After months of overblown rhetoric about what he sees as deplorable living conditions for black Americans and people in “inner cities,” Republican presidential nominee Donald Trump has finally proposed some ostensible solutions. But his urban renewal agenda is stuffed with items that don’t make much sense.
In a speech on Wednesday laying out his vision, Trump touted some of the policy proposals he’s already put forward. They include passing a $1 trillion infrastructure spending package, the benefits of which he said would largely flow to inner cities; closing the trade deficit with various countries and threatening American manufacturers who move factories abroad; and lowering the corporate tax rate from 35 to 15 percent.
But he also laid out some new ideas specifically targeted, he said, at African Americans and city dwellers, a “new deal for Black America” focused on jobs, education, and public safety.
As part of this deal, Trump would allow social workers who handle cases for the Temporary Assistance for Needy Families (TANF) cash welfare program to convert the money into “repayable but forgive-able [sic] micro-loans.” Trump claimed that this would encourage the creation of small businesses, but gave no further details.
It’s unclear how much of a say welfare recipients themselves would get in whether they received a loan or a cash benefit. Trump’s wording seems to suggest it would be at the discretion of case managers, but a spokesperson for the Trump campaign did not respond to an emailed request for clarification.
Very few people actually receive TANF today, thanks in large part to the reforms signed into law by President Bill Clinton in the 1990s. Before reform, nearly three-quarters of needy families got benefits from Aid to Families with Dependent Children (AFDC), TANF’s predecessor; today about a quarter receive welfare benefits. Those who do get welfare are usually in real need of assistance: On average, those families make just $946 a month, or a bit over $11,000 a year.
It’s not clear, then, how turning much-needed cash benefits, which can buy things not covered by other assistance programs, into a business loan would benefit them. While microfinance has become popular among philanthropists and lenders who invest in developing countries, research has found that microloans don’t significantly reduce poverty and might even make things worse for the most destitute.
Because low-income microloan borrowers are often a riskier investment than a traditional business, the loans they receive often come with incredibly high interest rates. That potentially leaves borrowers worse off if they can’t recoup enough profits.
Sending low-income people cash, on the other hand, has a good track record. Giving the poor money without strings attached has been found to increase earnings, work, and well-being while reducing hardship in countries such as Kenya, Liberia, Mexico, South Africa, and Uganda. It even worked in North Carolina when the Eastern Band of Cherokee Indians distributed casino profits to its members. Giving the poor more cash in the U.S. has the potential to dramatically reduce poverty.
Trump put forward other plans to get credit to African-American communities. He called for a “21st century Glass Steagall” — referring to the Depression-era law, repealed in the 90s, that enacted firewalls in banks between regular consumer lending and high-risk investment and insurance activities — “and, as part of that, a priority on helping African-American businesses get the credit they need.”
It’s true that people of color are more likely to be denied credit and end up paying higher interest rates on loans when they get them. But without details, it’s not at all clear how resurrecting Glass-Steagall would help. Bringing back the law could, in theory, lower risk in the financial sector and therefore make it more stable in a crisis while also reducing the size and power of Wall Street. But none of that would impact banks’ racial lending practices.
Trump also proposed “tax holidays” on firms that invest in inner cities, as well as new tax breaks to entice foreign companies to headquarter in “blighted American neighborhoods.” He also put forward the idea of allowing cities and states to seek federal disaster designation — currently only available in the wake of a natural disaster — to get funding that could let them rebuild infrastructure, demolish abandoned properties, and hire more police.
Police and safety is a major focus for his urban renewal strategy beyond economics. “The problem is not the presence of police but the absence of police,” he said, promising to increase funding and training for law enforcement in order to reduce crime.
He repeated a familiar talking point of his: that black Americans live in an environment of “crippling crime and violence.” He told the audience, “I mean you walk to the store to buy a loaf of bread, maybe with your child, and you get shot, your child gets shot,” adding the false claim that murders are at the highest rate in 45 years.
While violence is a concern in some cities, and the FBI recently reported an increase in violent crime, overall the trend over recent decades has been toward a dramatic decrease in violence across the country decades, particularly in cities.
Trump also made stark claims of high poverty and unemployment rates among African Americans. While blacks have higher rates of poverty and joblessness than whites, African Americans have also seen important gains: On these economic measures, they are doing better now than at any time in the country’s history. Trump’s proposals are unlikely to make those gains accumulate faster, and could in fact make things worse.