Reparations, Explained

Last April, the U.S. Congress advanced H.R. 40, the Commission to Study and Develop Reparation Proposals for African-Americans Act, for committee consideration. In 1989, Congressman John Conyers first introduced the bill. Since then, H.R. 40 has been re-introduced at every congressional session but never reached a committee vote. The bill would form a 13-member federal commission to examine the sources of racial discrimination and voter suppression that date back to the United State’s enslavement of Black people. This federal commission would then present policy proposals to Congress for redress and repair, including reparations.

Reparations refer to an economic system of redress for grievous injustices, the calls for which have gained unprecedented support alongside the fight to disrupt and abolish state-sanctioned violence against Black people. To understand the case for H.R. 40, an examination of the economic analysis that would determine a federal reparations package is first necessary. In this question, economic analysis would help determine the type of reparations programs, the long-term effects, the magnitude of reparations, and eligibility. Here, we survey economic research and consider its application for H.R. 40.

Rashawn Ray and Andre Perry from the Brookings Institution consider the types of reparations programs for descendants of enslaved Black Americans. They emphasize that a reparations package should include individual and collective public benefits that simultaneously build wealth and eliminate debt. As such, programs are not mutually exclusive and include individual payments (for lost wages and damages), tuition remission, student loan debt forgiveness, down payment and housing revitalization grants, and business grants. In addition, these programs would address the sources of state-sanctioned racial discrimination that hinder the accumulation of assets and force debt, by which Black Americans cannot ​​build wealth (defined as assets minus debt).

In evaluating these programs, the long-term economic analysis points to the transfer problem in international trade theory. The transfer problem is the possibility that a donor country could be better off after giving away resources to another country. In their research, William Darity, Bidisha Lahiri, and Dania Frank examine several reparations programs as a transfer problem, where non-Black Americans could end up better off than Black Americans after reparations. The paper finds that reparations payments that give incentives for Black Americans to spend money on goods and services produced by non-Black Americans may widen the income gap. Thus, a reparations package must simultaneously increase income and create a healthy business environment for Black-owned businesses.

In the question of the magnitude of a reparations package, we review the economic literature and turn to the economic concept of discounting to understand how the government may determine the values of lost wages and damages across generations. For true intergenerational justice, a rate of compounding should be applied to account for long-term losses. Here, we review institutionalized racism and anti-Blackness as a long-term loss. 

The choice of a compounding rate is an integral factor. For example, we consider an event with damage at a billion dollars. If the event occurred two hundred years ago, at a one percent compounding rate, positive compounding puts a reparations value at 7.3 billion dollars rather than one billion. At a three percent rate of compounding, it increases to 369.4 billion dollars, and at a five percent rate of compounding, it increases to 17.3 trillion dollars. In the case of reparations, social scientists recommend positive compounding rates and inform these suggested rates by the real interest rates, real growth rates, and standard cost-benefit practices. However, the history of reparations in the United States does not reflect this economic analysis; families of Japanese-Americans who were interned during WWII received lump-sum payments which implicitly use zero or negative compounding.
State-sanctioned racism against enslaved Black Americans and their descendants was institutionalized such that there are spillover effects for immigrant Black Americans as well. Ray and Perry thus emphasize that eligibility for a reparations package should not stop at Black people who can trace their heritage to people enslaved in U.S. states and territories. For example, Senator Cory Booker whose parents are descendants of enslaved Black Americans would qualify for slavery reparation programs whereas Senator Kamala Harris (Jamaican immigrant father) and President Barack Obama (Kenyan immigrant father) may seek redress for housing and education segregation. A consistent pattern of identification is also advised.

Leave a Reply

Your email address will not be published. Required fields are marked *