But, no, actually, he didn't. The unemployment rate was 6.2% when voters went to the polls in 2008. Now, it's 9.6%. That's why independent voters decided that anyone was better than those in power, flocking to the Republicans and "shellacking" the Democrats. The really interesting parts are around the edges. What tipped the margin of victory or defeat in the close races? Part of this question involves the votes of African-Americans, who have comprised an essential part of the Democratic Party's base since the 1930s.
Every political party in the world, large or small, has a base or bases. You are a member of a political party's base if you would never vote for any other party's candidates. Notice that this is different than saying you would always vote for your party's candidates. Members of a party's base do have a choice: They can vote for their party's candidates or they can stay home. This means that a political party is in trouble if it neglects its base.
The Census Bureau recently published a report, "Voting and Registration in the Election of 2008," that documents how energized the Democrats' African-American base was two years ago. Sixty-five percent of voting-age Blacks voted, about even with Non-Hispanic Whites (66%) and well ahead of Hispanics and Asians, both at 49%. This was a huge increase from previous presidential elections as the chart above shows. In 2008, 12.3% of all voters were African-American, about the same as their percentage of the population as a whole. CBS News estimates that this year only 10% of voters were African-American, implying a loss of three million votes, nearly all of which would have gone to the Democrats.
African-Americans as a group have been hit much harder by the recession than others. Their unemployment rate jumped from 11.4% to 15.7% in the two years it took for the White unemployment rate to go from 5.5% to 8.8%. In housing, the situation is just as bad, and, to make matters worse, a recent study published in the American Sociological Review indicates that the damage was deliberate.
Written by two Princeton University researchers, "Racial Segregation and the Foreclosure Crisis" argues that African-American neighborhoods were specifically targeted for subprime loans that were then packaged, sold, and securitized. Such targeting was possible, indeed easy, because housing in the United States remains intensely segregated. "In areas with large African-American communities—places such as New York, Chicago, Detroit, Atlanta, Houston, and Washington—declines (in housing segregation) have been minimal or non-existent."
This is not exactly news. It's a fact of American life that we take for granted without following its trail of consequences. Princeton's Jacob S. Rugh and Douglas S. Massey did follow the trail. They argue that minority neighborhoods were ideally suited for subprime lending as it evolved in the 1990s because they were served by few mainstream lenders. "Subprime mortgages accounted for 43% of the increase of in black home ownership during the 1990s and 33% of the growth within minority neighborhoods." The initial impact of subprime lending in minority neighborhoods was deceptively beneficial. Easy terms and low or non-existent down payments created loan volume that in turn drove appraised home values higher. Higher values in their turn allowed subprime borrowers to avoid financial problems by refinancing into lower "teaser-rate" ARMs or bolster their reserves with a home equity line.
But with the crash in home values nationwide, several factors came together to put African-American neighborhoods in a vice. All the subprime lenders were gone and the securitization of subprime loans abruptly ceased. Since these lenders had dominated the housing markets in segregated neighborhoods, home values collapsed with their demise. The few mainstream lenders who have previously served the neighborhoods either deserted them, or if they were deeply embedded, collapsed in the general debacle. For all intents and purposes, housing markets in segregated urban neighborhoods evaporated.
Everyone in the neighborhoods suffered. Those residents who remained solvent saw much of their accumulated wealth disappear. Those who did not faced foreclosure rates that rose from 3.3% of subprime loans to 15.6% in 2009. Rugh and Massey conclude, "Ongoing racial segregation, discriminatory lending, and an overheated housing market combined to leave minority groups uniquely vulnerable to the housing bust."
A second conclusion brings the losses suffered by segregated neighborhoods back to the political process. "The utter collapse of subprime lending exposed the extremes of a pricing regime that assessed risks individually but not collectively, not accounting for the aggregate risk of ever-increasing subprime lending and securitization." An aggregate risk of this magnitude is not a local problem; it's a national problem. But the political regime inaugurated in January 2009 decided not to talk about race let alone address it. A Democrat president and congress neglected one of its primary bases, permitting the illusion to flourish that America is a post-racial society.
What could the federal government have done? Well, for one thing they could have designed mortgage rescue programs specifically for racially segregated neighborhoods. Such programs would have included principal forgiveness, payment moratoriums, and restructuring of "teaser" or "exploding" ARMs. Second, the government could have made a market, setting a base price for homes whose owners simply could not pay their mortgages under any circumstances. Third, the government could have subsidized cheap mortgages for new buyers in segregated neighborhoods. Fourth, the government could have instructed its captive mortgage accumulators, Fannie Mae and Freddie Mac, to offer especially advantageous terms for buying mortgages from lenders who would agree to make traditional 30-year mortgages in segregated neighborhoods. Fifth, the government could have targeted jobs programs aimed at repairing and rehabbing homes and commercial buildings. And that's just a start.
Why should the government have spent federal tax dollars on such racially targeted programs? The answer is simple. Not having done so is going to cost a lot more dollars. It's true that foreclosure rates are high in segregated neighborhoods, but not nearly as high as might be expected given the even higher delinquency rates. Lenders don't want to own properties that they can't sell and that entail significant costs to maintain. It makes more financial sense to let them sit abandoned or sell them to vultures at pennies on the dollar. Of course, this is a purely short-term benefit. The long-term disadvantages are obvious. In many cities, stable neighborhoods of working people in the middle- to lower-income brackets are now in serious danger of deteriorating into slums or worse, the urban deserts of east Detroit.
Only a dreamer would expect a new urban agenda to emerge from the Democrats' 2010 election debacle. The only lesson the Democrats appear to have taken to heart is to become more like the Republicans. In 2010, a significant portion of a core Democratic base stayed away from the polls. Unless Democrats take notice and bring race back into the national dialogue, they are likely to lose even more next time around. As long as Blacks and Whites can't live in the same neighborhoods, Americans still have a lot to talk about.