Friday, August 14, 2020

Musings on Racism, Reparations, Racial Disparities and the Federal Reserve

  By Rudy Barnes, Jr.

Racism is an ugly reality in American culture and politics.  Civil rights laws provide a remedy for racial discrimination, but not for racism and racial disparities in wealth, education, employment, health and criminal justice.  Such disparities are a norm in libertarian democracies that provide equal opportunity but not equality.  Political freedom and equality are incompatible. 

Black Lives Matter protests have demanded reparations to blacks for slavery and to end racial disparities caused by a variety of social, economic and political factors.  Kamala Harris has supported the demands of Black Lives Matter, and she is more popular with Democrats than Biden.  That may push a formerly moderate Biden toward more leftist Democratic policies. 

American democracy seems destined to remain polarized by partisan politics.  While Republicans are committed to Trump’s divisive radical right politics, Biden’s choice of an aggressive and ambitious Kamala Harris makes it questionable that he will be able to provide the moderate leadership needed to counter our polarized politics with a politics of reconciliation.

A healthy democracy requires altruistic policies that balance individual rights and political identity group wants with providing for the common good.  Most Americans claim to be Christians, and the altruistic teachings of Jesus are summarized in the greatest commandment to love God and to love our neighbors of other races and religions as we love ourselves. 


Last year Joe Biden was the only candidate in the Democratic presidential campaign who did not advocate reparations.  Even so, Jim Clyburn endorsed Biden in the S.C. primary and set him up to be the Democratic nominee for president.  Clyburn advocates repairing the damages of racism with programs that benefit blacks without entitlements based on race.

Democrats have introduced “The Federal Reserve Racial and Economic Equity Act that requires the central bank to take action ‘to minimize and eliminate racial disparities.”   The Fed controls the economy through monetary policies that have propped up megacorporations and created vast disparities in wealth, and it’s unlikely to agree to be responsible for ending racial disparities in wealth.  That would redefine the Fed and be a back door to socialism.  

The church and partisan politics are as split on racial issues today as they were before the Civil War; and the church remains racially segregated, with most white Christians voting Republican and most blacks voting Democratic.  There seems little prospect for change in our polarized politics and churches, unless caused by unforeseen consequences of the pandemic.

Racism and increasing disparities in wealth are once again threatening to unravel the fabric of American democracy.  The remedy is not racial preferences that exacerbate racism, but civil rights remedies that protect blacks and other minorities from unlawful discrimination, coupled with a moral reformation in the church that promotes a politics of racial reconciliation.


Congressman James Clyburn (D-SC) and Chales M. Blow have contrasting views on reparations: 

James Clyburn understands the importance of race relations to racism and has emphasized the need to repair what’s wrong with America:  “I always say the root word for reparations is repair, repair, repair. We need to repair what's going on in this country. These fault lines that have been opened up need to be repaired. ...When you start talking about reparations in terms of monetary issues, then you lose me because nobody can put a value on the loss of education. Nobody can put a value on the loss of a life. Let's repair what's wrong with America and not allow ourselves to spend the next 150 years studying what a monetary value needs to be assigned to the loss of these freedoms and liberties.” See

Clyburn said he fears reparations would lead to contested debates about who would be eligible due to the sprawling family trees that have evolved in the generations since slavery was abolished. ...Clyburn said he liked a recent comment by U.S. Sen. Bernie Sanders, who said in a CNN town hall last week that he would push to increase the usage of Clyburn’s “10-20-30” policy. That formula, which has already been inserted in some federal policies, calls for directing 10 percent of government funds to counties where 20 percent or more of the population has lived below the poverty line for the past 30 years.  ‘To me, that’s a much better way to deal with what reparations is supposed to be about,’ Clyburn said.” See

Charles M. Blow supports reparations, which he describes as “reasonable and right.”         

