For the nation to be competitive, we must pursue economic justice and close the racial wealth gap, write LISC CEO Maurice A. Jones and board chair Robert E. Rubin in an op-ed for The Hill. They lay out concrete bipartisan steps that government can take today to lift millions of Americans out of poverty and promote an equitable economic recovery.
The op-ed below was originally published on The Hill:
How to better assist communities left behind in this economic crisis
In his 1982 book “The Underclass,” the longtime New Yorker writer Ken Auletta described poverty as a systemic problem replicated from generation to generation because our nation had not dealt with its history. Thirty-eight years since Auletta wrote that gripping book, intergenerational poverty stubbornly persists — and disproportionately affects people of color. With the severe economic disruption brought on by the coronavirus, these communities are now facing dire challenges.
Our country is engaged in an important national conversation about race. And a critical piece of that conversation must be how to overcome poverty. Far too little has been done for far too long — including in the coronavirus relief bills passed by Congress. Income and wealth gaps, already excessive before the crisis, are now seriously heightened. As legislators continue to consider how to address the economic crisis, they need to focus on reaching people with low incomes and too few opportunities for support.
For years, we have both urged policymakers to view poverty as a vital issue for the future of our economy. No matter what your income may be or where you live, poverty affects all of us, in addition to being a wrenching human issue. Even before the crisis, the poverty rate in tens of thousands of low-income communities topped 20 percent. The unemployment rate in those communities was nearly eight times the national average and is greater now, as roughly three-in-four jobs lost over the past few months have been low or moderate wage jobs. Roughly 40 percent of people earning less than $40,000 a year have been laid off. And these job losses especially affect people of color.
To stop conditions from worsening, and instead promote recovery, policymakers should adopt economic policies that help people who have been hit the hardest by the crisis. One such proposal is for a new, $10 billion low income emergency support fund that states and localities could use to help economically vulnerable people facing severe crises, like eviction or homelessness.
A second important idea is to temporarily increase SNAP benefits, more commonly known as food stamps, a program that is exceedingly effective in helping people facing hunger. Another positive measure would be a one-time expansion of the Child Tax Credit — targeted to the poorest children — and of the now-tiny Earned Income Tax Credit for workers not raising children. And additional rental assistance would help protect at-risk households and multifamily property owners. All of these measures are included in the House $3 trillion Heroes Act, which passed on May 15 and is now before the Senate.
We also need programs that reach small businesses and nonprofits that serve poor neighborhoods. To accomplish this, policymakers must recognize that millions of enterprises and jobs operate outside the mainstream financial system. To better aid small businesses that don’t have credit or deposit relationships with traditional banks, the federal relief efforts should fully leverage the experience and expertise of community development financial institutions (CDFIs), which are the prime source of capital for low-wealth communities.
We were both at the Treasury Department in the 1990s when the CDFI Fund, the federal agency that certifies and helps fund these lenders, was in its infancy. Since then, the sector has grown to more than one thousand nonprofit loan funds, credit unions, and mission-driven banks that aggregate capital from public, private and nonprofit sources.
Treasury recently announced a $10 billion program for CDFIs from the second round of the Paycheck Protection Program, recognizing that these lenders are well-positioned to sustain businesses in rural, minority and other underserved communities.Congress should reinforce those efforts with a multi-billion-dollar commitment to the CDFI Fund to help community-focused lenders provide emergency loans and grants to their customers, as well as shore up their balance sheets. The Federal Reserve or the Treasury Department should further support recovery by creating a new facility to purchase CDFI loans.
In the next coronavirus response bill, Congress has an opportunity to take a more inclusive approach and reach millions of Americans who have been left behind by the previous pieces of legislation, making investments that will pay high dividends in the years to come.
Robert Rubin is a former secretary of the Treasury Department and chairman of Local Initiatives Support Corporation. Maurice Jones is a former director at the Treasury Department and chief executive officer of Local Initiatives Support Corporation.