HARVARD Latino LAW REVIEW
Nicole Diaz: I would like to introduce our moderator, Al Kauffman, currently with the Harvard Law School. He has a long history of work with the Mexican American Legal Defense Fund (MALDEF), including having served as a staff attorney and regional counsel with MALDEF in San Antonio. As a MALDEF attorney, he was lead attorney for low-income families and low-wealth school districts in Texas school finance cases. He was also a private practitioner in San Antonio and Dallas. He argued cases before the Texas Supreme Court,[1] and he has been an instrumental figure in many advocacy efforts in that state.
He was extremely active as an advocate for civil rights issues before the Texas legislature. He has received numerous awards from local, state, and national civil rights and education groups, and was selected by Texas Lawyer as one of the Ten Most Influential Lawyers in Texas. He will be moderating our panel on one of the most important issues facing our community today, which is immigration, post–September 11.
Al Kauffman: This is a panel about immigration, and our job is to try to summarize some of the major issues affecting Latinos.
We must examine the history of the relationship between the United States and its immigrants. I call it one of approach/avoidance, because, so many times in our history, this country has opened its arms to all immigrants, only to decide to expel them afterward. Many people were invited into this country to work, and were subsequently repatriated when the economy went bad. Americans used immigrants to do their farm work, to do their construction work, and to build their railroads, and then excluded them when they no longer needed them, or when they found cheaper labor in the form of a new immigrant group.
I want to provide some perspective on the issue of immigration and its relationship to other matters. Immigration is an extremely important issue for everyone in the United States, particularly for Latinos. It is, however, not the only issue. If Latinos get pigeonholed as merely being inter-
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ested in immigration and bilingual education, it deemphasizes and ignores the fact that other key issues affect our community, such as racial disparities in dropout rates, other educational challenges, and employment issues.
There are two topics that we would like to talk about today. The first is related to immigration reform—whether we need comprehensive reform of the immigration laws, what that would look like, what options would be available, and the tension between comprehensive reform and a more incremental process.
Second, the Latino community strongly supports measures to address security issues and provide security for our country, but at the same time, wants humane immigration rules. How may we accomplish both of those objectives simultaneously?
There have been proposals before Congress every session since I began working on this issue about thirty years ago. Some of these proposals eventually lead to major legislation. There were the Simpson-Rodino bills in the mid 1980s,[2] there was the Illegal Immigrant Reform and Immigrant Responsibility Act (IIRIRA)[3] in 1996, and there are many proposals now.[4] I think it is very important to try to put these into a broad perspective.
We will also look at the issue of socioeconomic development; more specifically, the ways in which socioeconomic development affects immigrant communities in general, and the Latino community in particular.
Finally, we will look at the effects of September 11 on the Latino community. We will explore the extent to which the Latino community and Latino immigrants have shared the experiences of September 11 enforcement with other immigrant groups, especially the Muslim and East-Asian communities.
We will start with Enrico Marcelli, who is a Foundation Health and Society Scholar at Harvard. He has a long record of looking at socioeconomic issues surrounding immigration. He will provide some background in this area, and also try to de-mythologize some of the stereotypes about the community.
We will also hear from Kathleen Culliton, who works with MALDEF in Washington, D.C. She is a lawyer who has worked with the Organization of American States and lived in South America. She has been very active on Capitol Hill, representing the Latino community on immigra-
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tion issues. She will talk about some existing legislative measures, and propose an agenda for what we would like Congress to do in the future.
Lastly, we have John Willshire-Carrera. He is an active practitioner who represents immigrants here in the Boston area, and also has a long history doing scholarly work in the area of immigrant representation. He will give us an idea of the ways in which all these policy issues play out at the local level.
Before we begin, I want us to remember that, like any immigrant group, Latinos comprise a diverse community, spread out across the United States. I come from south Texas, where almost all the Latino immigrants are from Mexico, although more recently, many are also coming from San Salvador. Newer immigrants assimilate extremely well into the existing community, which is already ninety percent Latino. Everybody fits in; everybody knows each other. You cannot easily distinguish the “undocumented” from the “documented.” There are also places, like North Carolina, which have very recent immigrant populations, and where relationships with the predominantly white local communities are very strained. People do not know each other; they do not know each other’s history. The immigrant community feels extremely isolated. Then there are areas, like Massachusetts, which have historically had many waves of immigration, and now have new immigrant communities, which have been met with a lot of anti-immigrant fervor.
Enrico Marcelli: I am not a lawyer; I am an economist. Most of my research focuses on estimating the number, the impact, and the integration of unauthorized Mexican and other Latino immigrants in California.
How does unauthorized residency status among Mexicans and other Latinos affect their well-being? By “well-being,” I am referring to labor market outcomes, access to medical care, access to public assistance, et cetera. I will discuss their probability of settling permanently in the United States, and the effects that their presence has on the well-being of other Americans. I say specifically, “other Americans,” because oftentimes we dichotomize immigrants and other groups in our society.
First, however, I will discuss the ways in which September 11 tipped public policy toward separating the “welcoming,” or service, function of the former Immigration and Naturalization Service (INS) from its enforcement functions. It is a move that emanated, at least to my knowledge, out of the U.S. immigration reform in its third and last report to Congress in 1997.[5]
The INS reorganization followed the recommendations of the U.S. Commission on Immigration Reform by separating the “welcoming” and the enforcement arms. The former was previously housed under Customs,
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and under the Department of Treasury. The enforcement side of immigration law was housed in the Department of Justice. The recommendation to split was, I think, enacted in March of 2003, with some complications.
The recommendation of the U.S. Commission on Immigration Reform was to take four different tasks—immigration enforcement, benefits, labor spendage and enforcement immigrant appeals—and put them into four different departments.[6] Prior to that time, that is, in 1997, these four tasks were divided between the Justice Department, the State Department, and the Labor Department. The argument was that they ought to be separated, because you would want to present one “face” at the border. You would want to “welcome” immigrants at the border, as opposed to performing any other function.
That was the recommendation in the 1997 report, but that is not exactly what happened. Instead, the dichotomist split that the Commission had recommended resulted in the “welcoming” function being put into what is now called the Bureau of Custom and Immigration Services (CIS). The enforcement wing was put into the Bureau of Custom and Border Protection (CBP), and the Bureau of Immigration and Customs Enforcement (ICE).
The “border” terminology has been dropped now, in favor of three- or four-word terms, or even more frequently, acronyms. Enforcement is further split into two categories. One, Customs and Border Protection, deals with the flow of goods and people at the borders. The second, Immigration and Customs Enforcement, brings together both Customs and former INS agents in the interior to work with issues such as workplace sanctions and enforcement. That is but a quick summary of the reorganization that occurred, and which I believe September 11 prompted, or at least made possible.
One can debate whether it is a fortuitous development or not, but this is, as I understand it, the organization of the new immigration system. It is not exactly what the Commission recommended, but somewhat similar. Turning now to what I am more familiar with, I will address how unauthorized status affects Latino immigrants, primarily in California. I would venture that the effects might not be too different elsewhere, but there is very limited research on unauthorized immigrants in the rest of the United States.
Unauthorized immigration is mainly thought of as a six-state phenomenon, but that is changing—or has changed—rapidly. Congress has requested numerous reports by the newly named General Accountability Office (GAO), formerly the General Accounting Office, to assess the state of national security in relation to border entry issues. There are, for example, repeated reports of situations in which unauthorized immigrants have had access to secure airport areas.
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Reports on visa management are a second example. And a third type of report relates to statistics on foreign-born residents. My main focus within this category is on the unauthorized immigrant contingent. Even before September 11, there was already movement toward trying to better estimate the size of the unauthorized population. To that end, the GAO has adopted a methodology that we developed in the mid-1990s and subsequently followed up on in 2001. It is a survey-based methodology, limited to Mexican immigrants in Los Angeles county.
Essentially, we never ask an immigrant directly, “What is your residency status?” Instead, we ask, “Are you or are you not a U.S. citizen?” Secondly, if they answer no to that, “Are you a legal permanent resident?” If they say yes to that, then we ask, “How did you obtain that residency status?” But if they say they are neither a citizen, nor a legal permanent resident, nor a green card holder, we will ask, “Are you a temporary visitor?” If not in one of those three categories, unless perhaps from El Salvador, an individual is probably an unauthorized immigrant. In this way, by looking to characteristics of that population, one can be placed into that residual category.
This in turn allows us to come up with predictors of who is unauthorized within larger public use samples, such as the census. What we and other demographers have estimated is that the unauthorized population has grown from about 3.5 million in 1990 to about 11 million as of March of this year.[7]
What should be emphasized here is that the proportion of immigrants arriving from Mexico and other Latin American countries has remained remarkably consistent, at about eighty percent. I am being somewhat evasive here, as this proportion increased by six or seven percent in the year 2000. That was a significant jump, but it has since started to decrease. I would argue, then, that it has remained quite constant when considered on the whole.
Based on my estimates from California, what I want to illustrate is not simply that the number of unauthorized immigrants has risen nationally, and the proportion of those from Latin American countries has remained fairly consistent, but from what we see in California, there has been an increase of between 61 and 75% in terms of numbers. Without going into the details of our methodology as demographers, it may be said that we essentially come up with ranges of estimates. What we see in this case is that the number of Mexicans and other Latinos in California has risen from about 1.2 or 1.3 million in 1990, to about 1.9 or 2 million as of 2002.
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What I wish to show is that whereas Proposition 187,[8] the Welfare Act[9] and the Legal Immigration Act[10] are associated with a relative flattening and even decline of the trend in unauthorized immigration in California, September 11 appears, at this point, not to have had such an impact. In fact, unauthorized immigration after September 11 continued the upward trend it had begun in the late nineties, even after September 11. Results related to how unauthorized immigrants affect other workers, how unauthorized residency status affects labor market outcomes, and whether such immigrants test positive for illicit drug use or engage in drug-related and economic crimes, have been collected. But the essential conclusion is that unauthorized residency status does not appear to affect the probability that one will settle permanently in the United States. Work I have done with Glen Cornelius of the University of California at San Diego has found that certain demographic characteristics, like being female, or enrolling in an institution of higher education in the United States, increase the probability of settling permanently in the United States. We have concluded that, contrary to popular myth, it is not unauthorized status per se, or even legal status generally, that influences whether somebody decides to settle permanently in the United States.