For a vast majority of black people’s time in this country, they have been suffering under an oppression operating on all levels of government — local, state and federal.  It is absolutely a good idea for America to think about how to make that right, to think about how to repair the damage it did, to think about how to do what is morally just.  And the idea that too much time has passed makes a mockery of morality. ...Furthermore, this is not about individual guilt or shame but rather about collective responsibility and redemption. America needs to set its soul right. The paying of reparations isn’t at all an outlandish idea. To the contrary, it’s an exceedingly reasonable proposition. Most of all, it’s right.”  See

Charles Blow showed contempt for race relations when he wrote: “I have never fully understood what [race relations] meant. It suggests a relationship that swings from harmony to disharmony. But that is not the way race is structured or animated in this country. From the beginning, the racial dynamics in America have been about power, equality and access, or the lack thereof.  ...So what are the relations here? It is a linguistic sidestep that avoids the true issue: anti-Black and anti-other white supremacy.  It also seems that the way people interpret that question is in direct proportion to the intensity of revolt that’s taking place at a particular time. ...After the rise of Black Lives Matter, satisfaction with race relations suffered a sustained drop.” See

Democrats are trying a new approach to eliminating racial disparities.  “They have introduced a  bill to give the Federal Reserve a new mission: ending racial inequality. The legislation would make minimizing racial disparities an official part of the central bank’s mandate.  The Federal Reserve Racial and Economic Equity Act requires the central bank to take action ‘to minimize and eliminate racial disparities in employment, wages, wealth, and access to affordable credit.’ It would be the first major change to the Fed’s mandate since 1977 and would significantly alter the central bank’s focus. The Fed’s current mandate from Congress is to keep prices stable and maximize the number of Americans with jobs.  While the legislation is not expected to pass Congress while Republicans control the Senate, it signals a growing consensus among Democrats that the Fed has played a role in deepening inequality and needs to be part of the solution to close gaps in employment and pay.  Presumptive Democratic presidential nominee Joe Biden recently released a similar proposal calling on the Fed to ‘aggressively enhance’ its monitoring and targeting of ‘persistent racial gaps in jobs, wages, and wealth.’ This latest bill in Congress goes a step further by explicitly requiring the Fed to work to close the gaps.

‘The Federal Reserve Racial and Economic Equity Act creates a new racial justice mission at the Fed to eliminate racial and economic disparities in all of its work," said Maxine Waters in a statement.

Critics of the proposal say the Fed already has clear goals to help every American and that the central bank’s tool kit is too limited to address long-standing inequalities in society. The Fed’s main policy action is to set interest rates, which makes it cheaper or more expensive to borrow money to buy a home, purchase a car or start a business.  “Isn’t this the job of Congress and, quite frankly, all of us?” tweeted Constance Hunter, chief economist at KPMG. “To put this on the Fed seems to set them up for failure Raphael Bostic, president of the Atlanta Fed and the only African American among the 17 members of the central bank’s top leadership, said the nation has a “moral and economic imperative to end racism," and the Fed “can play an important role” in addressing racism and inequality.  But Bostic also said that the Fed can only do so much and Congress and other institutions have a big role to play as well.

Fed Chair Jerome H. Powell...has said repeatedly that the Fed doesn’t have sufficient tools to address inequality. He has urged Congress to take the lead role in closing long-standing gaps.

“We don’t really have tools that can address distributional disparate outcomes as well as fiscal policy [can],” Powell said last week at a news conference. He added that Congress is generally “much better” suited to fixing education, health care and other problems.” See

There is a transformation of the Fed.  “The Federal Reserve is undergoing an overhaul. Conceived to keep inflation in check and oversee the country's money supply, the central bank is now essentially directing the economy and moving away from worries about rising prices.

…’Free market enterprise no longer exists,’ Scott Minerd, CIO of Guggenheim Partners, tells Axios. ‘The Fed by essence of what it's doing has taken control of the market.’

Why it matters: ‘The definition of market prices is whatever the Fed says it will be,’ says Minerd, a member of the New York Fed's Investor Advisory Committee on Financial Markets.’” The idea that the Fed is controlling or setting prices in financial markets was once the fodder of conspiracy theorists and cranks. But since the Fed's unprecedented intervention into credit markets in late March, it has become a general understanding stated openly by economists and asset managers, including those at high-profile investment firms like Deutsche Bank and Bank of America.   Yes, but: Not all of the Fed's new programs have worked as planned. After significant delays, its $600 billion Main Street Lending Program has provided less than one-tenth of 1% of its allotted funding to needy small businesses even as the Paycheck Protection program has whiffed and business closures have spiked.  ...Compare that to the trillions it has used on QE and the billions it has purchased in debt from some of the country's largest companies using a backstop of taxpayer money and it's no wonder politicians and economists have called the Main Street program a "failure" and an "unmitigated disaster." See

See also, The Federal Reserve’s new Inflation target redefines the meaning of inflation at


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