Symposium | The New Supply-Side Progressivism

Making Equity Inevitable

By Taifa Smith Butler Angela Hanks

Tagged GovernanceInequalityprogressivism

In the earliest days of the coronavirus pandemic, the media promoted a tidy narrative that the virus didn’t discriminate and that economic status and location would not protect us from infection. Yet the narrative hid a darker truth: We were not quite all in this together. Anyone can be infected with COVID-19, but our experience of the virus and of living through the pandemic was and is vastly different. Ultimately, the pandemic further exposed the devastation decades of disinvestment and neoliberalism had wreaked on our economy, especially in Black and brown communities. This devastation was an emergency long before COVID. It was an emergency even before the unemployment rate jumped to 14.7 percent in April 2020, a number that left even white middle- and upper-middle-class communities struggling to make ends meet. Job losses were even worse for workers paid low incomes, especially Black and brown workers. Even when they kept their jobs, the persistence of racial capitalism meant that they were more likely than white Americans to work in frontline positions with unsafe working conditions and low wages.

The pandemic’s impact was uneven but widespread enough to force federal policymakers into action. Lawmakers finally had the long-overdue rationale they needed to take sweeping action to bolster our economy and enact investments aimed at making it more resilient over time. In two years, Congress passed four bills that together authorized nearly $4 trillion in funds targeting pandemic relief, manufacturing, job creation, infrastructure, climate change and clean energy, and technology:

  • The American Rescue Plan Act: $1.9 trillion to be expended primarily by the end of 2026, including $350 billion directly to state, local, and tribal authorities, intended for a wide range of pandemic recovery projects;
  • The Infrastructure Investment and Jobs Act (IIJA): $1.2 trillion over ten years to rebuild our infrastructure, including roads, bridges, electricity, water, public transit, and more;
  • The Inflation Reduction Act (IRA) of 2022: Roughly $370 billion over ten years aimed at making the United States a leader in clean energy technology, manufacturing, and innovation as well as at combating climate change;
  • The CHIPS and Science Act of 2022: $280 billion over ten years to reduce U.S. dependence on foreign semiconductors.
This $4 Trillion Is a Massive Risk—and a Massive Opportunity

After decades of neoliberal disinvestment in our public functions and services, this funding represents an opportunity to reframe the role of government as that of an active agent in setting the conditions to make a stronger, more equitable economy. However, while there are opportunities, realizing them will take intention. Without taking race, location, and socioeconomic factors into account, the legislation risks perpetuating the conditions it claims to alleviate. Strategic interventions from workers in impacted communities, however, could turn the tide on runaway inequality and leverage the shift to create a democracy and economy that center Black and brown communities but allow all communities to thrive.

The result depends on the strength and specificity of the legislation’s equity requirements and funding formulas. It depends on whether the funding formulas consider the specific demographics of different states and cities and whether the enforcement mechanisms have tangible consequences for the recipients that fail to meet them. How the availability of this funding is communicated also matters, and whether states, cities, and community organizations understand what the money is for. There is an opportunity for transformational power-building work if they do.

The Risks of Neglecting Equity

Federal spending projects have a history of distributing benefits inequitably along race and class lines, with communities of color not only receiving the fewest benefits, but often bearing additional burdens. Historically underfunded communities do not have the same resources to apply for and seek out these federal investments. When agencies do try to direct support to the communities that most need it, they often fail. A 2021 Pew Charitable Trusts report, which included a meta-analysis of more than 40 years of studies on place-based economic development projects, found that “the criteria that states use to geographically target their programs are often ill-conceived or out-of-date, with the result that initiatives end up serving wealthy locations instead of disadvantaged ones. And even when programs do reach the intended communities, they often are not well-suited to help residents.”

This is true across the types of infrastructure, disaster recovery, and economic development projects that the new legislation aims to fund. More money is not always more help. After World War II, interstate highway construction decimated communities of color across the country, from Los Angeles to Nashville to New York. The federal government spent massive amounts of funds that privileged cars over public transportation, physically destroying entire neighborhoods, many of them communities of color.