Instead, factors such as economic crisis in Mexico, demand in the United States for their labor, and the existence of friendship networks are the main influences on whether people settle here. In summary, unauthorized residency status does adversely affect whether Mexican immigrants are employed, and whether they earn higher wages. It also appears to adversely affect their access to needed medical care, according to our estimates. Unauthorized resident workers, in turn, do not negatively affect the labor market outcomes of other workers in California, with the exceptions of legal Latino immigrants, and possibly lower-skilled African American workers.
In closing, some important questions arise out of the issues presented here. One is, what is the relative impact of circumstances such as September 11 or similar events? Others center on research findings such as those presented, and how they relate to immigration policy formation. Also, what are the likely effects of the new Bush-Fox Amnesty Guest Worker program,[11] which was in the making before September 11, but was effectively stalled by the attacks? And finally, what of the newly reorganized Department of Homeland Security? What about the resources allocated among the three immigration-related branches of the newly
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created Department of Homeland Security? Are they sufficient? Are they misallocated? These and other related issues deserve continued attention.
Kathleen Culliton: Turning from socioeconomic to legal issues, my work is as a civil rights lawyer, and I will discuss the status of immigration law and Latino civil rights since September 11. At issue as well are several larger, very challenging public policy questions.
I work with MALDEF, which has kept its Chicano name in large part because most Latinos in the United States are Chicano. Also significant, though, is that much of the backlash since September 11, and many of the problems experienced around the country, have primarily impacted Mexican-Americans. I wish to make it clear, however, that we do represent all Latinos. MALDEF is based in Washington, D.C., and my own work relates to national immigration policy.
I personally live in a neighborhood that is largely Central American, and find it interesting to discuss different communities. Our area is called Salverse Unido, and consists of many Central American refugees. The name itself came from Oscar Arias,[12] and the neighborhood embodies a very interesting phenomenon in Washington, D.C. It is a place where national policy happens, and yet so often where the local is left out. It is encouraging, then, to follow a discussion of local issues.
MALDEF has been defending the civil rights of the nation’s Latinos for thirty-five years through public education, advocacy, and litigation. Notable in this regard is that, since September 11, over one hundred measures taken in the name of fighting terrorism have been anti-immigrant measures. However, these have not been the least bit effective at actually finding terrorists.
These anti-immigrant measures have not identified a single terrorist, but they have resulted in numerous civil liberties and civil rights violations. One area of particular concern is the increasing use of racial profiling by law enforcement officers. Arab and Muslim communities have been wrongfully targeted, and their civil liberties infringed, since September 11. While none of these policies has made America any safer, the increased use of racial profiling as a law enforcement tool has exacerbated the longstanding problem of its use in the Latino community through immigration enforcement.
Predictably, this affects not only Latino immigrants, but Latino citizens. The Latino community is one of mixed status, being forty percent immigrant.[13] For that reason, anti-immigrant measures like those taken have
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a disproportionate impact on its members. One example of such a measure is a change of policy regarding racial profiling. In 2003, for national security and immigration purposes, the Department of Justice adopted guidelines permitting exceptions to the general rule against racial profiling.[14]
Last year, the Department of Homeland Security, which is now in charge of immigration, unfortunately adopted the same policy.[15] It now appears in training manuals for all immigration officers. As a new Border Patrol agent, one is told that one is not allowed to use race, ethnicity, religion or national origin in one’s work—unless, of course, one is working on national security or immigration matters. A long history of unconstitutional racial profiling along the southwestern border has only been exacerbated by this new policy since September 11.
In Washington, D.C., we work with a large coalition which emphasizes that racial profiling was not only wrong prior to September 11, but is still wrong now, post–September 11. It is worth emphasizing here that law enforcement officials are in agreement with our position that racial profiling does not help to find terrorists. We know that we should be looking for individualized, suspicious behavior rather than blatantly targeting entire classes or races. Other unwise anti-immigrant policies enacted since September 11 include the rounding up of Latino workers. One example of this type of aggressive enforcement measure is Operation Tarmac, which involved the rounding up of Latino airport workers.[16]
None of these measures, it should be repeated, has been successful in identifying any terrorists. Indeed, if immigrants—including legal, permanent residents who are rounded up as a result—posed too great a risk because of their immigration status to work in airport food services, one would think they could not be serving so honorably in the war in Iraq. Former Secretary of Homeland Security Tom Ridge has himself stated that unconstitutional profiling and enhanced immigration enforcement have become the new status quo against undocumented persons despite the fact that they pose no per se national security risk.[17]
Prior to September 11, immigration sweeps and raids were limited because of the likelihood of accompanying civil rights violations. Immigration enforcement’s first priority was to go after criminals and terrorists.
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This focus would seem even more important after September 11, but beginning in June 2003 with the Wal-Mart raids, the practice of sweeps against Latino workforces and communities has been vigorously renewed. In 2004, for instance, 11,000 Latinos on San Diego trolleys—immigrants and citizens alike—were questioned about their immigration status.[18] Less than one-tenth of one percent, it turned out, were immigration violators.
Even in Washington, D.C., a city that has a long tradition of welcoming immigrants, Latinos have been stopped and questioned about their immigration status on Columbia Road, in the heart of the Latino community. Meanwhile, white and black pedestrians proceeded uninterrupted during the same sweep. Also affected have been immigrant women. A recent NOW Legal Defense survey revealed fear of deportation as the most significant reason that battered immigrant women are much less likely than non-immigrant women to report abuse.
This reality has been exacerbated by state and local law enforcement officers threatening to enforce civil immigration laws, in the name of fight-ing the war against terrorism. Such action on the part of law enforcement officials is in direct contradiction to the legal protections for immigrant women set forth in the Violence Against Women Act (VAWA).[19] Considering that community policing is a very valuable tool for public safety, many police departments and national police associations have issued public statements indicating their intention of becoming involved in civil immigration enforcement. Nonetheless, former Attorney General Ashcroft and the 122 House co-sponsors of the Clear Law Enforcement for Criminal Alien Removal (CLEAR) Act[20] continue to misstate the law in this area.
These politicians continue to insist that state and local police have inherent authority to enforce immigration laws. The negative effects of this are reflected in a statement that was issued through a secret memo by former Attorney General Ashcroft, which stated that the inaccurate statements are responsible for substantial civil rights violations of the Latino population by local police. In May 2003, an example of this abuse occurred in Riverside, California, when local police officers demanded to see the drivers’ licenses of all Latinos working in an avocado grove. They harassed citizens, legal residents and undocumented immigrants alike, and threatened to turn them over to the Border Patrol. In this incident, nobody was driving. One undocumented immigrant ran, and was then assaulted by the local police.[21] The Riverside Sheriff told the police that it
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was department policy that officers should not be enforcing civil immigration laws, but the officers were confused by the statements of Attorney General Ashcroft. This incident shows that the new Attorney General should change this policy. It also illustrates why drivers’ licenses should not become immigration enforcement tools.
Current litigation[22] by the Puerto Rican Legal Defense and Education Fund (PRLDEF) in New York is proving that the DMV is confusing its functions with the job of the federal government with regards to immigration enforcement, and that this leads to numerous mistakes. It also leads to racial profiling. People who are untrained in immigration law tend to use inappropriate criteria to determine who should be questioned as to their immigration status.
Another way that post–September 11 practices have been harmful to the Latino community is in the context of immigrant detention. Abuses of post–September 11 detainees did not happen under the PATRIOT Act.[23] They happened in the context of immigrant detention, through the abuse of immigration law.
Immigration conditions, which were already abysmal prior to September 11, are unlikely to improve after the abuses seen with the September 11 detainees. Negative precedents have been set. For instance, last year in Passaic, New Jersey, dogs were used violently against detainees.[24] It should be mentioned that this type of practice is something that immigration advocates have known about for a long time. The New Jersey incident made national news. We know that conditions have been abysmal, and that there have been many abuses over a long period of time, yet the situation is very unlikely to improve in the current political context.
Other essential civil rights have also been put into question by post–September 11 policies against immigrants, including access to counsel, the right to know the charges, the right to bail, and the right to a defense. These are rights that belong to every person under the Bill of Rights, regardless of citizenship status. They are fundamental human rights that apply to every person within the United States, and they are being taken away from immigrants in the wake of September 11.
Human rights violations at the southwestern border have increased. Thousands have been detained and deported, but no terrorist suspects have been identified. Violence and deaths in the desert have also increased since September 11. MALDEF has filed two lawsuits against vigilantes at
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the border,[25] yet the Minutemen[26] continue to recruit for armed paramilitary-style groups to hold organized immigrant-hunts at the Arizona border. These vigilantes are tied to and financed by white supremacy groups.
Arizona has also recently passed Proposition 200.[27] Proposition 200 is just like Proposition 187 in California.[28] Proposition 187 would have made it illegal for the state of California to provide benefits to undocumented immigrants. MALDEF successfully litigated against Proposition 187 in California, because immigration enforcement is within the exclusive jurisdiction of the federal government.[29] States and localities are not supposed to engage in immigration enforcement. For that reason, if state officials discriminate in their determination of who can receive public bene-fits at the state level, that discrimination will be subject to strict scrutiny. This is the reason MALDEF won against Prop 187, and it is also the reason MALDEF won the Plyler v. Doe litigation, which provides access to public education for undocumented students.[30]
MALDEF has filed a lawsuit against Proposition 200 in Arizona, and may have to appeal it all the way to the Supreme Court this time.[31] It is not easy to win in the local federal court. At this point, MALDEF has lost the first round, but will continue to appeal. There are propositions similar to Proposition 200 in a dozen other states across the country. Their existence illustrates how the idea that immigration enforcement belongs exclusively to the federal government has been falling apart since September 11. Nonetheless, MALDEF remains hopeful, and will continue to fight.
Finally, it is important to touch on the issue of the backlogs. Many people think that immigrants are coming here in violation of the law. This is true to a certain extent, often due to the nature of the immigration system. What has happened historically, and especially lately with the Latino community, is that immigrants have not had meaningful access to legal status. For example, right now, first-priority family immigration for Mexican American families has a backlog of eleven years. That would apply to a U.S. citizen who wants to bring a spouse or a child from Mexico. The effect of the reorganization of the Department of Homeland Se-
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curity is that immigration is now seen through the lens of security, rather than as a means to promote family unity and family values. The fact that we are spending a lot of our resources on enforcement rather than services has also increased the backlogs. That is why we desperately need comprehensive immigration reform; people in our communities who are living in undocumented status are going through very difficult times. This has become a number-one priority for MALDEF, and every other national Latino civil rights group. We desperately need to have access to legal status to pull people out of the shadows and provide equal opportunity in America, a nation of immigrants.
