From [HERE] The Federal Reserve’s Community Advisory Council (CAC), created two years ago to counter criticism that the central bank was overly dominated by banking and corporate interests, has offered a rather somber assessment of the economy that conflicts with policymakers’ optimism about growth and jobs.
In its most recent report, the council said a decent pace of overall economic expansion and employment growth masked deep pockets of weakness among the country’s most vulnerable communities.
"Despite signs of strength and growth in aggregated data, there is persistent and perhaps even worsening anger among Americans living in marginalized communities across rural, suburban, and urban regions about their economic position," the CAC said.
Unlike the Fed, which prefers to stay away from politics and has largely skirted discussion about the impact of Donald Trump’s economic policies, the central bank’s community council did not shy away from taking issue with the president’s proposals.
"While capital markets have shown continuing signs of strength, recent budget proposals and executive actions by the new administration, if enacted, would severely constrain capital flow into low- and moderate-income communities," the Fed’s community council said.
"Proposed cuts to health care, food assistance, and significant cuts in taxes for the wealthy will exacerbate disparities in wages, borrowing, affordable housing finance, and employment across major demographic segments and regions."
The council argues race-related economic gaps are likely to have a growing impact on the economy because "a large portion of consumers of the future are going to be people of color." For example, seven out of 10 new households over the next 10 years will be non-white, the report says.
"Failing to address these disparities, particularly in segments that are driving the demographic growth in our nation, will likely result in national level economic consequences, including lagging economic productivity and reduced GDP."
Climate and immigration policies were also sources of concern.
"Radical changes in immigration policy and enforcement are adding to market uncertainty, reinforcing economic disparities for low- and middle- income immigrants and further degrading the capacity of our economy to harness the economic dynamism that immigrants have always brought to our country,” the report said. “There are clear signs of disruptions in industries that rely heavily on immigrant labor (e.g., agriculture and service industries such as restaurants, hospitality, and health care— among others) as well as among immigrant entrepreneurs."
This is likely to translate into weaker economic growth and higher prices for consumer in staple products like chicken, pork, and vegetables.
As for climate change, while its impacts are already felt by all, its worst ravages will affect poor communities the most.
"Sea level rise affects many coastal communities, including tribal and native lands, across the country. Streets near the coast and on barrier islands are flooding, especially at high tide," the report says. "Low-income families and people of color are disproportionately affected. The impacts of income and wealth inequality, racial and ethnic discrimination, and climate change are overlapping."
In addition, the report identifies a gap in small business lending that has been filled by the more predatory parts of finance, such as business credit cards.
"Unfortunately, commercial banks continue to seek out larger, more-established business borrowers rather than the non-tech growth businesses more commonly owned by people of color and women," the report says.
Small business loans have fallen to just 21% of total bank loans as of last year, down from around 40% in 1995, the council said. California Reinvestment Coalition data show that 90% of recent small business lending in the state "has been in the form of small business credit cards, and not loans."
"Credit cards often have high fees and penalties for late or missed payments, including rate hikes, and cannot be used for payroll and other small business cash needs," the report warns. "This often leaves small businesses more vulnerable to predatory alternatives."