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4 ways the US can pay reparations for slavery that aren’t direct cash payments

  • Reparations for slavery are back in the news as a decades-old bill is moving through Congress.
  • Some see direct cash payments as controversial, but they’re not the only way to pay reparations.
  • Experts suggest grants for homeownership, entrepreneurship, and education, as well as stock options.
  • Read more stories from Personal Finance Insider.

There’s much buzz about reparations for slavery since the US House of Representatives’ Judiciary Committee recently voted to send the decades-old HR 40, the Commission to Study and Develop Reparation Proposals for African Americans Act, to the full House. 

The bill seeks a greenlight to form a 15-person commission to get the conversation started about the “cruelty, brutality, and inhumanity of slavery” and subsequent racial and economic discrimination against African Americans that still exists, and to make recommendations to Congress about appropriate remedies. 

How does one repay for America’s “original sin”? A cash payment to all those impacted is often touted as a solution. But that’s likely to be a tough sell in a country that’s still racially divided, even though it wouldn’t be the first time. In the past, the federal government has paid reparations to survivors of the Japanese internment and victims of the Tuskegee experiments and their families.

A 2020 episode of Gimlet’s “Science Vs” tackled reparations. In it, producer Rose Rimler said, “Some hope that the cash payments will be big enough to wipe out the racial wealth gap, which currently stands at 15 cents on the dollar — in other words, for every dollar a white family has, a Black family has 15 cents. If you had $250,000 deposited in your account today, what would you do with it? Buy a house, start a business, pay off debt, send your kids to college? That amount of money is life-changing, and it could boost some recipients into the middle or upper class.”

Are direct cash payments the best option?

Sounds good, but the reality could be different. Social justice attorney Mark Bello suspects cash payments might do more harm than good. “History has demonstrated that handing money to individual citizens might not have the impact intended. Will people make sound financial decisions if they receive reparation funds? A good analogy is lottery winners who go bust shortly after winning the money,” he says.

Bello also considers the social impact of direct-to-citizen reparations: “Would it assist Black/white relations, or would it further the racial divide or cause resentment among those who are similarly situated to those who receive reparations? We must look at the social as well as the financial issues involved.”

Truth is, there are plenty of other ways to right wrongs that don’t require cash hitting hands.

For example, earlier this year, US Senator Cory Booker and Rep. Ayanna Pressley reintroduced the American Opportunity Accounts Act, legislation seeking to create a national program called “Baby Bonds.” The bill would create a federally funded savings account for every American child at birth seeded with $1,000 that will grow each year with additional deposits of $2,000 annually, depending on family income. The funds will sit in an interest-bearing account until the account holder is 18, when it can be used for things like buying a home, paying for educational expenses, or starting a business.

4 alternatives to direct cash payments

There are other alternatives to direct cash payments that can also go a long way to repaying the debt of slavery.

Education grants  and job training

Bello advocates for directing money to education (low-cost or no-cost college funding or grants, inexpensive daycare), and job training, particularly tech and skills training for high-paying blue-collar jobs. “Inner cities are slowly crumbling. A broad, community-based infrastructure plan for our crumbling cities would create thousands of high-paying jobs,” says Bello.

Startup capital

The non-profit Colour Conscious grants seed capital to Black start-up businesses. Founder Michellett Whitney is all for monetary reparations, but business grants “could give us the head start that we need,” she says.

Stock options

A 2021 survey found that just 55% of Black Americans have stock market investments, compared to 71% of white Americans. Kyra Kyles, CEO of YR Media and a past editor-in-chief of Ebony magazine, says reparations in the form of stock options are one way to help Black Americans build wealth. She applauded Barbra Streisand for providing George Floyd’s 6-year-old daughter, Gianna, with Disney stock options. 

“What if the vast number of public companies, who have greatly benefited from Black consumership, convened and came up with a system of providing wealth in this form? The ‘how’ of allocation and distribution shouldn’t be much of a barrier for a country — and citizens — that innovates systems to keep varying groups down, so the same ingenuity can be applied to lift them up,” says Kyles.

Homeownership and land grants

No doubt one area ripe for repair is real estate and homeownership. For decades, Black Americans have been victims of redlining, home undervaluation, and mortgage discrimination. The impact has been deleterious.  

“The average Black family has less than one-tenth the net worth of the average white family. The No. 1 vehicle for wealth is homeownership,” says Eric Bailey, president of consulting firm Bailey Strategic Innovation Group.

There are plenty of paths to chart a better course. “Why not provide grants or low-cost/government-subsidized loans for business district and housing rehab, home purchases, or new construction in places where minorities were historically discriminated against by the real estate, banking, and property development industries?” asks Bello.

As an example of what can be done, Kyles points to the story of “Bruce’s Beach,” prime beachfront land in Southern California improperly and unjustly seized from a Black family, Willa and Charles Bruce, over a century ago.  

“Very recently, that land has been returned to their descendants and is estimated to be worth millions of dollars. City governments should look into their own history and the roles they have played in divestment and remedy these actions in acknowledgment of the fact that the generational wealth for Black Americans is far below that of their white counterparts and property is a huge part of that unbalanced equation,” Kyles says.

The ramifications of redlining are huge. “Look at what redlining did to thriving Black neighborhoods in Baltimore. There’s an obligation for banks to restore those neighborhoods. No-interest loans for instance; the bigger proportion of infrastructure money, etc.,” says Kerry Mitchell Brown, equity strategist, cultural architect, and founder of KMB, a strategic advising firm.

She adds that more legislation like the American Rescue Plan is needed. In particular, Mitchell Brown says the $5 billion that will go to farmers of color, who lost 90% of their land over the past century because of systemic discrimination and a cycle of debt, will provide debt relief as well as grants, training, education, and other forms of assistance aimed at acquiring land, is a welcome remedy.

Simply put, Bailey says HR 40 can start a much-needed conversation. “Reparations are about repairing damage. In the US, there is a hesitation to acknowledge the damage. What we need are real conversations. How do you repair other people’s thoughts and beliefs? People have to talk until all the trauma is out. Those conversations can create enough empathy to solve problems.”

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