Reparations Are A Welfare Scheme And Would Have No Effect On Racial Wealth Gaps
Authored by William L. Anderson via the Mises Institute,
Since the 1960s, when racial turmoil exploded in the United States, there have been reparations demands, with groups representing black Americans calling for massive wealth transfers from whites and other economically successful ethnic groups to account for black chattel slavery in the US and the policies of Jim Crow. For example, during their heyday in the 1960s, the Black Panthers in 1966 called for a number of measures, including reparations, to bring about what they saw as justice. They included:
We believe that the federal government is responsible and obligated to give every man employment or a guaranteed income. We believe that if the White American businessmen will not give full employment, then the means of production should be taken from the businessmen and placed in the community so that the people of the community can organize and employ all of its people and give a high standard of living.
We believe that this racist government has robbed us, and now we are demanding the overdue debt of forty acres and two mules. Forty acres and two mules were promised 100 years ago as restitution for slave labor and mass murder of Black people. We will accept the payment in currency which will be distributed to our many communities.
Nearly a half-century later, Ta-Nehisi Coates wrote “The Case for Reparations” for The Atlantic in which he chronicled more than a century of racial discrimination for American blacks, looking at the life of one man, Clyde Ross, who spent his early years in Mississippi, where lynchings were common and there was little legal protection for blacks:
When Clyde Ross was still a child, Mississippi authorities claimed his father owed $3,000 in back taxes. The elder Ross could not read. He did not have a lawyer. He did not know anyone at the local courthouse. He could not expect the police to be impartial. Effectively, the Ross family had no way to contest the claim and no protection under the law. The authorities seized the land. They seized the buggy. They took the cows, hogs, and mules. And so for the upkeep of separate but equal, the entire Ross family was reduced to sharecropping.
This was hardly unusual. In 2001, the Associated Press published a three-part investigation into the theft of black-owned land stretching back to the antebellum period. The series documented some 406 victims and 24,000 acres of land valued at tens of millions of dollars. The land was taken through means ranging from legal chicanery to terrorism. “Some of the land taken from black families has become a country club in Virginia,” the AP reported, as well as “oil fields in Mississippi” and “a baseball spring training facility in Florida.”
When Ross moved to Chicago, he and his family had to deal with “redlining” and other discriminatory practices that made home ownership more difficult for blacks than whites. Coates writes:
In Chicago and across the country, whites looking to achieve the American dream could rely on a legitimate credit system backed by the government. Blacks were herded into the sights of unscrupulous lenders who took them for money and for sport. “It was like people who like to go out and shoot lions in Africa. It was the same thrill,” a housing attorney told the historian Beryl Satter in her 2009 book, Family Properties. “The thrill of the chase and the kill.”
Interestingly, Coates does not present any specific plans or programs. Instead, he chronicles the examples of racial discrimination—which are many—and then says the logical outcome should be reparations in one form or another:
Broach the topic of reparations today and a barrage of questions inevitably follows: Who will be paid? How much will they be paid? Who will pay? But if the practicalities, not the justice, of reparations are the true sticking point, there has for some time been the beginnings of a solution. For the past 25 years, Congressman John Conyers Jr., who represents the Detroit area, has marked every session of Congress by introducing a bill calling for a congressional study of slavery and its lingering effects as well as recommendations for “appropriate remedies.”
A country curious about how reparations might actually work has an easy solution in Conyers’s bill, now called HR 40, the Commission to Study Reparation Proposals for African Americans Act. We would support this bill, submit the question to study, and then assess the possible solutions. But we are not interested.
Other groups have also called for reparations, including the NAACP, the National African American Reparations Commission (NAARC), and the evangelical magazine, Christianity Today. The NAARC has some semi-specific proposals, while CT keeps everything in the abstract realm. Indeed, Coates’s “easy solution” is actually very difficult precisely because the “practicalities” are difficult—and very expensive—to put into action.
That doesn’t mean that there haven’t been attempts to come up with reparations plans. Evanston, Illinois—a city just outside of Chicago—has a program meant to deal with redlining and other discriminatory measures the city took earlier in the 20th century, but it is limited in scope and has a specific funding source: taxes from legal cannabis sales:
To be eligible, a person has to be Black and prove they lived in the city between 1919 and 1969 — the period when state-sponsored segregation and redlining were rampant — or be a direct descendant of someone who did.
Those eligible receive checks up to $25,000 and other in-kind aid from the city government. There are plenty of arguments to make against this plan, to be sure, but at least it does not bust the city’s budget, and it is a good-faith attempt to deal with overt policies that unjustly hurt Evanston’s black residents. San Francisco, however, is another matter, as its city council recently laid out a plan to pay the city’s black residents $5 million apiece and provide down payments for buying homes. Although San Francisco never had Jim Crow laws and blacks there never faced the kind of discrimination that the city practiced against Chinese immigrants, the politicians there have hatched a plan that is so costly that it will never be able to be carried out.
Likewise, the State of California’s legislature has created a reparations task force and passed a number of bills to identify past discriminatory practices in the state and to compensate black residents. However, Gov. Gavin Newsom—who almost surely will run in the 2028 Democratic Primary for president—has vetoed five of these bills.
