By Racquel Richards*
June 2017
IMAGE VIA FLICKR
Trump’s historical election win attracted the attention of many people around the world. In the words of former President Barack Obama “Donald J. Trump has created one of the biggest political upsets in history.”[1] But with upsets come some upset people.[2] To the contrary, there were also millions of people that did vote for Donald Trump.[3] Many citizens that chose to vote for Trump did so based on the conservative fiscal policies that he promised to implement.[4]
There are many reasons why proponents support conservative economic policies, like Trump’s economic plan.[5] According to the Census Bureau, under the Obama administration in 2009 the African American community had to face some staggering facts.[6] The unemployment rate was 12.7%, the labor force rate percent below poverty line was 25.8%, the real median household income was $35,954 and the number of food stamp participants was 7,393,000 among African Americans.[7] These numbers are heavy indicators that Black America did not have economic success under a Democratic administration that implemented more liberal fiscal policies.[8] Statistics like these have created the platform for those on the right to claim that while progress hasn’t always proven tremendous success under Republican presidents, the most current Democratic administration has left the current state of Black America in poor shape.[9]
However, others vehemently opposed Trump based on their ideas that his effects on the country would be devastating for an indefinite amount of time.[10]
Throughout his campaign, Trump did make a myriad of promises. One of his most noted promises was to the minority communities in the United States.[11] Now that he is the President of the United States, it is important to look at the fiscal policies that he plans to enforce and more importantly how they will help or hurt the African American small business community.[12]
Trump created a ten-point plan that lists very specific policies that are all designed to improve America’s African American community as a whole.[13] African American small businesses will succeed as a result of Trump’s ten-point plan because of its implementation of microfinance and the revitalization of the Glass-Steagall Act of 1933. [14]
Shortly before the election, Trump gave a speech in Charlotte, North Carolina directed specifically towards the African American community.[15] During the speech, Trump promised Blacks “safe communities, great education and high-paying jobs.” [16] In an effort to make good on what he claimed would help the African American community, Trump’s Administration created a 10-point plan for African Americans. [17] In it, the plan claims that microloans and a renewed Glass-Steagall Act will be critical to create African American small businesses. [18]
Microfinance
Trump’s plan asserts that allowing welfare workers to convert welfare assistance, Temporary Assistance for Needy Families (“TANF”), into microloans would help African Americans create small businesses.[19] Microloans are loans that are given to small businesses in order to help start up and expansion, which typically range from $13,000–$50,000 per small business.[20]
The idea of microfinance has received both skepticism and criticism, because it is not clear how turning welfare into microloans would actually benefit TANF recipients. [21] “Research has found that microloans don’t significantly reduce poverty and might even make things worse for the most destitute.” [22] This is incredibly problematic as people may receive large amounts of money that, if mismanaged, could lead to even more debt and financial insecurity. This risk increases exponentially given the high interest rates that are accompanied with microloans.[23] However, a potential solution to this high risk would be to require money management training for TANF recipients in order for microloan eligibility. [24] Based on the history of microloans in the small business industry, microloans may be excellent for small business growth in the African American community. [25]
Microfinance has also received praise. Lillian Singh, the Director of Economic Strategic Partnerships for the NAACP Economic Department, noted that microloans bring needed capital into Black businesses because microloans are more lenient than other traditional Small Business Association “(“SBA”)” loans.[26] This is clearly a benefit for any small business, because most small business owners lack the necessary startup capital. [27] This additional financial support helps to combat the disproportionate financial standing that African Americans face in comparison to their white counterparts. [28] “As African Americans continue to struggle with racial income inequality, disproportionate debt and underemployment, the residual income allows many to entertain investment options and build an economic future versus simply staying afloat.” [29]There are positive effects of having microloans for Black businesses.[30] “From short term impacts like income generation to long lasting impacts like intergenerational wealth, microloans can be a promising wealth building tool for many.” [31] While critics of microfinance may fail to see the direct benefit to TANF recipients, the potential benefits that microloans create for African Americans and their businesses are worth giving Trump’s policy a chance.