More recently, in 2017, Congress authorized more than $4 billion for disaster relief in Texas after Hurricane Harvey. The Federal Emergency Management Agency (FEMA) based its allocation formula on property values. As a result, in Houston, the average Black resident of a low-income neighborhood received $84 in FEMA funds, while the average white resident of a high-income neighborhood received $60,000. A 2019 investigation by researchers at the University of Colorado found that, as The New York Times put it, “[h]omeowners who lived on blocks with a greater share of nonwhite residents, as well as lower incomes and credit scores, had a lower chance of getting approved for FEMA grants.” And this disparity is not unusual: The Times reported that FEMA “often helps white disaster victims more than people of color, even when the amount of damage is the same.”

The response to Harvey was not an equitable place-based recovery. The funding formula did not take neighborhood or regional differences into account or consider how a natural disaster compounded the existing, man-made damages from generations of racism. Communities with a history of disinvestment should be adequately compensated not only for the current disaster, but for all the disinvestment that came before.

Similarly, in 2018 in Arlington, Virginia, the local government joined the race to the bottom for the prize of a second Amazon headquarters in the city. Arlington approved $23 million in subsidies, in addition to the $750 million over 15 years approved by the state, promising this would spur job creation and other forms of economic development. There was no guarantee that those jobs would offer livable wages, that Arlington residents would receive preferential consideration for those jobs, or that Amazon’s presence would not spur gentrification, including rising housing prices. According to a 2019 article from The Washington Post, the price of single-family homes near the proposed site of the headquarters doubled after the announcement while housing supply shrank. Amazon’s 2023 pause on HQ2 also underscores the risks in granting lavish corporate giveaways to companies that are not guaranteed to deliver the jobs or opportunities they’ve promised—particularly when there aren’t ways to hold the companies accountable if they renege. And the promises are, in the end, little comfort to communities struggling to find good jobs and affordable housing.

Inequity Doesn’t Have to Be Inevitable

Federal investment can—and indeed, must—provide real opportunities for historically marginalized communities to thrive. The agencies responsible for implementing this legislation and allocating funds must be intentional about reexamining their existing formulas for who receives funding. State and local governments must name equity requirements for how recipients are allowed to spend funds and set the terms with private companies so they’re able to ensure that industry is meeting those requirements. Here’s how to fund with equity:

Practice Co-governance

Workers and communities, particularly Black and brown communities, must have a seat at the table in determining how and where funding is allocated, and to whom. All funding recipients, whether state and local governments, corporations, or the nonprofit sector, must make co-governance a core requirement. This means any of those recipients must work in close collaboration with community residents and grassroots organizations to ensure the funding meets their needs.

The Texas Organizing Project (TOP) is one example of co-governance in action. After the twin disasters of Hurricane Harvey and the FEMA funding that benefited only wealthy, white communities, grassroots organizers in TOP mobilized. They set out to secure seats for residents of color on the local boards and commissions that decide where resources should go. They then embarked on an electoral strategy that involved training women of color to run for local office, ensuring that the area’s most vulnerable communities had decision-making power within these historically exclusionary institutions. In the process, they unseated a longtime incumbent county judge and got an equity-minded successor elected. Now these bodies are compelled to make funding decisions in collaboration with communities.

Pittsburgh United’s Our Water Campaign in Pennsylvania is another example of how communities and local governments can work together. While related to only local government spending, the joint effort by a grassroots coalition and the Pittsburgh Water and Sewer Authority to protect the city’s water supply is an example of the kind of co-decision-making that massive federal spending projects should use to distribute funds equitably.

Rethink Funding Formulas to Center Equity

Like the post-Harvey FEMA funding, the majority of the IIJA funds are allocated as formula funds, which are given to recipients who meet specific criteria and in amounts determined by formulas. According to a Brookings Institution analysis, the act allocates about three times as much in formula funding as it does in discretionary and competitive funding. Few of the formula grants mandate criteria like race, household income, or a history of disinvestment.

Some states create their own definitions for “environmental justice communities,” or communities disproportionately impacted by hazardous materials, poor air quality, excessive emissions, or other similar harms. But while other funding streams may be directed to those communities, there’s no explicit directive that says the IIJA funds should be. Also, not every state has these definitions, and until now the federal government has given little guidance on how to make them.

One option for guidance on recalibrating these formulas comes from the criteria in the executive order on advancing racial equity. This 2021 order directs federal agencies to address systemic barriers in their policies and programs that perpetuate inequities for disadvantaged groups. The order names “Black, Latino, and Indigenous and Native American persons, Asian Americans and Pacific Islanders and other persons of color; members of religious minorities; lesbian, gay, bisexual, transgender, and queer (LGBTQ+) persons,” among others. When distributing funds regionally, the agencies must target that funding toward programs that directly serve the communities that have historically been marginalized.