John Willshire-Carrera: I know that there are many people thinking about immigration, and fighting for real changes that are inclusive of all of our communities. I think this is a very useful conversation generally, but it is also a very useful conversation for myself and my clients. I am a senior attorney with Greater Boston Legal Services,[32] and at times I head the immigration unit.
I am also a clinical supervisor for the Harvard Immigration and Refugee Clinic, and I have had the pleasure of working with a number of students from Harvard Law School over the years. I am also connected to the Refugee Law Center,[33] which has done a lot of work over the years on issues involving refugee and asylum rights for women and children. To begin with, I would like to state that I am originally from South America. I am Andean; I came here when I was fourteen; I am an immigrant.
I was undocumented for a short period of time. Like many, many other people in our communities, I am where I am now because of the civil rights movement, because of people around me, because I was supported by my family, because I was able to go to school and work. Over the years, I have come to recognize that this is my home; this is the place where I will fight for betterments. Also, I am American in the very broad sense—I am from the Americas, not just the United States. That is the perspective from which I interpret America. And because of my human rights work and my immigration work, I realize that I am a global citizen as well.
We as a Latino community are very much a part of global issues involving human rights, immigration, and a range of other, different issues. My fellow panelists have touched on so many things that I think that are important, and have made their points very succinctly. I will add a couple of comments onto each piece, and then speak from the perspective of somebody who is working on a day-to-day basis with immigrants, within his own community of immigrants, as well as working on a national and international level.
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To begin with, I work in legal services. And for many years, there were restrictions on the use of Legal Services Corporation money, which was federal money, for the representation of immigrants. I believe that stemmed from anti-immigrant struggles in the 1980s, which resulted in restrictions being imposed on the use of Legal Services Corporation monies. I came to this work in the 1980s, when in fact, legal services offices were receiving federal money and could still represent immigrants as long as they got monies from other places.
Then, in 1996, anti-immigrant feelings were strong and federal legislation was on the table, including IIRIRA. This brought significant, very negative changes for immigrants, including changes that restricted due process rights and defenses. Changes that, in many ways, complicated the situation for people, and negatively affected family unity, which is a very basic part of our social existence. Around that period of time, Congress barred the use of federal LSC money for the representation of immigrants. So my office, which was here in Cambridge, ended up having to give up all of its federal money in order to continue working with immigrants, which they did.
They did the right thing, and they merged with Greater Boston Legal Services, which did the same thing. Between the two organizations, there were over 150 staff members. They lost almost a third of their staff members in order to be able to continue doing what they considered to be real work for the community. There were other issues involved, but this was a huge part of it. This history affects not only us as immigrants, but our work in immigrant rights. And it keeps on going.
I would like to go back to IIRIRA. In my opinion, IIRIRA was a very important part of the beginning of what I see as a growing apartheid against immigrants in the United States. This phenomenon is also global, in the sense that countries around the world are no longer the nation states that we knew before. It is much more of a global economy. A real restructuring of the world is going on, through free trade agreements and the imposition of structural adjustment programs, among other things. A large number of people in the world are being forced out of their communities, and feel as though their world is coming apart around them.
I believe that policy changes provide one explanation for the large numbers of people coming into the United States from Central and South America right now. I think that, at many different levels, a decision has been made that there is a need to build walls to control the people. We now have a system of laws that is being expanded every day, such that the walls are getting higher and thicker, and more intrusive in everybody’s lives.
We have to deal with this new system. I think in order to deal with immigration, we have to make some very basic, structural changes. We have to think of things very, very differently, or face the possibility that we will end up where we were in the 1960s, the 1950s, and the 1940s, when there was significant discrimination against people of color. IIRIRA said,
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“Okay, we are going to give you amnesty. But we are going to prohibit employers from hiring people without work authorization, if they are not citizens or permanent residents.”
In essence, they were licensing work. That, in its own way, has created a dynamic which has really added to all of the problems that immigrants have in the United States. There are different versions; there are different ways of looking at this. But I think this is a very important part of it. In the early- to mid-1990s, they started criminalizing immigrants in many ways. They broadened the definition of what crimes make people removable, and prevent people from coming in when they adjust, or when they get their papers here. They also took away a lot of due process rights, and a lot of defenses.
September 11 was a situation that changed things in this country even more dramatically. As a result of September 11, we have a patriarchy, but we have many other changes taking place in immigration that really end up, in a sense, broadening and strengthening this apartheid against immigrants. Which brings us to today.
The work I do means that I have clients from all over the world. Basically, I do asylum and human rights work. I also do a lot of outreach to the communities with my office colleagues. Many of us are from different communities, and what we see is that the climate is probably worse now than it has been since we can remember. It is true that right after September 11 it was really, really dangerous. But I think what has happened is that the danger for a small number of people in the immigrant communities has now broadened, so that it now definitely affects all immigrants of color, and it also affects anyone who is seen as being different. The danger affects people in very broad ways, including those addressed by Katherine Culliton. The state of Massachusetts was very clear that undocumented kids have a right to go to school here, in public schools.
I worked on these issues in the early 1990s; in fact, after the Plyler v. Doe ruling was issued by the U.S. Supreme Court, I worked on a national project that dealt with these issues, and Massachusetts was used as a model. Massachusetts is no longer a model. There are so many schools in Massachusetts where people, for one reason or another, either decide that a child is an immigrant, or they dislike that person. They begin looking for the child’s passport, without knowing how to read a passport, or what visas are about. They just hear that everybody who is not a citizen or permanent resident is illegal, which means that they are not even human. As a result, a large number of kids have a very hard time getting into school.
The other side of the struggle is that there are a lot of very good people who are fighting these issues. We are lucky to have a very strong immigrant rights community in the Commonwealth of Massachusetts. People are fighting these issues, but the truth is, many children are spending a significant amount of time out of school. When they do get into school,
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they have already been labeled. They know it, and they are afraid of being called “illegals.” Their lifestyle changes as a result of this concern.
There are other issues that affect the daily lives of immigrants. Many immigrants have problems with drivers’ licenses. In response, some people might say, “It’s good that they’re going to stop those undocumenteds.” But this does not affect only the undocumenteds. These problems also affect permanent residents and citizens, especially people who look different, and others who, for some reason, are labeled as problematic. No one wants to be the person who lets in someone who is going to make trouble, so such a label can have a far-reaching effect.
Legal residents come into our office saying, “I have a problem; I can’t get a driver’s license. Without a driver’s license, I can’t get work authorization. If I’m not work-authorized, I’m going to get fired from my job.” People do get fired from their jobs as a result, and it is not an uncommon problem. I represent asylum seekers. People who are granted asylum have a right to live here, and a right to be automatically authorized to work here. Yet they have a very hard time getting their first documents, such as their social security card. The Social Security office is backlogged, and records can be disorganized. Sometimes the system works very well, but often there is a problem.
Often, they can get a social security card, but they cannot get a driver’s license; they cannot get a Massachusetts ID, and it goes from there. It becomes a very bad situation. In terms of immigration, what used to take three months is now taking six months, or a year, or two years. A large number of people who have a legal right to have status in the United States cannot get their papers through. There are people who have been waiting for their green cards for almost ten years. There are asylum seekers who have been granted asylum, who face waiting lists of seventeen years before they can expect to receive their green card.
Part of the delay has to do with the rule changes, and part of it has to do with the fact that, in re-organizing immigration, the government has decided to privatize part of what was INS. Many INS employees foresaw the changes, and they left the agency. Fortunately for us in this area, the people who are most committed to the work have generally ended up being the people who stayed, but they are overwhelmed. The new people coming in are not trained, and a lot of functions that were being done by INS officers are now being outsourced to the private market.
Privatization creates a whole set of problems. Contractors do not have access to necessary files because they are not government officers. The courts are overwhelmed; judges are now in positions where they have 1000 or 1500 cases on their docket at any one time. Obviously they cannot hear them all in one day, and proceedings are time-consuming. The case-loads are huge, and people are on the verge of burning out.
Recently, there was a Congressional hearing on merging the three units of immigration back together again. After all the confusion created
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by the separation, there is talk of putting things back together again. It just does not make any sense.
Meanwhile, there are many people who are working every day and paying taxes. Sometimes they are undocumented, but they pay taxes. They work all the time, because in this country you cannot live without working. Like everybody else, immigrants work like hell. These people’s lives are on the line, and they are trying to get their papers processed, but the bureaucracy does not work. I spend a lot of time holding hands, trying to keep people going from day to day.
There are some positive aspects to this work. In the last ten or fifteen years, the asylum process has changed in this country. The Refugee Act was passed in 1980.[34] For ten years people did not understand asylum, and they did not want to grant it. Since 1990, however, there has been a new Asylum Corps, which is an elite corps in the immigration service. They do very good work, and we are very concerned now that they are under attack by the second term of the Bush administration. We are very concerned because human rights affect everyone, on both ends of the political spectrum.
Human rights are a key issue, and it is one area in which women’s rights and children’s rights are really moving forward. VAWA has also been a very bright spot, because women and children who have been abused at home do have access to relief under VAWA. It is a very important piece of legislation, but it is now under attack as well.
I would like to conclude by stating that I think somehow, we need to get through this. We will need to make incremental changes to accomplish that, but in the end, we need to re-think our entire approach to immigration. We live in a globalized community, and we must take that fact into consideration.
Audience Member: I think there has definitely been a slow, steady drumbeat conquering racial equality, especially in the past year. People are acting, especially the Minutemen. Democrats and Latinos, on the other hand, are reacting. I think we are on the defensive because we are not offering alternative proposals. So, if we believe that the country’s immigration problem is going to intensify, it would benefit Latinos and Latino organizations to think seriously about alternative immigration policies.
