The Disadvantaged Business Enterprise program is an example of the downside of race- and gender-based federal assistance.

A recent Wall Street Journal editorial detailed the pervasive fraud with the federal Disadvantaged Business Enterprise (DBE) program.

The DBE program is just one of the scores of programs that dole out loans, preferences, and set-asides based on race, or more accurately, concocted races.  DBE adds gender to the mix.

As the editorial explained, “The DBE program, set up in the 1980s, steers money to small businesses that are at least 51% owned by ‘disadvantaged’ persons. Women are ‘presumed disadvantaged,’ along with people who are black, Hispanic, Native American, Asian-Pacific or Subcontinent Asian, although there are also limits on net worth and firm size. The government’s general goal is for 10% of its highway and transit funds to be spent with DBEs. But they’re supposed to do real work, not merely pass money through.”

The editorial didn’t say this, but programs like DBE explain why various ethnocultural groups have lobbied over the decades to be classified as racial minorities.  The latest manifestation is a new “race” that the government is thinking of formally adding to the list of racial minorities—namely, MENA, which stands for Middle Eastern and North African.

Below is a table from the online edition of the editorial.  It shows how many millions of dollars were distributed by race and gender in 2021 through just the DBE program.  (Look for a transgender category in the future.)

Predictably, as the table shows, when something is based on a specious premise, much of what follows will be incongruous.  The incongruities will be described after the table.

Disadvantaged Business Enterprise contracts and subcontracts in fiscal 2021, by DBE category, in millions of dollars

The dollar figure represents only the federal share.

U.S. Department of Transportation, WSJ Freedom of Information Act request

Incongruities

– Only $16 million out of the total DBE outlay of just over $6 billion, or 2.7%, went to white men, probably reflecting the premise that white men can’t be disadvantaged, although over 30 million white Americans live in poverty, and, it’s safe to assume, many of them are male.

– In the same vein, white women received over $2.5 billion, versus $16 million for white men, or 156 times more, although men have a lower life expectancy than women, commit suicide at four times the rate of women, graduate from college at a lower rate, and are imprisoned at a much higher rate.

– For all of the “races” except the white race, men have received considerably more DBE money than women of the same race.  The greatest difference is in the Hispanic category, where Hispanic men received over $1.3 billion, or four times as much as the $324 million received by Hispanic women.

– Hispanic men and women received nearly $1.7 billion in total, versus $656 million for black men and women in total.  Of course, there are a lot more Hispanics in the US population than blacks, even taking into account that many Hispanics are categorized as white.  But it should be remembered that set-asides such as DBE were first targeted to blacks and not other races. Clearly, the original intent has been subverted.

– No doubt, East Indians comprise the majority of the category labeled “Subcontinent Asian.”  East Indians rank at the top by a comfortable margin in household income compared to other racial/ethnic groups.  This is partly due to many Indian immigrants have been in an upper caste in India and thus having access to education and money.  It’s also partly due to how they tend to fund each other’s business ventures, which is how the Patel clan rose to dominance in the ownership of independent hotels in the US.  And it’s partly due to them having a high percentage of two-parent households.  Do they really need DBE money?

Historical Closing Note

If you’re at my advanced age and come from a poor ethnic family with immigrant grandparents, you know that programs such as DBE didn’t exist for your forebears and that they faced awful discrimination, albeit not to the degree of African Americans.  Yet, they funded each other as today’s East Indians have done and found a way to start businesses.  In my hometown of St. Louis, for example, the major construction companies in town were started by the Irish and Italians.

My dad was a non-union tile setter, and his sister was married to a union tile setter.  The sister (my aunt) and her husband (my uncle) raised five kids in a 700 sq. ft., one-bedroom flat, which they co-owned with my grandparents, who lived in the upstairs flat on a barkeep’s pay.  My mom and dad got the money for the down payment on my boyhood home through a private loan from my dad’s uncle.