Implement Community Benefit Agreements

Funding agencies should also institute Community Benefit Agreements (CBAs) as a condition of funding and should do so across agencies and legislation. A contract between community stakeholders and the funding recipient, a CBA spells out the benefits the recipient must provide to the local community in return for the funding. This could include minimums for local hiring, living wage requirements, or investments in child care or affordable housing, among other provisions. The Department of Energy currently requires CBAs for projects funded under the IRA and the IIJA. All agencies distributing funds should follow its lead. By contrast, most IIJA funding is allocated to existing programs, which request only cursory environmental reviews or community input, without any criteria for what that input entails. Input could mean a single community meeting held at a time when most people are at work—or it could mean regular engagement in which funders meet residents in central locations at convenient times, and not only listen to their concerns, but adopt them.

Agencies must issue directives outlining specific definitions of community engagement, and strong accountability and performance metrics for meeting them. This could include requiring regular community updates, information sharing, and community benefits agreements, or it could entail measuring certain outcomes, such as ensuring that companies make a specific percentage of local hires. Engage grassroots organizations, ask people what they want and need, then give it to them.

Center Worker Rights and Protections

The IRA already includes strong language on worker protections, requiring funded projects to pay prevailing wages and hire registered apprentices. This is a start, but the agencies distributing these funds must also develop enforcement mechanisms and explicitly communicate them to ensure that recipients meet these requirements. Moreover, all funding agencies should require worker protections, with prevailing wages and training requirements being the minimum of what the projects they fund should offer.

All four bills are being touted as a source of “good jobs.” We often conflate this phrase with manufacturing jobs. But the manufacturing jobs of midcentury America—with their good wages and opportunities for growth and a comfortable retirement—were good because they were often unionized. When jobs aren’t unionized, there’s no reason to expect those wages and protections. Not to mention those manufacturing jobs were not always available to Black and brown workers.

Without requirements for hiring marginalized people and providing livable wages, job training, and other wraparound supports, the funds can be used by states that advertise their weak worker protections and resistance to unions as a benefit to corporations. Applicants for competitive funds and recipients of automatically allocated funds alike must instead be required to show how they will ensure that workers have a free and fair choice to join a union, and should be prohibited from engaging in or using their funding for union-busting tactics. Without those requirements, corporations can take these funds and still exploit their workers, especially workers of color.

Even when equity benefits are included, agencies should take steps to make them as expansive as possible. We also can’t forget that these bills and their benefits are only the beginning of what is needed to redress systemic inequality. For example, the Biden Administration has frequently mentioned how companies requesting $150 million or more in CHIPS funding must provide child care for their workers. This is a positive step for an estimated 100,000 construction staff and 90,000 manufacturing facility staff. However, it only scratches the surface of addressing the lack of affordable child care in the United States, which affects millions of people. It also says nothing about raising the wages of child care workers. Even if they did more, these bills are no replacement for an expansive system of public goods like health care, education, child care, and other essential components of a care economy.

Which Future Will We Choose?

These bills are an opportunity to repair historic harm and to build a more sustainable future. Equity requirements must be specific and enforceable, and implementation must include penalties for not meeting these requirements. This can’t be a race to the bottom or an opportunity for companies to funnel money into places where they know they can disempower workers. This is a chance to turn the page on years of disinvestment—the beginning of a post-neoliberal future.

That future, however, is not guaranteed. Whether we reach it hinges on both how we implement this legislation and how much further we go. It requires policymakers to keep their foot on the gas. The last three years have demonstrated how sorely we need sweeping legislation that invests in care—in child care, health care, education, and the programs that make our economy more stable and resilient going forward. We will not be able to deliver an inclusive economy where Black and brown people thrive without them.

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Taifa Smith Butler is the president of Demos. Prior to joining Demos, she worked at the Georgia Budget and Policy Institute, where she was president and CEO from 2015 to 2021.

Angela Hanks is Chief of Programs at Demos. Prior to Demos, she was the Acting Assistant Secretary of the Employment and Training Administration in the U.S. Department of Labor.

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