President Biden pledges to fix the racial wealth gap. Here are his plans

Just over two weeks into his administration, President Joe Biden has already made it clear he wants to close the racial wealth gap in America.

“We need to make the issue of racial equity not just an issue for any one department of government; it has to be the business of the whole of government,” Biden said, when signing four executive orders relating to the issue.

The gap is wide. The median wealth for a white family was $188,200, compared to $24,100 for Black families and $36,100 for Hispanic families, according to the Federal Reserve’s 2019 Survey of Consumer Finances, released in September 2020.

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“This is an area where we are not only not making progress, we are losing ground,” said Marc Morial, president and CEO of the National Urban League.

“The Covid recession has continued to drive wealth upward to a more concentrated group of Americans.”

So far, Biden’s executive orders tackle fair housing, ending the use of private prisons by the federal government, reaffirming the U.S.’s commitment to tribunal sovereignty and consultation and combating xenophobia against Asian Americans and Pacific Islanders.

He’s also made a number of proposals on the campaign trial. Here are some of his plans.

Biden’s first order of business was making a $15 federal minimum wage part of his stimulus plan. However, it has to pass Congress and was not included in the Senate’s most recent proposal. At the same time, Democrats have reintroduced the Raise the Wage Act which will incrementally increase the minimum wage to $15 by 2025.

Under Biden’s plan, the pay boost would give 31% of Black and 26% of Latino workers a raise, according to the Economic Policy Institute, a left-leaning research group.

Opponents of the wage increase note that the Congressional Budget Office has projected a $15 minimum wage increase by 2025 could mean a median of 1.3 million jobs lost in the U.S. due to a fall in business revenues.

But to really help boost the earning power of people of color, financial education should be part of the package, said Louis Barajas, chief strategy officer at Newport, California-based MGO Private Wealth and a member of the CNBC Financial Advisor Council.

“I meet a lot of people who are poor and they don’t understand what it takes to get to the next level,” said Barajas, who grew up in East Los Angeles and has since returned as a certified financial planner to help the underserved community.

During the campaign, Biden pledged a $2 trillion accelerated investment to create jobs to build modern, sustainable infrastructure in Black and Brown communities. That includes not only roads and bridges, but schools, drinking water and broadband access.

His goal is that 40% of the overall benefits go to disadvantaged communities and that jobs are filled by diverse, local and well-trained workers.

“We need a Rooseveltian public works plan in this country right now,” Morial said.

Biden also signed an executive order directing the Department of Housing and Urban Development to examine the effects of President Donald Trump’s regulatory actions that “undermined fair housing policies and laws.”

Based on that analysis, HUD will take steps to implement requirements of the Fair Housing Act.

As a candidate, Biden proposed creating a new refundable, advanceable tax credit of up to $15,000 to help families buy their first home. He also promised to scale up support for federal programs that financially support and revitalize distressed neighborhoods, as well as spur the construction of 1.5 million homes and public housing units.

In addition to calling for grants to more than 1 million of the hardest hit businesses in his Covid-19 relief package, Biden is also looking at longer-term solutions for small business owners of color.

During the campaign, Biden called to allocate $10 billion from the new Small Business Opportunity Fund to state and local venture capital programs. Based on past government investments, he believes that can spur $50 billion in new equity investment for small businesses.

In addition to proposing some sort of student debt forgiveness, Biden also advocated making public colleges and universities tuition-free for all families with incomes below $125,000. He also wants to nix tuition at two-year community colleges.

Nearly 85% of Black bachelor’s degree recipients carry student debt, compared with 69% of white bachelor’s degree recipients, according to the Center for Responsible Lending.

Institutions that are historically Black and Hispanic, as well as others, will also see an investment under Biden’s plan. It includes building high-tech labs and digital infrastructure, as well as investing in programs that increase enrollment, retention, completion and employment rates.

For entrepreneurs, he would like to establish intensive, semester-long business development programs at every public community college in the U.S. Workforce training is also part of his focus, including a $50 billion investment that will include community-college business partnerships and apprenticeships.

Communities of color have long been under-served by banks. In 2019, 14% of Black households and 10% of Hispanics had no bank accounts, according to the Federal Reserve.

To ensure U.S. banks are serving everyone, Biden is aiming to strengthen and expand the Community Reinvestment Act. It currently regulates banks “but does little to ensure that fintechs and non-bank lenders are providing responsible access to all members of the community,” his campaign website stated.

Biden also wants to expand access to $100 billion in low-interest business loans by funding state, local, tribal and non-profit lending programs in Black and Brown communities. He proposes expanding the role of Community Development Financial Institutions (CDFIs) in underserved communities.

The big banks should also do their part, Barajas believes. Instead of the advisors being paid a commission on products sold, the institutions should rethink the way they work.

“They need to be the leaders,” he said. “They need to put people in these communities and pay them a salary to work in those communities full-time.”

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