Kamala Harris announces what amounts to a stealth reparations plan

In a little-noted speech last week, V.P. Kamala Harris revealed that the federal government will be giving out gifts amounting to $1.7 billion to "minority" businesses.  This amounts to a stealth reparations plan, as the recipients likely will be predominantly Black.  The Hill reports:

Vice President Harris on Monday announced $1.7 billion in grants for more than 600 community lenders to support small businesses, entrepreneurs, nonprofits, housing and commercial real estate as they seek to rebound from the coronavirus pandemic.

Harris announced the grants as part of the Treasury Department's Community Development Financial Institutions Fund, saying that the loans will go to support local lending institutions that primarily serve minority communities, which may be hesitant to seek out a loan from a bigger bank. She said that the lenders will not need to pay back "not even a dollar of this investment," and noting that the awards are grants, not loans.

"These banks predominantly do business in overlooked and underserved communities," she said. "They know these communities. They understand these communities. And in particular, most importantly, they know and see the capacity of these communities."

YouTube screen grab (cropped).

It is unclear where the money will come from, though there is still cash from COVID appropriations and the massive spending bills available.

Disguising the gifts, targeted on the basis of race, as loans that don't have to be repaid is particularly obnoxious.  What kind of lesson is it for budding entrepreneurs that you don't have to repay money that you borrowed — because you have the approved racial identity?

Moreover, targeted loans to "disadvantaged" firms have a terrible track record, as the Wall Street Journal editorial board points out:

[T]he U.S. Attorney in Philadelphia recently won a $1 million settlement for fraud in federal contracting for Disadvantaged Business Enterprises, or DBEs. Here's a wild idea: Why not award construction funds based on merit, not claims of identity? (snip)

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.

"This was precisely the case with the Platt Bridge project," says a news release by the U.S. Attorney. In 2011, Hercules-Vimas Joint Venture won a $42.7 million painting job from Pennsylvania's Department of Transportation. To meet the disadvantaged rules, it subcontracted Vertech International, a certified DBE. "While Hercules-Vimas represented to PENNDOT that Vertech was the paint supplier, the government alleges that it worked directly with Sherwin-Williams, a non-disadvantaged business, to deliver paint and materials to the project site. Vertech merely created invoices designed to conceal the fraud in exchange for a nominal fee."

Principals from Vertech and Hercules-Vimas pleaded guilty in 2016 and 2017. The new $1 million settlement is with Sherwin-Williams, which the feds allege was a knowing participant. (snip)

So the DBE program raises the cost of construction, creates an ecosystem of make-work for certification and oversight, and provides easy pickings for scofflaws? The U.S. Attorney in Boston last week announced a $1.24 million settlement to resolve an alleged "fraudulent scheme" in an I-95 project. 

Favoritism of any type, whether based on race, ethnicity, bribery, or political clout, is counterproductive.  I am more and more convinced that the solution to racial disparities is in the reforming the education system and efforts to recognize the importance of merit and to instill functional social norms across underperforming groups.

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