Ms. Culliton: Actually, that is a large part of what we are doing in the civil rights movement, and in the national immigration reform movement. We work very closely with the National Immigration Forum[35] and other groups. For example, the Leadership Conference on Civil Rights, an umbrella organization of 180 civil rights groups, is in favor of compre-
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hensive immigration reform.[36] Last year we helped draft the SOLVE Act,[37] but it did not pass.
This year we are working with Senators Kennedy and McCain on a bill that should be introduced in a few weeks. We also submit testimony through Senator Cronin’s immigration sub-committee, and try to suggest solutions that would work. A large part of what we are doing is trying to convince the President and the White House that in order to fix immigration, a broken system, we must do what will work in the real world. That is an approach that appeals to many people. We work with business, labor, and other groups. Immigration reform, in order to work in this world, needs to be comprehensive.
A solely guest-worker program will not work because the best employees at many companies, such as Tyson Foods,[38] for example, are Latino immigrants. Business representatives such as the U.S. Chamber of Commerce and the Essential Worker Immigration Coalition[39] agree with this assertion. These companies do not want their employees to have to return to Mexico after three years; they want them to continue working. Family unity is an extremely important part of establishing equality, as well as what would work in the real world. We cannot have a guest worker-only program.
As the Latino community knows from very tough experiences with the Bracero program,[40] many labor rights abuses happen if you have a temporary worker-only model. The National Hispanic Leadership Agenda published a special immigration report last year calling specifically for comprehensive reform with the components I have discussed. A path to permanent status, family unity, and integrating the current undocumented population are essential, or we will be back where we started.
The 1986 amnesty[41] was a one-time only shot, and that is why we are back here again. Immigration is not going to stop, and it is not a bad thing. Immigration is good for the U.S. economy, and for the country as a whole. It is something that is very helpful; immigrants make many important contributions to our society. Therefore, we want to make sure that there is a
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mechanism for the future as well. If we are very lucky and we are able to get a lot of people involved, this might happen in the next few years.
Audience Member: Dr. Marcelli, could you comment and elaborate on your findings on the labor market impact of undocumented workers in southern California? In addition, could you extrapolate, and discuss the larger impact throughout the United States?
Dr. Marcelli: Here is the issue. To my knowledge, there are only three studies that investigated the impact of unauthorized immigrants on the wages and employment outcomes of other workers in the United States. I would ask anybody to please let me know if they know of others. I have been looking at this for about ten years, and what I have found is that organizations like the Center for Immigration Studies[42] want to show that unauthorized immigrants have a negative impact on the labor market outcomes of other workers in the United States. They will assume that the lowest-skilled Latino immigrants are all undocumented, and control for other variables in particular ways.
These studies do not empirically speak to the issues in an unbiased way. There is very little research on the topic. But I think there is broad agreement among the economists that the overall impact of immigrants is positive. There are certain groups, such as legal Latino immigrant workers and lower-skilled blacks, that may present some adverse wage and employment effects. But even the evidence for that proposition is really sparse, and the effect amounts to pennies on a dollar.
Mr. Kauffman: I do not think there has been a study that has found an overall negative economic impact of immigrants in the United States. There is a lot of ignorance about immigrants and taxes. Immigrants often pay taxes without receiving the benefits of the Social Security system. They pay income taxes, sales taxes, and real estate taxes as well. There is not a lot of great research on this topic.
Audience Member: Most of the work that is being done for undocumented immigrants is through academia and human rights programs. However, every time you see undocumented immigrants in the media, they are shown like rats coming out of a sewer pipe, in a degrading light.
What is being done to portray the immigrant community to the general public as something positive, as something good? The prevailing attitude toward illegal immigrants seems to be: “Incarcerate them, prosecute them, and deport them.”
Dr. Marcelli: I want to say that I could not agree more with your critique, and I see it as a critique of some of us, in not working together more effectively to get the message out. But when I had my empirical results come out in the mid to late 1990s, about the economic effects of undocumented Mexicans, the story made the front page of La Opinión, a primar-
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ily Mexican paper in Los Angeles, and The Sentinel, an African American paper. The L.A. Times would not touch it.
Ms. Culliton: I think this is a really important and frustrating point. I feel the same way when I watch TV. Since joining MALDEF, I have been doing a lot of media work, and I have even gone on FOX. We have to get our message out there. I also agree with Dr. Marcelli that the Spanish-language media is much more receptive.
It is not that we are not trying, but we do not have as much money. Anti-immigrant forces are more organized and have more money, but they are actually a minority in the United States. We have a recent poll by a nonpartisan pollster that demonstrates that seventy-five percent of the American public is in favor of comprehensive immigration reform. It is so frustrating to watch Lou Dobbs, and it is frustrating that Samuel Huntington[43] got the attention that he did, knowing that his research was absolutely wrong and unfounded.
And so, we have to try to put together a better media strategy, and to push for comprehensive immigration reform. The fact that Spanish-language media is so much easier and so much more receptive is a very good indicator of where we should go. We should be doing more with La Opinion and Telemundo. I know it has been effective to communicate to people about what is happening in Washington, what their rights are, and what they can do.
One positive story is that the reason that the matrícula, the consular identification cards,[44] are still accepted by the federal government, is because of a Spanish-language media strategy. I think there is a huge potential through Spanish-language media, but it is a tough battle.
Mr. Willshire-Carrera: You are right. What both of you said is so important in this work. If you hear a story in the news that is anti-immigrant—for example, blaming somebody for bringing in diseases, accusing someone of taking up the money in the prisons, or even, “The illegals are driving cars in the streets!”—the next day, the next week, the next two weeks, you feel it in the community. It has an impact. Those who are concerned about it will start asking questions and start harassing immigrants.
For us, I think we always know that we are going to be swimming upstream, because the media, in reality, is going to follow the policies that are being pushed. At this point, I do think there is a very strong anti-immi-grant line that has been drawn by a lot of people in power, so others are following it. What is really important—and I think people who are orga-
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nizing around the DREAM Act[45] have done a beautiful job around this—is to get stories out about individuals affected by these policies.
I think people who have broad concerns about immigrants can learn to change their perspective when they can connect to somebody, whether it be the person next door whom they know to be a very good person, or who took care of their mother, or who is going to school, or named valedictorian. I think the individual stories are so important, and that is something that we really try to push. I think it is much better when they talk about the individual, as long as the individual is safe. That really is a very powerful way of telling the story.
Mr. Kauffman: I want to support that. We passed a bill in the Texas legislature through a Republican Senate, Republican House, and Republican Governor, that gives undocumented high school graduates the right to go to college with in-state tuition.[46] Even though there were people who would say, “We must protect our borders; we must protect America,” when they saw these very deserving people who had lived here ten or twelve years, were valedictorians of their high school, and yet could not go to college, there was increased sensitivity and support. The DREAM Act would carry that to a national scale.
Audience Member: Immigration has basically become patriotic. Family values are still good and American, and working hard is good. But somehow, those values are not associated with immigration. The issue is about banking, making money, and remitting. We keep hearing a lot about the power of remittances, and I would like to ask: How is banking playing into immigration discourse, if at all? And if you could project into the future, especially given all this reorganization, has the Treasury Department come back into the picture? Everybody wants to harness the power of money, regardless of where it comes from. Could you speak to that, in particular, to remittances in relation to immigration?
Dr. Marcelli: I am glad you asked that question. I only have information from Los Angeles County, but I have given presentations at the Boston Federal Reserve Bank on this issue. To my knowledge, there is no data in New England on the level of remittances, the mechanisms through which people are remitting, the use of those remittances, or how they affect the lives of immigrants in the United States. Essentially, we found that remitting to Mexico does not reduce the probability that the Mexican immigrants will integrate in the United States. They are actually more likely to buy homes if they remit, contrary to popular perception. They are also less likely to use welfare, so it is a transnational perspective. This is a paper that just came out last week, on a special immigration review.[47]
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Ms. Culliton: I think there is a disconnect, because in Washington we have a lot of international economists with ties to the World Bank, and the Inter-American Development Bank, who examine development issues in Latin America. What we have seen is that development aid in Latin America is the lowest proportionally around the world, and it is going down. Remittances are actually the number one component of the Mexican economy, and Mexico is very important to the economy of the United States.
There are some studies by the Dallas Federal Reserve, and by some of these development institutions that I mentioned, showing how one way that immigrants revitalize economies is through their use of financial services. The financial services industry has been somewhat abusive, and we are in favor of Senator Sarbanes’s bill that would give people who are remitters consumer rights.[48] There have been cases of people going into Western Union and having to pay much higher fees. There is corruption on the other end, as well.
So there have been abuses, and yet, if you look at the overall economic development of the region, of the Americas as a whole, for both Mexico and the United States, Latino immigrants are huge contributors, and extremely important to the well-being of our economy. For example, if you were to deport only Mexican undocumented immigrants, we would lose 220 billion dollars in GDP here in the United States. The irony is that people who are doing this do not have much access to legal status. It is really an underclass paradigm that is being created, and we have to find a way to break it.
Mr. Willshire-Carrera: Remittances are very important for all immigrant communities. If you talk to people in Haiti, it is the way that people have been able to send money home that has actually worked to help better their communities. It is a development from the bottom-up, and it has been very important. Secondly, and this is one of the big contradictions of the moment: the system wants the money to move; on the other hand, they are putting up all these restrictions which are being imposed on immigrant communities, and are having a negative effect on those communities.
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Andrew Smith[∗]
Enforcing the civil provisions of the Immigration and Naturalization Act (INA)[49] has traditionally been an exclusively federal responsibility. In the wake of September 11, however, state and local law enforcement agencies have increasingly been urged to divert their scarce resources to the enforcement of the INA’s civil provisions.[50] In light of increasing nativist pressures, the perceived need for greater cooperation between state and federal agencies in thwarting foreign terrorist attacks, and the woeful understaffing of Immigration and Customs Enforcement (ICE),[51] politicians and others have increasingly called for an expanded role for state and local police in immigration enforcement. The latest of these calls is § 220 of the “Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005,” passed by the House in December 2005, which would “affirm” the inherent authority of state and local officials to enforce immigration law.[52] In this Commentary, I shall argue that H.R. 4437 § 220 poses a threat to public safety, to civil rights, and to the rights of immigrants. I shall show that despite the fact that §220 purports to affirm existing law, the legal status quo regarding inherent authority is quite murky. Finally, I shall argue that §220 is unnecessary from a policy standpoint given the existence of other statutory mechanisms for cooperation among federal, state, and local agencies.
