27 Jun The math on reparations: total cost of $51 trillion and a tripling of the national debt
OK, taxpayers. Better get the checkbook out.
Not only are we talking about universal health care and a “Green New Deal,” we’re also now talking about paying reparations.
Democrats raised the idea on Capitol Hill last week, as part of their plan to blow the 2020 presidential elections.
The immediate idea is to pay reparations to today’s African-Americans for the economic losses from slavery. But as we’re going to see, the idea won’t stop there. Actually, it can’t.
Nobody knows what kind of numbers we’re talking about, but Claudia Goldin, an economics professor at Harvard, tells me they’d be “huge.”
Actually, we can sort of work it out.
Contemporaries put a number on the economic “value” of their slaves. It showed up in market prices.
And we know what would happen if you had reinvested that money, for example in Treasury bonds, since then.
Bottom line: If you took the values of successive generations of U.S. slaves — say, the total values in 1800, 1830 and 1860 — and applied Treasury bond interest rates to the money over the decades since, today we’re looking at a reparations bill of $16 trillion.
That’s about three quarters of U.S. gross domestic product, and slightly more than total U.S. personal disposable income for a year.
That’s around about $1 million per African-American household.
Sure, these are rough, ballpark figures. But it’s not a totally random guess. The numbers could reasonably be higher. If you used private sector “equity” returns on the money, the figure would go into orbit.
And if you think that’s the only check we’re writing, you are dreaming.
These numbers don’t even include reparations for the decades of Jim Crow.
And if we’re going to pay reparations to today’s African-Americans for the wrongs done to their ancestors, we surely have to do the same to today’s Native Americans, who were also treated appallingly.
While slaves were forcibly robbed of their labor, Native Americans were forcibly robbed of their land.
And paying that back is going to cost the U.S. another $35 trillion. That’s another two years’ disposable personal income.
Why $35 trillion? Well, the Bureau of Economic Analysis recently estimated that the value of all U.S. land was about $23 trillion. But their figure was for 2009. And in the 10 years since, if you look at farmland and at real estate, values have risen about 50%.
According to the U.S. Census, this will work out at about $7 million per Native American household.
If we borrow the money, this $51 trillion reparations bill will more than triple the current U.S. national debt, from $22 trillion to $73 trillion. Good luck with that.
Sensible financial advice in this environment: Own a lot of gold.
It may not stop there. Sen. Elizabeth Warren says we should pay reparations to gay Americans for the years they were denied marital tax benefits. Fair enough. Those are comparatively small sums. So are the sums paid to Japanese-Americans, German-Americans and others interned during World War II.
But if we’re going to pay reparations for slavery, for example, shouldn’t we also pay it for the young men conscripted and sent off to die to end it? Using similar math, that may come to another $750 billion. Some 360,000 young men died fighting for the Union in the Civil War, many under the most appalling conditions. A young male slave was “valued” at around $1,500 in 1860. Why should these soldiers be “worth” any less?
And have we paid full reparations to the families of all those who were sent off to other wars and never came back? Sure, some of them were wars of national defense. But Vietnam? Iraq?
You could argue we also ought to compensate all those abroad who’ve wrongfully suffered from our foreign and military policies over the years. Few would today defend the invasion of Iraq, and even fewer would say the aftermath was handled competently.
What about the terrible sufferings of the Vietnamese and the Cambodians from the 1960s and 1970s?
I’m not sure we shouldn’t also pay reparations to the Mexicans for taking California and most of the southwest.
This is going to be a lot of checks.
Naturally, “the government” doesn’t pay for anything. The government doesn’t have any money. It’s actually $22 trillion in debt. So the money will comes from taxpayers.
Reparations have sometimes been paid in the past to the direct victims of an injustice.
Some of you may wonder why people today should pay reparations for things they didn’t do, which have nothing to do with them, and which ended more than 150 years ago. Why should Person A pay Person B for the appalling way Person C treated Person D?
This issue was addressed briefly by author Ta-Nehisi Coates, the prophet of reparations, when he started this ball rolling five years ago. “One cannot escape the question by hand-waving at the past, disavowing the acts of one’s ancestors, nor by citing a recent date of ancestral immigration,” he says.
Why not? My parents came to this country in the 1950s. What does this have to do with me anyway?
“A nation outlives its generations,” he says, adding that if we honor George Washington and Thomas Jefferson we therefore need to write checks to the descendants of their slaves.
Well, you can’t argue with that kind of logic. What if I don’t honor these people? Can I get an exemption?
Black-white wealth imbalance
A slightly stronger argument may be that the big economic gap between median white and black families today quantifies the legacy of injustice. The median black household income is $28,000 less than that of median white households, and their median net worth is just one-10th as much.
But we are, of course, ignoring all the other injustices around. Newborn babies face unequal odds — sometimes grossly unequal odds — when they are born for many unfair reasons. Why should some injustices be OK and others not? Why would we compensate the victims of some in life and not of others? You could argue the logical conclusion of this thinking is equality of income. Make of it what you will.
Meanwhile, here’s a prediction. Sure, reparations talk probably isn’t going anywhere. But if it did, the bill would be paid by people in the former Union, not those in the former slave-owning Confederacy. Dixie has been living off the Union ever since Appomattox. Why should anything change?
Brett Arends is a MarketWatch columnist.