Then there was Amadeo Peter Giannini.  The son of poor Italian immigrants and a produce peddler, Giannini started the Bank of Italy in San Francisco to provide banking services and loans to Italian fishermen who were shut out of mainstream banks.  The bank became the Bank of America.

Was this a better system than fighting over racial spoils?  I’m unable to be objective about that but certainly have an opinion, which I’ll keep to myself.

The last 150 years have been the most amazing 150 years in all of human history.  If we turn the clock back to, say, 1870, we find a world where there were no automobiles, no airplanes, no electric washing machines or gas dryers, and no computers — you get the point.  Economic growth powered by invention, human productivity, and our standard of living has all skyrocketed during the last century and a one-half.

More recently, the prospect for economic growth has dimmed.  International Monetary Fund Managing Director Kristalina Georgieva has predicted that worldwide economic growth will remain below 3 percent in 2023 and that the years 2024-2028 will see similar subpar growth.

Director Georgieva’s predictions are in line with an exhaustive study of American economic growth and the standard of living conducted by Professor Robert J. Gordon for the period 1870 to 2015 and recounted in his magisterial work entitled “The Rise and Fall of American Growth” (published in 2016 by the Princeton University Press).  Professor Gordon divides his analysis into three periods:  1870 to 1939, 1940 to 1969, and 1970-2015.  His general conclusions in his 652-page book (not counting data appendices, index, and bibliography) are that America’s growth got off to an excellent start in the period 1870-1939, went into warp speed from 1940 to 1969, and began a long decline in 1970 to 2015.   He concedes that the post-1969 era was interrupted by a surge of growth attributable to computers and the internet from 1995 to 2004 (what he terms “the revival decade”) but notes that this was insufficient to reverse the overall downtrend that began around 1970.

While Professor Gordon’s analysis of the period 1870 to 1969 is certainly of historical interest, it is his analysis of what began happening in 1970 (and continues all the way to the present day when one extrapolates his analysis) that is of more concern to Americans living in 2023.  In chapter 18 of his book, he refers to “a more pessimistic note about the prognosis for the future of the standard of living based on the power of gale-force headwinds that are currently operating to slow the growth of the standard of living for the majority of Americans.”

Professor Gordon identifies four “gale-force headwinds”:  increased income inequality; the fading role of educational attainment as a creator of productivity growth; shrinkage in hours worked per person (what he calls “the demographic headwind”); and the “fiscal headwind,” where taxes raised to fund entitlement spending will reduce the future growth of disposable personal income. 

He supports his analysis of the post-1969 decline with a mountain of economic charts and data.  For example, on page 609 he displays a chart of the growth of real income in three periods from 1917 through 2013.  From 1917-1948, the average per annum real income grew at 1.11 percent, from 1948 to 1972 at 2.58 percent, and from 1972 to 2013 at 0.48 percent.  For the bottom 90 percent of the population, however, real income rose at 2.65 percent per annum from 1948-1972 but then fell to a negative 0.17 percent from 1972 to 2013.  This is consistent with other sources stating that real wages for average people peaked in the early 1970s and have been declining in fits and starts ever since.

And what does the good professor propose as solutions to rekindle American growth?  Disappointingly, what he serves up to us is a potpourri of warmed-over “progressive” Left nostrums:  raise taxes on the rich, raise the minimum wage, boost the earned income tax credit, pardon prisoners en masse, and let them out of jail and legalization of drugs.

Have things been getting worse for the average guy or gal since 1969 as Professor Gordon contends?  Yes and no. Measured by real income growth, yes.  Measured by standard of living?  That’s more difficult to assess.  The average guy is a beneficiary of improved health care (statins, coronary bypasses, and an entire host of other medical advances) and the general improvement in technology between 1969 and now.  Such advances offset some — but certainly not all — of the effect of a half-century worth of declining wages.

This multi-generational decline in the real income of 90 percent of Americans is something that should be of grave concern to conservatives.