Local enforcement of federal immigration law creates a number of problems. Delegating enforcement to the local level exacerbates the problem of racial profiling due to state and local officers’ relative unfamiliarity with proper immigration enforcement techniques. Senator Harry Reid, among others, has expressed this concern, as well as the fear that local enforce-
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ment of immigration law may result in decreased public safety due to the diversion of police resources away from criminal law enforcement and the reluctance of some immigrants to report crimes to and cooperate with police.[53] Houston Police Chief Harold Hurtt has said that the increased responsibility of such enforcement would “stretch our manpower to the point where we could not provide the services that citizens expect from us.”[54] Recognizing that these concerns are not merely theoretical, some police agencies have resisted calls to assume enforcement responsibilities under the INA.[55]
As a matter of statutory interpretation, it is unclear whether the INA grants state and local agencies the inherent authority to enforce the civil provisions of federal immigration law. There is no question that state and local police can enforce select criminal provisions of the INA, since such authorization is clearly provided for in the text of the Act.[56] Likewise, no one disputes that state and local agencies can enter into agreements with ICE, known as Memoranda of Understanding (MOUs), whereby state and local officers receive training from ICE in return for limited authority to enforce the INA. This limited grant of power is known as 287(g) authority.[57]
Reasonable minds have disagreed as to whether the local agencies that have not pursued 287(g) authority nevertheless have inherent authority to enforce the civil provisions of the INA.[58] Despite the exaggerated claims
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on both sides of the debate, it is unclear whether the INA grants state and local agencies this inherent authority. As recently as 1996, the Department of Justice Office of Legal Counsel (OLC) took the position that state and local agencies have no authority to make arrests on suspicion of civil immigration violations.[59] However, after the passage of the Illegal Immigration Reform and Responsibility Act of 1996 (IIRIRA)[60] and the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA),[61] the OLC withdrew this opinion, leaving the state of the law murky. The current debate centers on the ambiguous effects of these Acts, particularly INA 287(g) and 8 U.S.C. § 1252(c).[62]
Both 287(g) and 8 U.S.C 1252(c) can plausibly be read either to preempt inherent authority or to confirm inherent authority. On one hand, certain sections of 287(g) make no sense unless they are understood as precluding inherent authority.[63] 287(g)(1), (2), and (3), which govern the train-
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ing and selection of state or local officers for enforcement of federal immigration laws, are most logically understood as conditions on a grant of limited enforcement authority. If state and local agencies had preexisting inherent authority to enforce immigration laws willy-nilly, without any training or oversight, then these sections imposing constraints on enforcement authority would be rendered meaningless. On the other hand, the plain language of 287(g)(10), a savings-clause that reiterates, in broad terms, the authority of state and local officers to cooperate with the Attorney General in immigration matters, seems to militate for the opposite conclusion, although this result is not inexorable.[64]
Likewise, 8 U.S.C. 1252(c) could be read either as an express authorization for local officers to make certain arrests that implicitly limits their general authority, or, alternatively, as an attempt by Congress to increase local enforcement of immigration law that would be perverted by an interpretation that understood it to preclude general inherent authority.[65]
Against the background of this legal uncertainty, the “Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005” (H.R. 4437), which recently passed in the House, purports to “affirm” the “in-
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herent authority” of state and local agencies to enforce immigration law [emphasis added].[66] For the House to label this provision an “affirmation” of such authority seems disingenuous given the unclear state of existing law on this question. More disturbing however, is the fact that this so-called “affirmation” of inherent authority could exacerbate the flaws endemic to the local enforcement of immigration law, including decreased cooperation between police and immigrant communities, diversion of scarce crime-fighting resources, and the inevitability of racial profiling. The current 287(g) certification process is relatively narrowly tailored and attempts to mitigate these flaws by providing specialized training in immigration law to anyone who will assume enforcement responsibilities.[67] In a major step backwards, the broad grant of inherent authority contained in H.R. 4437 § 220 contains no such corresponding safeguards. While the limited authority granted under current 287(g) process is not an ideal policy, it is at least preferable to the broad and unsupervised power that Congress is poised to bestow upon untrained law enforcement officers.
Given the legal ambiguity concerning the question of state and local agencies’ immigration enforcement power, perhaps it would be a good thing for Congress to make its intent clear. Unfortunately, H.R. 4437 § 220 would settle the debate in exactly the wrong way, affirming inherent authority and encouraging untrained state and local officers to freelance as immigration enforcers.[68] Unlike ICE’s 287(g) program, which provides certifica-tion only to officers who complete a course in immigration enforcement that covers “immigration law, civil rights, intercultural relations, and the
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issues and illegalities surrounding racial profiling,”[69] H.R. 4437 contains no mandatory training provision. Rather, it contemplates arming local enforcement officers only with “pocket guides” on immigration enforcement for “quick reference . . . in the course of duty,”[70] a concept almost laughable to any student of the complexities of immigration law. And while H.R. 4437 purports to require the Secretary of Homeland Security to provide training to state and local officers,[71] the training would not be a mandatory condition on the grant of authority, and there are no guarantees as to how extensive such training would be.
The policy consequences of H.R. 4437’s so-called affirmance of inherent authority could be disastrous. It could lead to even greater diversion of scarce law enforcement resources, reduced immigrant cooperation with police, decreased rather than increased counterterrorism capability, and increased racial profiling. To truly improve the state of immigration enforcement, Congress should repeal 287(g) and declare enforcement of the INA’s civil provisions to be an exclusively federal responsibility. It should then increase funding for ICE in combination with comprehensive immigration reform that would provide for increased legal transnational labor flows and an eventual path to legal status for those undocumented persons already present in the United States. In the absence of such action, Congress should, at the very least, keep current 287(g) programs in place and insist that ICE provide high-quality certification programs that will simultaneously accommodate the goals of increased security and respect for civil rights. Unfortunately, as this goes to publication Congress seems poised to adopt the worst solution.
Norma Dominguez: I am a second-year student at the Kennedy School of Government. I have worked with a few other students from the Kennedy School and the Law School, including José Rodriguez, to put together a panel on an issue that we are all very interested in: wealth development.
I will leave the description to our moderator, Rafael Lopez. Mr. Lopez is a mid-career student at the Kennedy School of Government, and a wonderful resource for those of us who are studying at the Kennedy School. Prior to attending the Kennedy School, he was the founding executive
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director of First Five of Santa Cruz County.[72] He was also the youngest elected member of the City Council of Watsonville, California. He brings a wealth of knowledge and experience and we are grateful to him for moderating this panel.
Rafael Lopez: This is going to be an interesting panel. I am especially glad to participate because I have observed the importance of wealth-creation issues firsthand, both in my elected role and in my role in the nonprofit sector.
As an elected official, I represented a council district that was formed from a MALDEF lawsuit, Gomez v. City of Watsonville.[73] I won that council seat on the ten-year anniversary of that lawsuit. The most important thing about that district is its constituency. That particular district is the poorest neighborhood not only in Watsonville, but also in all of Santa Cruz County.
The people of my district are mostly Latino. Historically, that particular district has been a home to various immigrant groups. For each immigrant community, one of the primary issues that had to be dealt with was the issue of asset building and wealth development. Often, these people worked very hard but were unable to cultivate the assets they needed to purchase a home or adequately provide for their children. I will tell you one quick story.
My mother, who came to this country in the 1960s with my grandfather as part of the Bracero Program,[74] retired a couple of years ago. She had worked in the fields, canneries, kitchens, and other similar jobs. At the time she retired, she was excited because she retired making $7.25 an hour. This was two years ago. It was the most she had ever made in her life. I know that a version of this story exists within many Latino families. It is, however, one of the things that we are often embarrassed to talk about. There is a lot of shame for neighbors, families, or communities that do not have a lot of physical assets.
This panel was organized to foster an open and active conversation about this issue. As the Latino population continues to grow nationally, what are we going to do as Latinos to create wealth in our communities? How will we be able to purchase homes and create legacies, financial and otherwise, to pass on to future generations? We want to address these issues so that the story that we tell to our children and grandchildren is not the
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same one that my mother had to tell after decades and decades of back-breaking work, where she was finally able to make $7.25 an hour.
With that, I would like to introduce today’s distinguished panel. We have with us Michael Barrera, who is the national ombudsman for the Small Business Administration (SBA)[75] and was appointed by George W. Bush. His second day of work was September 11, 2001. Mention of that ominous date should indicate the kinds of challenges he has faced in his role in the Bush Administration.
I would like to highlight one part of his curriculum vitae. Prior to his appointment, Mr. Barrera was an attorney in Kansas City. He did a lot of work at the local level, which afforded him a unique perspective that he brings to his role as a national official. His insights are an asset to this panel.
Our second panelist, Jordana Barton, is also one of my colleagues in the mid-career program at the Kennedy School. Ms. Barton has worked extensively in Texas, where her experiences in wealth development range from the grassroots level to academia. She most recently served as assistant director of the Latino Financial Issues Program at the University of Texas at Austin.
Our third panelist, Evelyn Friedman, is the executive director of Nuestra Comunidad Development Corporation.[76] She works with several Boston-area communities, including Roxbury, Dorchester, and Jamaica Plain. Ms. Friedman is a wonderful example of what it means to work day-to-day in a community where asset building and wealth development are major issues. Her work is something that many Bostonians, particularly those in the Latino community, appreciate.
I will now welcome the panelists. They have each agreed to give a brief overview of their relevant experiences regarding the complex issues of financial assets and wealth building in the Latino community.
Michael Barrera: As Rafael mentioned, my job title is “national ombudsman.” Very few of you probably know what that is. As the national ombudsman, I travel throughout the country conducting small-business hearings. I have been to forty-four states in the last three years. At these hearings, businesses tell me about their interactions with various federal agencies.
My role is that of a liaison, or troubleshooter, between small businesses and federal agencies. It has been a great experience. Hearing the stories of these small businesses and their owners has taught me about the roles these enterprises play in the communities and the challenges that they face.
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The subject of wealth creation is particularly significant for the Latino community. As we all know, the Hispanic community is the fastest-growing ethnic group in the United States. Many predict that by 2050, one out of every four people will be Hispanic.[77] I personally think that this will happen before 2050. We are already the largest minority group, although that was not expected to happen until several years from now.
