For what it’s worth, I don’t expect that to change; if we acknowledge the federal government’s role in creating generational black poverty, then necessarily have to acknowledge the federal government’s equally direct role in building the wealth of middle-class white America. As Wright notes, the Homestead Acts, the New Deal and the G.I. Bill all but created the white middle-class.  To acknowledge that – to really, truly take it and its implications seriously – is to directly undermine the myth of self-reliance and independence that we cling to as Americans. And that’s to say nothing of the fact that a full public account and understanding of the government’s role in hampering black progress will probably put us on a path towards something approaching reparations*, which – as I’m sure you’ve noticed – aren’t terribly popular.

And here’s Kuznicki on the New Deal-era Federal Housing Administration (from pg. 443 – emphasis mine):

One of the most egregious examples of the federalization of Jim Crow came in the form of the Federal Housing Administration. The FHA was created in 1934 to extend loans to relatively risky home buyers otherwise unable to obtain them. One way it sought to preserve these home buyers’ investments was, perhaps unsurprisingly, the racially restrictive covenant. The FHA explicitly recommended restrictive covenants and even insisted on them, with the announced goal of protecting the property values of FHA mortgages (Massey2007: 60–61).
The FHA also appears to have pioneered the practice of “redlining”— that is, of establishing areas into which blacks and whites are sorted when they enter the housing market, with the intent of producing segregated neighborhoods. Indeed, the red lines referenced in the term were first drawn on FHA maps. They demarcated heavily black neighborhoods, which could not receive FHA loans at all (Roediger 2005: 226–27). Even the incomes of the would-be homeowners were irrelevant (Massey 2007: 60). Historian David Roediger describes the FHA as “the open incarnation of the New Deal alliance between white supremacist southern Democrats and northern segregationist forces, in this case realtors, bankers, and white urban and suburban home owners,” whose “largesse” was “racially targeted” (Roediger 2005: 228).

Demographers continue to dispute the extent and even the existence of redlining among private real estate agents, with at least two recent studies concluding that race has not been a significant factor in the private market for homes (Holmes and Horvitz 1994, Klein and Grace 2001). The clearest form of redlining remains the eponymous redlining of the FHA. Although these practices clearly cannot explain the entire gap between black and white wealth accumulation, no one disputes that in the decades following the New Deal, home equity became the largest source of wealth for the American middle class. However, black homeownership has lagged behind, even controlling for income. Given that homeownership has been one of the key avenues of wealth appreciation for the middle class, any intervention discouraging it will likely have had disproportionate effects on wealth (Hilber and Liu 2008, Charles and Hurst 2002).

Kuznicki also highlights an interesting distinction between welfare programs that emphasize capital accumulation and eventual self-sufficiency (like the Federal Housing Administration, which provided loans to low-income homebuyers, or the GI Bill, which funded millions of Americans’ college education) and welfare programs aimed at addressing immediate material needs (food stamps, for example, or rent subsidization). This distinction is significant because many of the New Deal’s racially-segregated programs fell into the former category, whereas later, race-neutral welfare policies weren’t geared towards wealth accumulation. In short, both Kuznicki and Jamelle argue that Black Americans were frozen out of a system that helped create the American middle class. By the time segregation ended, our approach to social welfare already shifted to a needs-based system that was less equipped to encourage social mobility.

I mention this not because the story of institutionalized discrimination is particularly pleasant, but because it has real relevance to how we view the current debate over homeownership and the housing crisis. The Community Reinvestment Act and Fannie Mae and Freddie Mac’s much-maligned loans to low-income homebuyers were widely criticized on the right for inflating the housing bubble. Given that I can barely balance a checkbook, I’m in no position to determine the accuracy of these claims.  But before condemning government-subsidized loans to low-income homebuyers, the CRA’s history is worth taking into account. The CRA was originally conceived ” . . . to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords.” In other words, it was an attempt to address racial disparities that were originally widened (if not created) by government programs like the Federal Housing Administration.

One of Kuznicki’s broader arguments is that the United States government was never “race neutral” – before the Civil Rights Movement, discrimination was not just social custom, it was rigorously enforced at both the state and federal levels. As a result, he argues that the comparatively limited state interventions sanctioned by the Civil Rights Act were justified by a legacy of institutionalized racism. My question, then, is simple: Does Kuznicki’s logic also apply to social welfare programs aimed at promoting wealth accumulation? To return to the Federal Housing Administration, Black Americans were systematically excluded from a program that had a great deal to do with promoting homeownership and the subsequent growth of the American middle class.  So if the Civil Rights Act was aimed at rectifying the lingering impact of racist social policies, are programs like the CRA and other minority homeownership initiatives a justifiable response to state-sanctioned economic discrimination?

I only ask because Kuznicki’s article – which is worth reading in full – is a real challenge to  conservatives and libertarians who are generally suspicious of just about anything subsidized by the federal government. I admit I haven’t quite made up my own mind on the issue, but I’d be interested to hear other small government sympathizers on the policy implications of these lingering economic disparities.