June 1, 2023
Late tonight the Senate passed H.R. 3746, the Fiscal Responsibility Act, suspending the debt ceiling and cutting certain federal spending. President Joe Biden has promised to sign it tomorrow, preventing a government default. Forty-four Democrats and two Independents—Angus King (I-ME) and Kyrsten Sinema (I-AZ)—voted yes, along with 17 Republicans. Four Democrats and Independent Bernie Sanders (I-VT) voted no, along with 31 Republicans. The final tally to pass the measure was 63 to 36.
“Democrats are feeling very good tonight,” Senate majority leader Chuck Schumer (D-NY) said. “We’ve saved the country from the scourge of default.”
Republicans brought the nation to the brink of default with their insistence that they opposed runaway government spending, but their demands did not square with that argument. The nonpartisan Congressional Budget Office (CBO) said that the $21 billion cut in funding to the Internal Revenue Service, for example, will result in $40 billion in lost revenue, increasing the deficit by $19 billion.
In other economic news, the Biden administration today announced actions designed to address racial bias in the valuation of homes.
This sounds sort of in the weeds for administration action, I know, but it is actually an important move for addressing the nation’s wealth inequality. In 2019 a study from the Federal Reserve showed that white American families had a median net worth of $188,100, Hispanic or Latino families had a net worth of $36,200, and Black American families had a median net worth of $24,100.
Homeownership is the most important factor in creating generational wealth—that is, wealth that passes from one generation to the next—both because homeownership essentially forces savings as people pay mortgages, and because homes tend to appreciate in value.
But a 2021 study by the Federal Home Loan Mortgage Corporation, more popularly known as Freddie Mac, showed that real estate appraisers are twice as likely to undervalue minority-owned property relative to contract price for which the home sells, than they are to undervalue homes owned by white Americans.
The story of lower valuation came to popular attention after a Black couple living near San Francisco applied for a loan and received an initial valuation far too low for them to qualify for that loan. Shocked, since the same house had been appraised at almost a half a million dollars higher the year before, the couple removed all traces of their ownership of the house and asked a white friend to stand in as the owner before a new appraiser evaluated the worth of the property. That new appraisal came back a half a million dollars higher than the lowball one.
(The couple sued, and the case was settled in February 2022).
Two years ago, the Biden administration announced a sweeping effort to “root out racial and ethnic bias in home evaluations.” Today it bolstered those efforts to “ensure that every American who buys a home has the same opportunities to build generational wealth through homeownership.” They call for fixing algorithms to ensure that home values are accurately assessed, creating pathways for consumers to challenge low assessments, and increasing the numbers of trained appraisers.
There is a reason that the administration has centered its housing policies on June 1. This is the anniversary of the Tulsa Massacre, when in 1921 white gangs destroyed the prosperous Greenwood district of that city, which was home to more than 10,000 Black Americans. It wiped out 35 blocks with more than 1,200 homes and businesses and took hundreds of Black lives, robbing Black families of generational wealth and the opportunities that come with it.
In 1921, Greenwood, known as “Black Wall Street,” was estimated to be the richest Black community in the United States. The destruction of May 31 to June 1, 1921, changed all that. Residents of Greenwood filed $1.8 million in damage claims—more than $27 million in today’s dollars—against the city, but all but one of the claims were denied when the city was found not liable for damages caused by mobs. (A white pawnshop owner was compensated for the guns stolen from his store.) Insurance didn’t help, either: insurance companies claimed that damage caused by “riots” was not covered by their policies.
In a 2018 article in the American Journal of Economics and Sociology, Chris M. Messer, Thomas E. Shriver, and Alison E. Adams estimated that the destruction in Tulsa might well have amounted to more than $200 million in today’s dollars.
Greenwood’s Black residents nonetheless pooled their resources and rebuilt the district, despite the system of “redlining” by mortgage companies that deemed parts of Greenwood to be credit risks and made it impossible for residents to get mortgages. “Urban renewal” then destroyed the area again in the 1960s through the 1980s as white city planners rezoned the district, built highways through it, and took property through eminent domain.
Vice President Kamala Harris acknowledged the destruction of Greenwood today in a call with reporters. Noting that “[h]omeownership is one of the single most powerful engines of wealth-building available to American families,” she explained that ‘[m]illions rely on the equity in their homes to put their children through college, to fund a startup, to retire with dignity, to create intergenerational prosperity and wealth.” But “for generations, many people of color have been prevented from taking full advantage of the benefits of homeownership.”
The inequalities of the past have persisted in the home appraisal system, Harris said. “[B]ecause their homes are undervalued, Black and Latino people often pay more for their mortgage, receive less when they sell, and are less able to get access to home equity lines of credit—all of which widens the racial wealth gap and deepens longstanding financial inequities.”
“Today,” her Twitter account said, “our Administration is announcing new actions to root out racial bias in home valuations to ensure that all hardworking families can realize the true value of their investment and have a fair shot at the American dream.”
Jonathan Lemire, Adam Cancryn, and Jennifer Haberkorn of Politico reported today that White House officials urged allies to downplay their substantial victory on the debt ceiling crisis and the related budget negotiations, afraid of sparking Republican opposition and eager to be seen as the adults in the room.
But they needn’t have worried. Today, President Biden tripped over a sandbag left in his path as he was jogging away from the center stage of the U.S. Air Force Academy graduation in Colorado after giving the commencement address. He appeared fine after the fall, but it is dominating right-wing social media, the debt ceiling crisis already forgotten.