Therefore, it is extremely important that the Latino community understand what it means to create wealth, not just for our community, but for the whole country. If a quarter of the population will be composed of Latinos, our community needs to know how to create wealth in order for this country to prosper. So, at the risk of sounding Pollyanna-ish, it really is our patriotic duty to know how to create wealth.
When you think about wealth, you have to think not only about today, but also about tomorrow. I am going to digress just for a moment and use Social Security to illustrate this point. The current problem with Social Security began several years ago. In 1950, there were sixteen people working for each person retiring. Today, there are 3.3 people employed for each retiree.[78]
Three years from now, the first of 79 million baby boomers will retire. In 2018, there will be more money going out than money coming in. By 2042, the system will go bankrupt. These are not Democratic numbers. These are not Republican numbers. These are numbers that no one really disputes.
The President’s top priority is to initiate a conversation about Social Security. Why is this important to the Hispanic community? Because, for a third of our nation’s elderly, particularly those who are not well-off, Social Security is their primary source of income when they retire.
Right now, Latinos are the youngest growing community. Social Security will be problematic for those who will retire forty years from now. When that happens, as the youngest community, Latinos will play an important role in providing funds to pay for retiree benefits. Therefore, it is important that we think about what is going to happen with Social Security.
Similarly, effective wealth-building strategies require consideration of the bigger picture. When we talk about wealth, it is important to realize that the government does not create wealth. People create wealth. All that the government can do is create an environment in which people can create wealth.
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I have had several mentors in my life, including my father. My father had a good friend, Hector Barreto, who founded the United States Hispanic Chamber of Commerce.
Hector used to talk about the “triangle of power.” The triangle of power is economic power, educational power, and political power. You need all three of these to prosper. He would say to me, “Mike, if I had my choice, if they made me choose one, I would take economic power. Because if you have economic power, you can buy the other two.”
He said that jokingly, but there is a lot of truth in his message. You have to have economic power to prosper. Therefore, it is important that we do what we can to learn about wealth creation. When I think about economic power and creating wealth, I think of two things: investment and ownership. You have to be able to invest in something that will increase in value, like a home. In contrast, you do not “invest” in a car; you buy a car. There are other things, but investment and ownership are two of the most important.
We have already mentioned the problem of poverty. My grandfather came from Mexico. My dad grew up as one of fourteen children, and he and his family lived in railroad cars. My father was very proud of that. He used to say, “Mike, it doesn’t matter where you start, it matters where you end.” My family started poor, but my grandfather worked hard. He bought several homes, rehabbed them, and then rented them. He let the money make more money. He did not work for money; he let the money work for him. That is an important lesson.
Moving on, I am now going to talk briefly about small businesses. That, after all, is my area of expertise. Right now there are twenty-five million small businesses. These businesses employ fifty-one percent of the private work force. Small business creates three-fourths of new net jobs.[79] Three million jobs have been created over the last twenty-two months, two million of those by small business. Therefore, it is crucial that small businesses prosper.
Many people, when they think about trying to develop cities, think about bringing in the big corporations. That is important, but you should also focus on small business because you never know when a small business will become a big business. Compaq, Albert Edmonds Shoes, Nike, and AOL all received assistance from the SBA.
When small businesses do well, they create jobs. When a small business becomes a big business, it does business with other small businesses. This is why it is so important that people learn how to effectively run small businesses, because they can create both jobs and wealth.
The SBA does its part to help these companies. Last year we gave out eighty thousand loans to small businesses. The amount of money loaned to Hispanic businesses has grown forty-six percent over the last three years,
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and the number of loans that we have given to Hispanic businesses has grown by over sixty percent.
The Hispanic Chamber of Commerce estimates that there are about two million Hispanic businesses, and it predicts that this number will double every five years. The fastest-growing segment of that group is Latina-owned businesses.
As you can see, things are going very well and change is occurring. It is so important to be aware of these issues. The SBA website is a good source of information.[80]
In closing, I would like to emphasize one final point: Latinos need to do business with each other. There are some statistics out there that in the Asian communities and in the Jewish communities, a dollar bill will pass anywhere from eight to ten times. In the Latino community, it only passes one or two times. We must do business with each other to grow wealth within the community.
We still need to demand the same quality and the same service, because it is still about business. If, however, we can do business with each other, that makes a big difference.
Jordana Barton: I am an MPA student at the Kennedy School of Government. I am from Benavides, Texas, and currently serve as the executive director of the Latino Financial Issues Program (LFIP).[81] It is exciting to be on this panel because the purpose of the LFIP is to work with the various sectors represented here: government, industry, and community-based organizations.
Michael touched on something very important: the triangle of economic, educational and political power. In Latino studies, we talk about education and we talk about culture. We have not, however, connected these issues to wealth and asset building in the Latino community, business development, access to health care, and strong families. We are attempting to create such connections. The work has already begun.
I am here today to provide demographic and financial information about the Latino community. Michael touched on this topic, and I will go into a little more depth. I will also discuss the LFIP and explain how we envision addressing certain challenges.
I begin with some figures for the Latino population. There are approximately 40 million Latinos in the United States. Thirty percent of the Latino population is under eighteen.[82] These numbers become very important with regard to Social Security, marketing, and training young people in
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financial literacy. By 2020, Hispanics will make up nearly twenty percent of the U.S. population.[83] The point is that Latinos will exert greater and greater influence on the economy over time. More importantly, young Latinos will soon be moving into their prime earning years and will dramatically impact the U.S. economy.
Looking at net worth and access to banks, there is a dramatic difference between median net worth among Latinos and median net worth among white Americans.[84] In 2001, Latinos had just one-tenth the median net worth of white Americans. And Latinos are more likely to be unbanked; that is, to not have access to financial services, than any other ethnic group. A study found that 50% of Hispanic households had no deposit account. By comparison, 29% of black households and 7% of white households were considered unbanked. Latinos have longstanding suspicions about banking. Some of you have probably observed this phenomenon, which tends to pass from generation to generation.
Let us consider another measure of Latino wealth and assets. In 2003, the average family income for Latinos was $44,000, compared to $73,000 for Anglos.[85] Latinos have just sixty percent of the average family income that Anglos do. But that is not the whole story. Even with an average family income of $44,000, very little of that income translates into net worth, savings, and investment. These statistics confirm that Latinos lag behind on many significant measures of income, wealth, and access to financial services.
Now, let us examine one of the primary indicators of asset accumulation. In 2000, 48% of Latinos owned their own homes. African Americans have roughly the same rate, and Anglos had a home ownership rate of 73%.[86] But what these numbers do not show is that the average value of the Latino home is worth just half of what the white home is worth. The average value is about $47,000 compared to $113,000.[87]
In certain areas of the country, like the Texas-Mexico border, you have almost ninety percent home ownership. The homes, however, are not val-
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ued as highly as in other areas. Of course, these homes are very important to the families that own them. But these families do not have the kind of wealth that readily translates into, for example, access to education.
There is a bright side to these dim facts. In 2002, total Latino consumer spending reached over $530 billion, about eighty percent of the U.S. average. Projected rates of growth over the next eighteen years are also high. These numbers suggest that the growing Latino population will be a significant factor in the U.S. economy because companies want to attract the Latino market.
But Latinos should not spend blindly. The Latino community needs to acquire financial literacy so it can avoid unproductive consumer habits such as relying on predatory lending to finance consumption. Latinos have the market power to hold banks accountable and force them to meet the needs of the Latino community. Citizen’s Bank in Boston has a program targeted specifically at the Latino community. Citizen’s Bank has benefited from the thirty million dollars in annual remittances to Latin America that have been generated by serving the needs of some of America’s poorest immigrants. Citizen’s Bank said, “Instead of sending through Western Union for fourteen dollars, you can send through us for ten.” Wells Fargo and the Matricula Consular have also joined this profitable market. We need to encourage banks and other businesses to adjust to the members of the Latino community as both consumers and as economic partners. These businesses can make a lot of money by serving the Latino community, and should therefore participate in creating an ownership society among Latinos in order to foster loyalty and enable long-standing economic relationships.
I will speak briefly about the ownership society that the Bush administration often describes, because creating such a society among the Latino community is the purpose of the Latino Financial Issues Program. How do we create this ownership society that so many believe is important to long-term economic success? LFIP seeks to remove the obstacles to this ownership society by educating Latino undergraduates and grooming them for careers. We emphasize financial literacy since many of these students are the first generation in their families to go to college. We try to create leaders to continue the work of community-based organizations. We want our beneficiaries to develop the sophistication to work comfortably with both Wall Street bankers and government officials, as well as with grass- roots organizations.
We partner with community-based organizations and try to improve their capacity to serve the community. In other words, we are not going to reinvent the wheel. We want to serve by enhancing the efforts of others already on the ground. We want our students to gain hands-on experience serving their communities. We want to change the way wealth is talked about in this country, and do pragmatic research for the benefit of community-based organizations. These organizations need to conduct sophis-
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ticated impact analysis in order to obtain funding from foundations, the government, and individual donors. We want to strengthen and amplify the existing efforts of these community-based organizations.
Ours is a multi-sector approach to creating an ownership society. Our students are spending eight thousand hours to take a pilot program to the national level. The pilot program will expand LFIP to universities throughout the country. These groups will partner with community-based organizations and other entities that emphasize wealth and asset building.
Evelyn Friedman: I am going to talk about Nuestra Comunidad Development Corporation, which is a Community Development Corporation (CDC), a nonprofit right here in Boston.[88] The people we serve are at the low end of the financial spectrum. Nuestra is in Roxbury, which is the lowest-income community in Boston. It is a community that has experienced a lot of devastation and disinvestment. When I first started working at Nuestra, there was more vacant land than there was housing in Roxbury because the buildings had burned down or fallen down. Over time, however, that has begun to change.
One of the things that the community is dealing with is the beginning of gentrification. The community is not the same as it used to be, but most still view the residents as the same folks: Latinos, African Americans, and a smattering of others. From the outside, people still think of the community as Puerto Rican or African American, when in fact the community has become much more diverse. We all have to address the fact that not everybody is Puerto Rican or Mexican. Neither are they necessarily African American. Even if they are black, they may be from the Caribbean islands or Africa.