The Revitalization of Glass- Steagall Act
The Glass-Steagall Act of 1933 (the “Act”) was enacted for the purpose of reforming and reshaping the banking system in the US.[32] After the 1929 stock market crash, Congress wanted to restrict the general use of bank credit in the country by removing credit from speculation and using it for things like industry and commerce, because Congress was troubled that certain banking operations were causing even more losses in an already hostile market. [33]
Under Trump’s plan, the Act would be reinvented into a modern version to allow for greater access to credit for African American small business owners.[34] Due to lower socioeconomic status and poor credit, African Americans are more likely to be ineligible to establish the credit necessary to receive loans.[35] Even opponents of Trump’s plan did concede that with his plan African Americans would in fact be able to receive more credit for business.[36]However, the lack of details regarding this improvement makes it incredibly difficult to be certain that reinvention of the Act would help African American small business owners.[37]
Both the level of uncertainty and the lack of credit for African Americans is apparent.[38] However, revising the Act would give Black small businesses owners a chance at success.[39] Even though the access to more credit never guarantees any entrepreneur a lifetime of economic prosperity, the denial of this access can certainly make it seem impossible. [40] The possibility of having success as a result of more credit far exceeds the possibility of having success without it.[41]
Based on the information presented regarding both the benefits of microfinance and a Glass-Steagall revision, African American small businesses will most likely succeed under Trump’s 10- point plan.
* Racquel Richards is a rising 3L at Elon University School of Law. She currently serves as a staff editor of the Elon Business Law Journal, as well as a Student Editor for the ABA’s Student Lawyer Magazine. Racquel hopes to practice business law in Atlanta, Ga.
[1] Charlie Spiering, Obama Admits: Donald Trump Ran ‘One Of The Biggest Political Upsets In History’, Breitbart
http://www.breitbart.com/2016-presidential-race/2016/11/14/obama-admits-donald-trump-one-biggest-political-upsets-history/ (last visited May 7, 2017).
[2] Maxwell Tani, Donald Trump Shocks World, Wins Presidential Election in Biggest Upset in Political History, Business Insider, http://www.businessinsider.com/donald-trump-wins-election-results-2016-11 (last visited May 17, 2017).
[3] Thomas Frank, Millions of Ordinary Americans Support Donald Trump. Here’s Why, The Guardian
https://www.theguardian.com/commentisfree/2016/mar/07/donald-trump-why-americans-support (last visited May 17, 2017).
[4] Id.
[5] Gillian B. White, Black Wealth in The Age of Trump, The Atlantic (Nov. 21, 2016),
https://www.theatlantic.com/business/archive/2016/11/donald-trump-the-blacks-wealth/508046/
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Tim Hains, Trump Proposes “New Deal for Black America” In Charlotte, Real Clear Politics
http://www.realclearpolitics.com/video/2016/10/26/trump_proposes_new_deal_for_black_america_in_charlotte.html (last visited May 7, 2017).
[12] Id.
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id.
[18] Id.
[19] Bryce Covert, Trump’s Very Strange Ideas for Urban Renewal, Think Progress, https://thinkprogress.org/trump-urban-renewal-ee58654aaa75 (last visited April 30, 2017).
[20] United States Government, Microloan Program, U.S. Small Business Administration, https://www.sba.gov/loans-grants/see-what-sba-offers/sba-loan-programs/microloan-program (last visited April 17, 2017).
[21] Covert, supra note 13.
[22] Id.
[23] Id.
[24] Id.
[25] Lillian Singh, Micro- Lending and the Opportunity for African American Entrepreneurs, Huffington Post
http://www.huffingtonpost.com/lillian-d-singh/microlending-and-the-oppo_b_6956248.html (last visited May 17, 2017).
[26] Id.
[27] Id.
[28] Id.
[29] Id.
[30] Id.
[31] Id.
[32] Devan Goldstein, The Glass-Steagall Act: What It Is and Why it Matters, Nerd Wallet
https://www.nerdwallet.com/blog/banking/glass-steagall-act-explained/ (last visited May 17, 2017).
[33] Id.
[34] Id.
[35] Id.
[36] Id.
[37] Id.
[38] Id.
[39] Id.
[40] Id.
[41] Id.