As reparations task forces continue studying how to repay African Americans for past racist harms, Washington University researchers say there are tested policy models that can deliver mass repayment.
In the June issue of the Russell Sage Foundation Journal of the Social Sciences, the research brief Asset-Building Policy and Black Reparations: Effective Delivery and Wealth Accumulation explores three wealth-accumulating options for Black Americans to receive reparations.
“They've got to become a population that also has resources that also has wealth that also wants to invest and be part of our economic system,” said Trina Shanks, a Wash U Center for Social Development faculty director.
In the brief, researchers propose that local and state governments use the Child Development Accounts policy model to deliver potential reparations. The model allows repayment to be provided to African Americans as a cash transfer, in a savings plan account or a trust fund.
Child Development Accounts is a policy model used in seven states including Pennsylvania, Illinois, Nevada and California. State legislatures created them to invest in the wealth of children in their states. It is an account that grows over time. They are designed to help children save for college, open a business or put a down payment on a home.
Researchers have tested these models over large populations of people. The brief points to SEED OK, which started in 2007, as one of the researchers’ most successful policy model studies. SEED OK is based on an automatic 529 college savings plan platform that targeted Oklahoma children. The program demonstrated that the Child Development Accounts promoted universal inclusion, long-term stability and wealth accumulation.
“We are able to show with all the experience we've done around child's development accounts that once the platform is set up, whatever the parameters, whatever the allowable uses, whatever the automatic growth platform that's created, you can deliver it at scale for large numbers of people,” Shanks said.
Researchers Jin Huang, William Elliott, Haotian Zheng, Margaret M. Clancy and Michael Sherraden also co-authored the brief.
Huang said Black Americans will most likely use reparations for housing, education or family development, and having an asset-building tool readily available could help build wealth equity and close the racial wealth gap between Black and white Americans.
“These kinds of policy design can really provide a sustainable structure to deliver Black reparations for wealth equity, asset protection and asset growth,” he said.
According to the research brief, there are advantages and disadvantages to the three proposed reparations delivery options.
As for cash transfers, Black Americans would have ownership over their money, and it would be available for immediate use. However, reparations recipients would take the risk of asset loss and depletion, as there is no asset protection or option for investment growth.
If people who qualify for reparations choose to put their potential repayment in a trust fund, then they would have asset protection through the government, investments can be arranged and there will be predictable payouts. The disadvantages of using a trust fund for reparations include; limited autonomy, extreme government oversight and conservative investments.
Researchers suggest that governments invest in a savings plan structure as a delivery method for reparations. The pros of having a savings plan include giving recipients property rights over their money, a private asset management company, investment options and potential asset growth. However, this structure could potentially limit investment options and the use of assets.
The Child Development Accounts would automatically enroll reparations recipients into a savings account. Shanks, who is Black, said she understands that many Black Americans do not trust banks and are unbanked, so that is why the model can be effective because people do not have to leave their homes to enroll.
“We're still at a very early stage of exploring different options here,” Huang said. “With this kind of system in place, that's going to be a structure for wealth equity and to support individuals' long-term development.”
Shanks said it would be detrimental to the Black community if reparations passed and local and federal governments spent five more years figuring out how to make payments.
“We're putting this conversation at the forefront now as things are being debated, as the possibility comes through political dialogue,” she said. “We don't want people to have to search for a platform, there are platforms that could be successfully implemented right now based on research that we've done and things that we've already shown.”