Nuestra was started twenty-two years ago by a Social Service agency called Alianza Hispana.[89] At that time, Nelson Merced was the executive director. He went on to become the first Latino state legislator in Massachusetts. He now works for a national neighborhood reinvestment agency that supports CDCs. Since he saw some problems with housing, he decided to create an agency to become a receiver of property near their offices. They acquired and developed the property until they realized that they did not know anything about development. They then created Nuestra Comunidad. We currently own about one thousand units of housing and rental housing, and we own about sixty or seventy thousand square feet of commercial space. All of our property is for low- and moderate-income people, with some commercial space available for small businesses. In fact, we do not have any credit tenants. Credit tenants are tenants with a lot of credit, like a Starbucks.
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We perform several asset-building functions. Besides providing affordable housing in the rental market, we also provide a lot of owner-occupied housing. We do this in two ways. First, we take a property that costs us about $200,000 or $300,000 to build and we sell for about $150,000. This lets a family that is making $44,000 a year actually acquire a house.
We also have a home ownership program that provides loans and technical assistance to people purchasing homes. We offer financial literacy training so that people can understand what banking is about and what to look for in a loan. We also provide two kinds of loans: acquisition loans for up to one hundred percent financing for people who want to buy homes in the area, and second mortgages for people who want to rehabilitate their homes.
Why do we do that? Why do banks not do it? Banks do provide mortgages generally, but not for this segment of the population. Banks do not give loans to people who are low-income or of modest means who need to finance one hundred percent of a mortgage. Presently, banks are not willing to absorb that kind of risk. We hope that over time, however, banks will see that this is a good market for them. Why do we want that? Because banks have a lot more money than Nuestra.
We also provide second mortgages for rehabilitation purposes. Most of these folks do not have enough equity in their homes to get a home equity loan to rehabilitate their houses or to pay off debt. We are able to do that for them.
We also have a small business program. We provide loans, training programs, and technical assistance to small businesses. We have a couple of “business incubators.” One is a pushcart program where we lease pushcarts to people and provide them with technical assistance. People can purchase their own materials for $200–$500 or so, and can then sell and learn about business and marketing with very little risk.
We also have an auto mall. That sounds a little strange. But the year we started that project, seventy-seven small businesses had been closed by the Inspectional Services Department (ISD) in the city of Boston for failure to dispose of their materials properly or for other code violations. Each of these small businesses employed four or five people, including the owner. It was a tragedy that they were going out of business.
Most of these business people were not native English speakers. In order to support these businesses, we developed an old neighborhood garage so that five or six businesses could rent space affordably and properly dispose of all their oils and so forth. Some of those businesses eventually moved out into larger spaces because we became too small for them. They have now bought their own spaces and have expanded their businesses.
The third incubator that we have right now is a commercial kitchen. A lot of small business people want to be in the food industry, because it
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is an easy industry to get started in, or at least they think so. People want to eat their own food, and they want to sell it to other people. But it is very expensive to equip a certified commercial kitchen. So we have a commercial kitchen where we rent space by the hour to caterers and specialty food producers. We also provide them with technical assistance, marketing, and a variety of other support services. Some of those specialty food producers are now slowly getting their products into Whole Foods Market, or Harvest Co-op here in Cambridge, as well as other markets. The incubator has allowed them to sell their products and grow their businesses without much overhead.
I want to talk about some of the other things that Nuestra is doing, so that you can understand how a community-based organization can help businesses. The first is a grocery store that we helped to secure financing. It was a small Latino-owned grocery store in our neighborhood that was paying about twenty-three percent interest to a loan shark. We helped the owner refinance with an intermediary lender, a non-institutional lender that gets its funding from the SBA or other places. The owner did not have a bank account. He did not have a lot of the things lenders usually want to see. But we were able to work with him, and with Nuestra’s support he was able to get through the refinancing process. In the end, we helped him secure a loan at a rate of about ten percent.
Just by refinancing, he was able to fix up his shop and improve his business significantly. He was able to really change his whole business environment. Two years went by, and we helped him refinance again, this time with a bank, at around a 7.5% interest rate. In addition to the loan, he was able to get a line of credit from the bank so that he could acquire more materials and things that he needed for his business. He was also able to send his kid to private school and buy a house.
Another way that we have helped small businesses is by providing loans directly. For example, we do a lot of construction loans. We gave a contractor a $15,000 loan so that he could buy a truck. Then, his business grew a little, and he needed to increase his bonding. We worked with him and his bonding company so that he could do a $650,000 project for us. Today, just about ten years later, this businessperson from our community is doing multi-million dollar projects because he was able to get loans and support from a small organization like ours.
Finally, we try to do partnerships in some cases where we really feel that it works for both of us. The first one that we did was with a business called Meringue Restaurant, which is on Blue Hill Avenue in Roxbury. Meringue was a small business. They only had five tables, but they had done a lot of Meals-on-Wheels programs, providing Latino meals in the city of Boston. The catering part of their business was growing, but they could not fit their catering business and their restaurant business in one kitchen. They wanted to move out of the neighborhood because they could not find a place in the neighborhood that could accommodate both sides
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of the house. But we did not want them to leave because it was the only sit-down restaurant in the whole neighborhood.
So we acquired a property next door and we built a new restaurant with the owner, Hector Pena. Mr. Pena and Nuestra Comunidad are partners in ownership of the building. He has now about a forty-seat restaurant that has become a gathering place for all the folks from the neighborhood, including the Latino baseball players. He has pictures of them all over his walls. It is a wonderful place. And this businessperson is gaining equity in the property because he is a part-owner of the building. Over time, the plan is for him to buy us out so that he will be the sole owner. And when he does that, he is going to have additional equity so that he can do other business ventures or whatever he would like to do.
Audience Member: I am a Masters in Public Policy student at the Kennedy School. I want to know if there is a big picture strategy. I see the problem of wealth creation in our community as multi-faceted. It includes the fact that we do not have immigration reform and we cannot get a minimum wage raise in this country. Our youth are not being well-educated in our public schools and we do not have access to financial education.
We also need to be better-educated about our attitudes toward spending, debt and investment. These problems obviously require action from a lot of different stakeholders from the private sector, government and nonprofits. But, is this happening? Is there a coalition of groups talking? Do they have a strategy? How can we as students become involved?
Ms. Barton: I can address that. In fact, that is the very purpose of creating this national Latino Financial Issues Program, in partnership with the National Association of Latino Community Asset Builders.[90] The Bush administration has presented us with a challenge: how are we going to create an ownership society?[91] We want to take responsibility for that. It is not about somebody saying, “What do you need? Where can I help?” It is about saying, “This is who we are, this is what we need and this is how we are going to coordinate it.” So it is about changing the whole dialogue in this country, about how people talk about poverty.
We must make people recognize that the “bottom of the pyramid” is an amazing market and has amazing potential. Many female small business owners started on the Texas-Mexico border, through micro-enterprise and the work of some of the Community Development Corporations there.
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It is, more specifically, the National Association of Latino Community Asset Builders, along with the Latino Financial Issues Program. When we talk about the sectors, nobody talks about the universities; they are somewhat irrelevant. But those faculty and those students have a service to provide and the community can greatly enrich the curriculum of the university.
So we are sending students into the communities and the communities are coming in to teach. Earlier, I just glossed over what the LFIP program does. The first semester, the students get financial literacy training and gain an understanding of where the Latino community is. The second semester is all taught by the Community Development Corporations: the community development of financial institutions, major Latino bankers in this country, the Securities and Exchange Commissioners, and so forth.
Representatives from many sectors come in to teach the students and do workshops with them. In the process, the students learn about the work and the kinds of people that need to get together to make a coordinated change. How do you change the way this issue is talked about in this country? How do you make a coordinated effort and join the right people together? That is what the Latino Financial Issues Program and the National Association of Latino Community Asset Builders are all about.
This program was founded by, among others, Claudia Guerrero of the Rural Development and Finance Corporation,[92] an amazing woman. She was one of the Fannie Mae Foundation’s Johnson fellows and was instrumental in creating affordable housing along with Pete Garcia from Chicanos Por La Causa[93] and others. We know that as a university, we have this human power of students who want this information, who have not thought of how they can not only do well in business, but also serve the community.
Mr. Barrera: I think you ask a great question. But as with any program, there must be a way to deliver it. We can have a great national policy, but if there is no delivery aspect to it, it will not be effective. I think the fact that you came here and asked that question is very important, because we have to start a national conversation. A lot of people say to me as I travel, “Well, why doesn’t the government do this? Why doesn’t the government do that?” What I have learned in my three years working in the government is to be careful what you ask the government to do, because they may do it. Good intentions may have unintended consequences. I think it is important that, like the universities and the busi-
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nesses themselves, you as students go out there and do it. I think a local politician here once said, “Politics is local.” Having a national policy is important. But the national policy discussion on issues you mentioned, such as immigration and finance, really has to start in the local communities. We cannot rely on any one entity to do it.
Here is an example: when I was an attorney, I had a client from Peru. We were able to get a settlement check for him in the amount of $40,000. Rather than putting the money in a bank, he cashed it. We simply have too many people who believe in what I call the “Mattress Banking System.” They take the money and put it under their mattresses. That really does have to change. People must build their credit history in order to start getting investments. It really takes a lot to go back and educate people one by one.
Ms. Friedman: I think that the fact of the matter is that it is very difficult. It is very difficult to get people across disciplines to work together even though everybody wants to do it, and even though everyone sees the need to do it.
I was at a presentation in this very university where we were talking about housing. I asked one of the professors there a question about economic development. He said, “I don’t know the answer to that question, because we do housing.” So I think you asked the right question. One of the things that we need to do is to think across disciplines, which is very challenging. But I think if we can do it, we will definitely be much stronger.
Mr. Barrera: I think Evelyn will tell you that it is difficult just getting Puerto Ricans and Mexicans and Cubans to work with one another. Even coming from the Mexican community, getting Mexicans to work with other Mexicans is sometimes difficult. We must be willing to start working with each other across those different disciplines.
Norma Diaz: The story you shared, Ms. Friedman, about the gentleman who was able to cut his interest rate and what that helped him accomplish reminds me of Mr. Barrera’s narrative about making your money work for you. Growing up, we were told, “Go to school, and work hard for your money.” What can financial institutions do, or what do we need to do as a community, to get that narrative engrained in us?
