by James A. Bacon
Robert L. Johnson, founder of the Black Entertainment Network and America’s first black billionaire, touted a proposal on CNBC this morning to help African-Americans — and, for that matter, all Americans — build wealth through their 401(k) plans. His proposal would make it easier for Americans to carry their employer-based retirement plans from one employer to another.
Sixty-three percent of African-Americans cash out their 401(k) plans when they move from job to job, said Johnson. With “auto-portability,” workers would not have to take any action for their 401(ks) to follow them. Often, owners of small accounts are given the option of cashing out. When they do, they pay various taxes and withdrawal penalties. People still would have the freedom to cash out if they really needed the money, but the administrative change would nudge them into keeping their funds intact and, thereby, boosting their savings.
African-Americans are more likely than other Americans to have small accounts that would be ported from one employer to the next. Over time, Johnson claims, his proposal would put approximately $191 billion dollars into the retirement savings of black Americans (and many billion into the savings of other Americans).
Here’s what I like about this proposal — it’s win-win. Auto-portability is a tool for helping African-Americans increase their net worth, but it’s not a carve-out or set-aside that creates a privileged racial status. Auto-portability would help all Americans with small 401(k) plans but African-Americans would benefit the most.
There has been a lot of talk about the inequality of wealth between the races, and it’s true that African-Americans have accumulated far less than other racial/ethnic groups. There are many possible explanations, but one is that African-Americans save less. Johnson’s proposal addresses that problem directly. Boosting African-Americans’ savings rate is not a remedy you often hear from social justice militants.
While the victimhood-and-grievance agenda of social justice militants would enact government-funded programs that would keep African-Americans as wards of the state, an Opportunity agenda would remove barriers to wealth building and empower the poor, particularly African-Americans, to take charge of their own destinies.
An Opportunity agenda would give minorities the means to escape failing public school monopolies by attending charter schools and private schools.
An Opportunity agenda would convert state assistance to public higher education, which academic and administrative elites use to maintain a bloated and inefficient status quo, into vouchers that put consumer power in the hands of students.
An Opportunity agenda would build on the success of Virginia’s Department of Corrections in teaching skills and reintegrated felons into society as a way to drive down the rate of recidivism.
An Opportunity agenda would loosen zoning restrictions that throttle the supply of new houses, the root cause of housing unaffordability, thus making it easier for African-Americans to accumulate wealth through home ownership.
An Opportunity agenda would drive productivity and innovation in the health care sector to drive down costs, improve outcomes, and make private health insurance more affordable for all.
And an Opportunity agenda would encourage African-Americans to spend less, save more, and accumulate capital.
An Opportunity agenda would be win-win for everyone. Many elements could be implemented here in Virginia if only our elected officials could get over the idea that more government programs are the answer to every social ill. Giving African-Americans the tools to improve their own lives, not keeping them dependent on the ministrations of political elites, is the surest way to achieve equality in Virginia and America.
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