So You Want To Boost The Economy? End Affirmative Action!
Print Friendly and PDF

With America having ruined its finances through excessive debt, the new administration is urging more hair of the dog that bit us: borrowing another $820 billion or so for "fiscal stimulus".

Of course, in all the infrastructure spending in the Democrats' bill, there's no mention of beefing up or speeding up one massive infrastructure project already underway: the lagging border fence.

The rationalizations for the stimulus keep changing. Obama's latest featured money pit—wind and solar energy!—being a desperate throwback to last summer when gasoline prices were twice as high.

Sure, none of it makes much sense. But for Obama, politically, it's a no-lose proposition. Either the economy gets better and he takes credit; or the economy flatlines and he demands more fiscal defibrillation.

In either case, he gets to give huge sums of other people's money to the politically well-positioned. The taxpayers will eventually have to pay for all the new borrowing, but most of the bill will likely come due after the 2012 election.

Our economic problem, though, is more severe than a temporary downturn. We now know that our purported wealth as of July 1, 2007 was illusory, based on a mountain of leverage teetering on the unquestioned assumption that some drywallers in Palmdale would actually pay off their half-million dollar mortgages.

From 2001 onward, there was no real economic growth in America, just pseudo-growth ginned up by home equity withdrawals. Our trade balance, for example, averaged over 5 percent of GDP throughout Bush's second term.

So, the real question is not how do we stimulate consumption once again to unsustainable heights, but: How do we become more productive? How do we make more stuff that people want to buy? How do we get better at creating more wealth?

The nation turns its eyes to Barack Obama, whose single year of working for a for-profit corporation made him feel like "a spy behind enemy lines" (as I point out in my book America's Half-Blood Prince: Barack Obama's "Story of Race and Inheritance." ) Obama has no experience in creating wealth, just in extracting it from others to spend for his political advancement.

But, needless to say, the Republicans have no clue what alternatives to offer.

The triumph of the globalist ideology means that the globalists' vaunted playbook is exhausted.

Free trade? Tariffs have already been cut almost to nothing—to 1.3 percent on average!

Cheaper labor?  The globalist recipe—outsourcing and insourcing once well-paid jobs away from American citizens—has been followed for decades. The plan was to drive wages down but keep consumption up by offering Americans lots and lots of debt. How's that working out lately?

It took us a long time to get to this dismal point, and it will take us a long time to get back on the right path. So, let's discuss long-term strategies for how Americans can make enough money to pay the taxes on all the debt the government has suddenly taken on.

The most obvious way for the government to help Americans become more productive is to junk government-required extravagances. Sure, these demands may have seemed affordable when California homes were "worth" a median half million, but now they must be reassessed with a jaundiced eye.

The most obvious reform for boosting productivity: end the national anti-discrimination witchhunt.

The assumption that lower economic achievement by a minority must be the fault of the majority has created costs vaster than previously imagined. For example, economist Edwin S. Rubenstein's recent report Cost of Diversity for the National Policy Institute estimates the price of affirmative action, immigration, and multiculturalism at eight percent of the GDP, or $1.1 trillion. (Peter Brimelow and Leslie Spencer estimated the shortfall at 4 percent of GNP in 1993, something that no one else wanted to do, and anonymous statistician La Griffe de Lion wrote Affirmative Action: The Robin Hood Effect in 1999, in which he pointed out  that "Whenever someone gets preferential access to a job or a promotion because of his race or ethnicity, someone else of a different race or ethnicity gets displaced. In the U.S., the displaced person is usually a non-Hispanic white. ")

The costs, direct and (especially) indirect, of affirmative action are seldom properly conceptualized. The public has been trained to assume that racial preferences are common only in college admissions. But in fact the vast anti-discrimination industry causes corporations to impose quotas on themselves as prophylaxis against discrimination lawsuits.

In 1978, the federal government adopted "Uniform Guidelines" that declared:

"A selection rate for any race, sex, or ethnic group which is less than four-fifths (or eighty percent) of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact …"

In other words, if your hiring procedures mean that any legally protected minority is hired at a rate less than 80 percent of the rate of the group that does best, then you are presumed guilty of discrimination unless you can prove yourself innocent.

Racial quotas are, thus, the inevitable by-products of our anti-discrimination laws and regulations.

Moreover, anti-discrimination laws undermine productivity even when only whites apply for the job—because they make it dangerous to use objective measures of competence.

For example, when I was at Dun & Bradstreet, I needed to hire a computer programmer. I asked the human resources department for the standard D&B written test for programmers. They said they would never, ever create such a thing because they would be certain to be sued over it as discriminatory. However, they assured me, I was free to ask orally all the programming questions I wanted—as long as I never wrote anything down.

Additionally, the costs of the current assumption that only discrimination can explain inequality are even greater than Ed Rubinstein's report assumes.

Consider the mortgage meltdown that launched the global economic crisis. Both the Clinton and Bush administrations demanded degraded credit standards so minorities could get their fair share of the American Dream. Team Obama whistles the same tune. The catastrophic expansion of subprime loans was justified by Obama's economics' expert Austan Goolsbee [email him] in 2007 on the grounds that "'Irresponsible' Mortgages Have Opened Doors to Many of the Excluded."[New York Times, March 29, 2007]

A new study, however, by Boston Fed economists Kristopher S. Gerardi and Paul S. Willen, Subprime Mortgages, Foreclosures, and Urban Neighborhoods, has revealed that minorities in Massachusetts default at about twice the white rate on subprime mortgages.

Previously, I noted that data from the federal Home Mortgage Disclosure Act database has shown that minorities, who make up one-third of the population, took out twice as many dollars per capita as whites in subprime mortgages during the Housing Bubble years of 2004-2007.

A back-of-an-envelope calculation says that if the national foreclosure rates are similar to those measured in Massachusetts, minority borrowers accounted for approaching two-thirds of the subprime mortgage dollars defaulted.


(There's a great irony here: it was a 1992 Boston Fed study purporting to show mortgage discrimination, authored future Clinton appointee Alicia H. Munnell, that provided the rationale for the feds' forcing the banks to make these risky loans. The then-president of the Boston Fed, Richard F. Syron, who greeted it with the glad cry of "Comports with common sense, no more studies needed", went on to bigger and better things as…CEO of Freddie Mac, one of two federally-sponsored "mortgage monsters". Yet it was refuted at the time in Forbes magazine (January 4, 1993) by Peter Brimelow and Leslie Spencer, who pointed precisely to differential default rates.)

Racial quotas might be necessary for some institutions, typically local monopolies such as utilities or police forces, that aren't disciplined by the market to maximize efficiency. But clearly, it's time to lift the dead weight of the anti-discrimination regime from firms in competitive markets.

The Republican leadership would of course whisper back to us that we can't possibly talk in public about boosting the economy by eliminating racial preferences because that involves … race. And, President Obama is, you know …

Of course, that's the kind of thinking that made Obama President.

My advice to the GOP: At the moment, the media is proclaiming that a black man being President is the greatest thing that ever happened in the history of the world. So use ju-jitsu. Go with the flow. Say that Obama being President shows that racial preferences were successful—and that it's time to pare them back to help the economy get out of the ditch.

[Steve Sailer (email him) is movie critic for The American Conservative. His website features his daily blog. His new book, AMERICA'S HALF-BLOOD PRINCE: BARACK OBAMA'S "STORY OF RACE AND INHERITANCE", is available here.]

Print Friendly and PDF