Aside from savings accounts, which are the lowest-paying cash accounts out there, I do not feel that the community is investing in other types of assets, such as mutual funds. Aside from home investment, what else needs to happen for us to change that narrative to make those assets accumulate? I feel like that conversation is not happening. So what can financial institutions do, or what kinds of products need to be out there, so that our community really makes our money work for us, instead of the other way around?
Mr. Barrera: I think there are a few things we can do. For one thing, we must become bankers ourselves. People even form investment clubs to make investing fun. A lot of people are afraid of money because they
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are afraid of losing it rather than making it. I think that happens to many of us; I grew up that way.
My father said, “Get that job; make sure you get that insurance.” Getting a job is important, but if you look at entrepreneurs, they are not afraid of losing money. Although you have to be smart with it, we have to want to make it more than we fear losing it. I think that really is a lot of it, and so I think we start changing. It is really just a cultural change, and we’re going to learn that. I think we can always learn; it is just a matter of not being afraid.
Ms. Friedman: I just want to make one comment. Citizen’s Bank is important. Banks have interests. What we have to do is figure out what those interests are and how to capitalize on them. This remittance thing is huge, not just for the Latino community, but for other communities of immigrants. The banks are desperate to figure out how to break into that, and we can use that as leverage for something else that we want.
Audience Member: What are we doing to help the small businesses build beyond the communities? I think that if you just focus on serving the small communities, there is a limit to wealth development. With increased competition, you might even argue that everybody will earn less. So to what degree is your organization or others helping communities expand? And, given the fact that most of the business owners might be immigrants, is it going to be a question of language skills, or a lack of education that limits growth beyond the communities where they were born and started to serve?
Ms. Friedman: I would say that not speaking English as a first language is not really the problem. But I mention that because, for example, Boston is home to mostly white-collar kinds of industry. Those employers tend to want people who speak and write well in English. So the challenge is, if you are not in that group, how do you support businesses? You are absolutely right; one of the big challenges is how to get people beyond the neighborhood borders, beyond their rural community.
For example, one thing we do with the pushcarts is that we have stations in Boston’s Downtown Crossing where we help with marketing. The food industry is great for that because right now ethnic foods are very “in.” We also get people into new venues. For instance, if we have a reception and we invite bankers to it, we have our small businesses cater the function. The bankers pick up the cards and pamphlets from these businesses and then hire them for later events. So those kinds of marketing efforts help, but you are absolutely right, that is a big challenge.
Audience Member: I think you mentioned, Mr. Barrera, that we need to change the cultural acceptance of finance, or expand the degree to which we incorporate it into our everyday family life. But I would venture to say that I think that the Latino culture may embody this already. I just think the mechanism by which we engage in economic activ-
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ity or take advantage of financial opportunities is not standardized and is not economically regulated.
One really good example: In Texas, near the borders, there is a lot of participation in tandas, in the rotating credit associations.[94] So we know that people are saving money and we know that people are spending money. These activities are happening within the communities, but not within the traditional banking structure. So the extent to which we are involved in the traditional financial system is what needs to change. I would not say that it is not within our culture or not a part of an ethic that we already embody.
My question relates to how we are going to change from a government perspective to a strictly ownership society. The federal government has facilitated opportunities for middle- and upper-income families to build wealth and assets in this country through home mortgage interest rate deductions and programs like Social Security. That is a large part of the reason why middle- and upper-income families have the assets that they have.
That has not happened with low-income families, because, as you mentioned, either they do not own a home or they have insufficient equity built up. So how are we going to use federal programs and the work that we are doing to really change paradigms completely to recognize that low-income families also need to build assets and wealth? What can the federal government do to facilitate those opportunities?
Mr. Barrera: That is a good question. I did not mean to disparage when I said, “among our culture,” but you saw the statistic. Fifty percent of Latinos do not have bank accounts, and that is significant.
The SBA is going to facilitate $16 billion in loans this year. We do not give out the money; we guarantee it. A lot of loan programs are not like that. So anyone who applies for a loan has to have the proper credit scores; they have to have a good financial history. As the government, we cannot make people put money in banks. I think, however, that there was a good point raised earlier that what is going to happen, and what we are already seeing a lot more of, is that businesses are going to get smart about it. When I was in nonprofit, we used to go to corporations or banks and say, “You should give us money, because it is the right thing to do.”
This is no longer the approach of nonprofit organizations. Now they say, “You should do business with us because it is the smart business thing to do.” That is what we are starting to see a lot more of because government resources, believe it or not, are shrinking. The budgets of all the federal agencies right now are very small except for Homeland Security and
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Defense. Even the SBA’s budget was reduced. Most agencies are undergoing cuts, so we are going to have to develop new strategies and actually use the private sector to start helping businesses.
When people actually gain that ownership, that is good business for them. When banks realize that there is such a great market out there and that this market is where they are going to get their future profits, that is going to have a lot to do with it. Now, what we as government agencies need to do is to get that education out there as best as we can. Not only the federal government, but also state and local officials need to get that out there. But you are right, we have to be out there talking to folks like you, to find out where we are.
What I have noticed in D.C. is that people there think they know it all for everybody. It is very paternalistic. So it is very important that we get out of D.C. and talk to people in the middle of Kansas City, for example. Different areas have different needs and we have to get out there, talk to them, and find out what solutions the government can provide to make things better and easier for low-income families.
Pablo Ormachea[∗]
The United States government should promote asset building among demographic groups that have traditionally earned and saved significantly less than the rest of American society. These groups are in an especially precarious position in the face of unexpected medical emergencies, impending retirement, and any other change in financial circumstances. Unfortunately, the Bush Administration and Congress have a long way to go. America’s largest minority group, Latinos, earns a median household income of $34,241, which is 43% lower than that of their white counterparts and 30% lower than the general national median.[95] In addition, one in four American Latinos lives at or below the poverty level. In 2000, Latinos numbered 35,622,000, constituting 12.6% of the population. By 2050, this demographic will almost triple (102,560,000) and nearly double as a percentage (24.4%).[96]
The United States must invest in its people to maintain its position as an economic superpower. The United States cannot afford to allow a large percentage of the rapidly expanding Latino population to continue living
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from paycheck to paycheck. Government disregard of this issue could result in unsustainable private and public savings deficits precipitated by the costs of an aging population made up of individuals who never received the education or wherewithal to invest in their own future. A panel of experts recently congregated at the Harvard Kennedy School of Government all agreed that by incentivizing home ownership and small business entrepreneurship, the United States could go a long way toward achieving this essential goal of fostering asset-building among American Latinos.
Small businesses play a vital role in the American economy. The approximately 22.9 million small businesses that existed in 2002 employed about 50.1% of the private workforce and represented 97% of all U.S. exporters.[97] By fostering small business in any segment of the population, the government could increase the number of employers. Small businesses already contribute three-fourths of all new jobs created.[98] The Global Entrepreneurship Monitor has also found a strong correlation between national economic growth and the level of entrepreneurship in prior years.[99] The United States should use a variety of tools to stimulate this key engine of the economy.
The panelists focused on one particular proposal that some believe will accomplish the desired growth in small businesses: low- or no-interest loans, offered either through the government or through charitable organizations. Increasing access to investment capital, whether in a home or in a small business, has indeed proven effective in building assets among lower-income families. There are, however, other equally beneficial programs that would only require a small financial commitment by the government. For example, heavily subsidized English classes would greatly promote investment among Latinos, as there is a strong correlation between English skills and financial literacy. Hispanic families that are more comfortable with English have a strong tendency to be more financially secure, with 79% having a bank account, 70% owning their own homes, and 66% working in white-collar jobs.[100] In contrast, only about half of Spanish-dominant families have bank accounts, only 50% own their own homes, and 74% work in blue-collar positions.[101] Helping Latinos improve their English, already a goal for many immigrant families, could lead them from “mattress banks” to investment accounts and drive them toward greater financial
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stability and home ownership. Moreover, bilingual fluency significantly expands the economic reach of sole proprietors by allowing them to serve both English and Spanish markets.
Another often-overlooked proposal to help small businesses survive involves removing the $0 floor on the Adjusted Gross Income (AGI) on the 1040 tax form. By an unfortunate quirk in the tax code, a less successful sole proprietor is frequently taxed at a higher rate on net income than he or she would be if the income had instead been a salary, looking at what the self-employed must file—among other things, the standard 1040 (or 1040A) and a 1040SE. On the SE, the self-employed who earns a net income between $400 and $90,000 pays taxes at 15.3%. The proprietor is awarded a deduction of half their self-employment income, but because all deductions and adjustments on the 1040 are taken out before adding in the self employment tax, any family who would have had an AGI in the negative were it not for the $0 floor pays the flat 15.3% tax rate on their entire income (assuming it is all from the self-employed business). It is the low-income family that most needs those exemptions or deductions who gets hit with the floor, paying 15.3% instead of the 0% often paid by the lowest-income families.
Congress permits salaried employees to deduct expenses such as health account savings, student loan interest, and tuition and fees. Why not grant this same benefit to the self-employed? Currently, the government fails to provide low-income, small business owners with an additional incentive to save money for pre-tax health care. About half of start-up businesses with employees fail within four years, and this increased tax burden makes it that much more difficult for businesses to stay afloat in their turbulent first years.[102]
The benefits of the above-mentioned reforms will enable not only wealth creation among Latinos, but also will expand the dream of financial stability and home ownership to many other Americans. When coordinated with loan programs already available through organizations such as the Small Business Administration and Community Development Corporations such as Boston’s Nuestra Comunidad,[103] these reforms could help elevate Latinos to the income levels enjoyed by the American populace as a whole. With seventy-five percent of new jobs in the economy coming from small businesses,[104] to do otherwise could condemn entire segments of
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society to dependency on financial support from federal or state governments, particularly as the more than eight million Latino baby-boomers begin to retire en masse.[105] If it wishes to avoid such a fate of stagnancy and popular dependence on welfare, the United States must develop this rapidly growing demographic, and thereby ensure its own continued prosperity and economic dominance for decades to come.
Marie Scott: I have had the pleasure of putting together this panel with a lot of help from students at the Graduate School of Education, the Kennedy School, and the Law School. I would like to introduce our moderator, James Montoya. He is the vice president of the College Board. In that role, he manages the SAT and oth