A man who can make a good living with his two hands and his brain is in less need of government giveaways than a man who cannot support his family even though he is working two or three jobs.  Although times have changed between Thomas Jefferson’s era and today, the underlying reasons supporting Jefferson’s belief that the yeoman farmer was the bastion of liberty and the best defense against despotism remain the same.  A man who can raise a family and enjoy a comfortable life on the wages and salaries or small business profits provided to him by reason of a free marketplace has little need of government largesse and therefore will turn away from corrupt politicians promising free handouts.  Of course, there will always be those greedy people for whom the wage or salary or profit they obtain from a free market is insufficient and who will seek government giveaways (it’s called crony capitalism), but they are in a minority.

It can be seen, then, that the person who can adequately support himself and his family with his own labor and intelligence and who does not want or seek government bread and circuses is a nightmare for liberal and progressive politicians.  Such a man has integrity, and corrupt Left-leaning politicians cannot buy his vote with earned income tax credits, Section 8 housing, food stamps, etc.

This brings us to the most important point of this article: the Left (and distressingly some who purport to be on the Right) have embarked on a 50-plus year campaign to reduce salaries and wages of average Americans so that they can make them dependent on corrupt government leaders offering free handouts. Make no mistake about it, the goal of the Left (together with its fellow travelers on the Right) is to destroy American’s middle class and make its former members dependent upon handouts from Leftist politicians.

Reducing the real (inflation-adjusted) wages and salaries of ordinary Americans serves other critically important purposes for the Left and the elites who have joined forces with the Left:  (1) it permits the federal government to engage in massive deficit spending without creating much in the way of consumer price inflation; (2) it permits the Federal Reserve to keep interest rates low and to print vast quantities of money, again without unleashing the Inflation Genie.  Average Americans largely spend their salaries and wages on consumer goods (unlike the very wealthy, who spend a larger portion of their income and wealth on investment assets).  Thus, consumer price inflation can be reined in by keeping most average Americans living paycheck to paycheck.

Wages and salaries have been kept reined in by a variety of factors.  A major factor has been the increase in the supply of labor.  According to the St. Louis Fed, 64.8 percent of those between 25 and 54 years of age were in the U.S. workforce in January 1950.  By January 2000 that same percentage had climbed to 84.3 percent.  In January 2023 it was 82.6 percent.  Women entering the workforce have had a dramatic impact.  In 1950, 33.9 percent of women were in the workforce.  By 2000, that percentage had climbed to 59.9 percent (U.S. Bureau of Labor Statistics).  Other factors include the outsourcing of good manufacturing jobs to countries overseas, a decline in the unionized workforce, and trade policies that have rendered America the world’s importer of last resort and have hugely reduced American exports.

Professor Gordon’s income inequality argument is a red herring.  The issue is not how much the corporate CEO is earning, it is what the average American is earning.  The ratio between the two is of little or no importance.  Would you rather live in a society where the median income of the bottom 90 percent is $40,000 and that of the top 10 percent is $100,000 (2.5 to 1) or in a society where the median income of the bottom 90 percent is $80,000 and that the top 10 percent is $1.6 million (20 to 1)?

In summary, we should strive as a society to increase the wages and salaries of average Americans through the operation of the marketplace and thereby reduce (or ideally eliminate) the demand of citizens for government subsidies, handouts, bread, and circuses.  The principal means for accomplishing this is to reduce the supply of labor through strict enforcement of immigration laws, a reduction in the number of legal immigrants, changes in trade policies, the imposition of civil (not criminal) penalties on those who choose to eliminate American jobs through outsourcing to foreign countries and the enactment of fair but labor-friendly laws.

If this effort is successful, we can move toward a society in which government handouts are eliminated or at least greatly reduced, budgets are balanced, the Federal Reserve no longer engages in the printing of money or quantitative easing, and minimum wage laws are extinct because they have become pointless.