May 25, 2023
Report: U.S. Default Could Bring $132B Economic Loss For Black Americans
According to an analysis from Creative Investment Research, the largest financial blow for Black Americans could come from the nation’s housing market totaling $60.9 billion. The findings are from the firm’s Projected Impact of Federal Government Default on Black Americans: Dire Report.
In an interview with BLACK ENTERPRISE, William Michael Cunningham, an economist and owner of Creative Investment Research in Washington, D.C., reflected on the report. He says a setback in the housing market could come from several sources, including the elimination of fair-housing supervision from government regulators not working if the country goes into default.
He pointed out that there could be a higher number of home foreclosures in the Black community stemming from increased job losses and an increase in unethical behavior in the housing market due to federal officials’ lack of supervision over the financial services industry.
On a larger scale, another estimate projects a default would generate job losses totaling over 7 million, boost the unemployment rate to around 8%, and erase $10 trillion in household wealth. So far, no agreement has been reached to raise the U.S. government’s $31.4 trillion debt ceiling, with a deadline reportedly looming soon that could crush the entire U.S. economy if a deal is not reached.
Cunningham noted his firm’s report is based on a one-year time frame and does not include Black Americans’ stock investments. He says the estimate would be $750 billion higher if the stock market were included. He added that the figures were not included because they are irrelevant to the other factors, given that Black people have a low stock market stock participation rate.
Cunningham says his firm’s figures reflect employment losses of $35.7 billion for the Black community, an $8 billion loss for Black recipients of the federal SNAP program, and a $15.2 billion in losses for Blacks in public services like transportation, healthcare, community, and emergency services. Further, Cunningham estimates that Black unemployment could rise to 16% from 4.7% if the projected default occurs.
“If the market adjusts to these changes, Black people will be the first to lose their jobs.”
He says Blacks could suffer a $12.1 billion reduction in the household credit market if banks start issuing fewer credit cards, pulling back on offering lines of credit, and stop providing other types of credit.
“The overall effect could be devastating because of the long-term negative impact on Black Americans and the time it would take for the economy to recover.”
Cunningham added that a huge potential pitfall could come from the public sector as it is the most important source of employment and other vital resources for Black Americans.
“This is the sector most immediately impacted by a default because the first way the government seeks to save money in a fiscal emergency is by deferring payment to their own employees.”