While racial discrimination has existed in California—as it did in most other places, especially during the 19th century and the Progressive Era—the state never had Jim Crow laws mandating racial segregation and discrimination. However, with California dominated politically by the left wing of the Democratic Party, its politicians are eager to engage in the kind of political theater on this subject that is guaranteed to leave the entire matter in the abstract realm.
What is meant by classifying this discussion as “abstract” is that politicians are coming up with grandiose proposals that are so costly that they never could be funded, even if they were justified. For example, Rep. Cori Bush from Missouri introduced a bill calling for $14 trillion in reparations payments, even though that number is close to half of what real GDP was in the US in 2025. The numbers are so out-of-sorts that they can never get out of the abstract realm because this country could never come up with the resources necessary to fund these schemes even if Americans actually agreed that reparations were justified.
Believers in reparations hold that these payments are necessary to deal with the very real wealth gaps between black and white Americans as a whole. Two years ago, the Brookings Institute reported that while overall wealth was rising, it was rising faster for whites than blacks:
According to the latest data from the Federal Reserve’s Survey of Consumer Finances, the nation’s racial wealth gap increased during the COVID-19 pandemic. Between 2019 and 2022, median wealth increased by $51,800, but the racial wealth gap increased by $49,950—adding up to a total difference of $240,120 in wealth between the median white household and the median Black household.
Yet, there is very little in any of the reparations schemes that would enable black Americans to build true generational wealth. Indeed, the adherents to reparations don’t even see the irony in the fact that they are blaming capitalism and private enterprise for racism and racial discrimination even while writers like Coates—no fan of capitalism himself—demonstrate how government agencies at every level in this country were responsible for throwing roadblocks in the way of black American advances.
Instead, they look to expanding the welfare system as the “solution” even though the welfare system itself has accelerated the wealth gaps as welfare programs expanded, something pointed out by Thomas Sowell in Vision of the Anointed. As Ryan McMaken wrote in 2020:
Today, the idea of reparations is geared toward the sorts of policy options that are now quite familiar: more spending on programs that resemble traditional welfare programs of recent decades. Kamala Harris, for example, supports more spending on health programs “as a form of reparations for slavery.”
This April 2020 report from the Brookings Institution suggests that reparations take the form of student loan forgiveness, free college tuition, and down payment grants for potential homeowners.
This has now become the standard policy formula for reparations. It’s not about payments to specific victims. It’s about increasing funding for the usual package of social programs around housing, cash transfers, and healthcare. In other words, in its form and administration, the “reparations state” is now indistinguishable from the “welfare state.”
Murray Rothbard himself raised the issue years ago about reparations, but his plan was based on natural law, natural justice, and building real wealth. He wrote:
One of the tragic aspects of the emancipation of the serfs in Russia in 1861 was that while the serfs gained their personal freedom, the land—their means of production and of life, their land was retained under the ownership of their feudal masters. The land should have gone to the serfs themselves, for under the homestead principle they had tilled the land and deserved its title. Furthermore, the serfs were entitled to a host of reparations from their masters for the centuries of oppression and exploitation. The fact that the land remained in the hands of the lords paved the way inexorably for the Bolshevik Revolution, since the revolution that had freed the serfs remained unfinished.
The same is true of the abolition of slavery in the United States. The slaves gained their freedom, it is true, but the land, the plantations that they had tilled and therefore deserved to own under the homestead principle, remained in the hands of their former masters. Furthermore, no reparations were granted the slaves for their oppression out of the hides of their masters. Hence the abolition of slavery remained unfinished, and the seeds of a new revolt have remained to intensify to the present day. Hence, the great importance of the shift in Negro demands from greater welfare handouts to “reparations”, reparations for the years of slavery and exploitation and for the failure to grant the Negroes their land, the failure to heed the Radical abolitionist’s call for “40 acres and a mule” to the former slaves. In many cases, moreover, the old plantations and the heirs and descendants of the former slaves can be identified, and the reparations can become highly specific indeed.
Unfortunately, Rothbard’s plan was not followed, nor would any present reparations program do much to increase real wealth in black communities. Instead, it would deteriorate into just another welfare program. The present push for reparations for black Americans is yet another scheme that has failed even before it could possibly come to fruition. Taxpayers would be forced to pay extra taxes—or the funding would come from borrowing and massive money creation by the Federal Reserve System—and the entire thing would deteriorate into the government either handing out checks or offering the usual substandard government services.
Yes, some recipients might invest or save their reparations checks, but most likely people would spend them quickly and then demand more to continue their higher-end lifestyles, something that we have seen with many people of all races who won significant amounts of money via a lottery. The reparations industry would no doubt come up with reasons as to why the system had to be expanded, and we would be back to square one.
No one has built wealth by being served by the nation’s welfare systems, so while any reparations package would result in large wealth transfers to black Americans from everyone else living here, those transfers would not translate into new, appreciable wealth. If anything, they would result in a negative-sum result and make things even worse than they were before.