent billions of dollars to billionaires and their off shore accounts and which sent poor people to the poor house

 

Purplekow, I had a part-time job at a housing counseling agency as a supervisor in 2008 and 2009. To be fair, some homeowners took advantage of the situation, and stopped paying their mortgages when they could easily have afforded to pay. On occasion, they received a better deal with a refinance. So you are only 99% right, in my opinion,

[bigvalboy]

I had a part-time job at a housing counseling agency as a supervisor in 2008 and 2009. To be fair, some homeowners took advantage of the situation, and stopped paying their mortgages when they could easily have afforded to pay. On occasion, they received a better deal with a refinance. So you are only 99% right, in my opinion,

 

Absolutely correct...and I "had" several friends who borrowed 100% to value on their homes, leaving them with zero equity, knowing full well that the real estate bubble was going to burst, and knew that they were just going to walk away....They just took the money and ran.

[+ stevenkesslar]

Who got burned worst, in charts and graphs:

 

http://3.bp.blogspot.com/-KpU6eMR8k4Y/UnutL41i2HI/AAAAAAAAcxg/Dw1goQrr-Yo/s1600/MBANDSQ32013.jpg

http://www.realtytrac.com/images/reportimages/fha_foreclosure_rates.png

http://4.bp.blogspot.com/-e6vVQgTLSOU/UCezPPxyPII/AAAAAAAAPLA/nNwOCufFS1w/s1600/MBANDSPrimeQ22012.jpg

 

Note that both prime loans and FHA loans never had foreclosure and serious deliquency rates that topped a single digit. Also note that foreclosure rates on these loans are now back down to their early 1990's lows.

 

The real disaster was, no surprise, in subprime loans. And whether you view them as victims or victimizers, blacks and Hispanics took the biggest hits:

 

http://2.bp.blogspot.com/_4yctHhP4f-8/SewTJkjRf3I/AAAAAAAAASY/K6fut-hx4Lk/s400/Boston+Fed+subprime+foreclosure+rate+in+massachusetts.png

 

Here is the most disturbing chart, which reflects what BVB and others were saying about people using the equity in their homes as ATM machines:

 

http://www.heritage.org/~/media/infographics/2014/06/bg2917/bg-fixed-rate-mortgage-30-years-chart-1-825.ashx

I'm pretty sure that this chart shows one factor holding the recovery back. All through the 90's and up to 2006 people taking equity out of their homes to spend helped keep the economy going. The Great Recession wiped out a huge amount of middle-class wealth. While it is recovering, we are not back to "normal" yet.

[+ WilliamM]

The real disaster was, no surprise, in subprime loans. And whether you view them as victims or victimizers, blacks and Hispanics took the biggest hits:

 

All through the 90's and up to 2006 people taking equity out of their homes to spend helped keep the economy going. The Great Recession wiped out a huge amount of middle-class wealth. While it is recovering, we are not back to "normal" yet.

 

I agree completely -- certainly here in Philadelphia. BVB and I may have gotten off track a bit. There is no doubt that low-and-moderate income people -- particularly blacks and Hispanics -- suffered through foreclosures and equity loss in record numbers.