Ensuring Equitable Economic Recovery: The American Rescue Plan

| Guest post by Deputy Secretary of the Treasury Wally Adeyemo

photo of Wally Adeyemo

March 9, 2022


A year ago this week, President Biden signed the American Rescue Plan (ARP) into law. I spent yesterday in Memphis seeing the impact these resources are having firsthand, speaking with members of the community about the tremendous efforts they are undertaking to build an economy that works for everyone. I heard stories from local officials, civic leaders, small business owners, and others in the community about how American Rescue Plan (ARP) resources are being used to mitigate the impacts of the pandemic and create economic opportunity. Like so many southern cities, Memphis was hit hard by the pandemic. But long before the virus hit the city, racism and discrimination constrained economic opportunity, as they have in too many cities and communities across the country. We know too well the impact of racism and discrimination on social cohesion, but we spend far less time discussing the many ways they hold back America’s economic potential.

The President of the Atlanta Federal Reserve Bank, Raphael Bostic, put it best when he wrote in the weeks following George Floyd’s murder: “By limiting economic and educational opportunities for a large number of Americans, institutionalized racism constrains this country’s economic potential.” At the time, I was serving as the president of the Obama Foundation, working with the former President to try and find ways to turn the anguish so many Americans were grappling with into actions that would effectuate change.

I moved to the South Side of Chicago to run the Foundation and found the anguish so many Americans felt in the summer of 2020 existed on the South Side long before the murder of George Floyd. For too many Americans, that feeling — fear, frustration, and anger — is something they live with from birth. The fact that a child born on the South Side of Chicago is about two times as likely to live in poverty as a child less than five miles away on the North Side is no accident. The unfortunate reality is that our country has long a history of excluding people of color from opportunities to build economic security. In America today, the median wealth of white households is nearly eight times that of Black households and more than five times that of Hispanic households. This doesn’t mean that all Black Americans are poor and all white Americans are rich. But it does speak to a legacy of disinvestment that harms us all.

In his final speech in 1968, delivered in support of sanitation workers in Memphis striking for better pay and union recognition, Dr. Martin Luther King, Jr. argued that racial equality and economic equality cannot, and should not, be separated in our quest to live up to our highest ideals and meet our economic potential. As he put it, “What does it profit a man to be able to eat at an integrated lunch counter if he doesn’t earn enough money to buy a hamburger and a cup of coffee?” Dr. King knew that dismantling Jim Crow on its own was not enough — and that rings true to this day. If your only option to borrow is a payday loan, or you can’t afford to live near a good school for your children, or you can’t buy clothes for a job interview, you are locked out of opportunity just the same — Black, Brown, or white. In his final years — through his marches with working class laborers and the launch of the Poor People’s Campaign — Dr. King sought to give voice to this fundamental reality.

This recognition is infused throughout the Biden-Harris economic strategy. Our policies seek to unlock the unrealized potential of marginalized Americans in order to build an economy that works for everyone. This requires us to defeat the notion that, as President Biden put it, “America is a zero-sum game where there is only one winner. If you succeed, I fail. If you get ahead, I fall behind. If you get a job, I lose mine.” This approach has animated the economic choices the President has made from his first day in office.

The American Rescue Plan and Racial Equity

The President’s first task upon taking office was putting in place a plan to fight the pandemic and the economic crisis it created, which disproportionately affected communities of color. Hispanic and Latino Americans saw the steepest initial decline in employment, with the Hispanic and Latino unemployment rate peaking at 18.8 percent in April 2020. As of January 2021, Black unemployment remained 3.2 percentage points higher than in February 2020 and Hispanic and Latino unemployment stood 4.2 percentage points higher, compared to 3 percentage points for white unemployment.

Before becoming Deputy Secretary, I was well aware of the history of past economic crises: that downturns often hit communities of color hardest and that recovery too frequently reaches them last. During the Great Depression, Black unemployment reached roughly 50 percent — more than double the rate among white Americans. During the Great Recession nearly a century later, the same unfortunate pattern held true: While national unemployment peaked at 10 percent in October 2009, Black unemployment continued to rise, reaching 16.8 percent in March 2010. And in the aftermath of the Great Recession, while median white household wealth began to recover from 2010 to 2013, Black household wealth fell another 23 percent during this period. These were more than just numbers to me. During the Great Recession, I watched friends and family members lose jobs, homes, and hope in the face of an economic downturn that devastated my community. Riverside and San Bernardino Counties — which make up the Inland Empire in California, where I am from — saw foreclosure rates nearly 6 and 3.5 times larger than neighboring Los Angeles County, respectively. The same story was true in other communities of color across the country. Many of these families that lost their homes were still recovering from the Great Recession when the pandemic hit.

President Biden signed the American Rescue Plan mindful of the disparate impact of these crises: not only that communities of color too often bear the brunt of downturns, but also that providing broad economic support to working families — from rental assistance to childcare support — will advance racial equity precisely because of the ways race and economic opportunity intersect.

The economic support provided by the ARP helped reinvigorate an economy that added 6.6 million jobs last year, with the unemployment rates for Black and Hispanic Americans nearing their pre-COVID levels. Indeed, the recovery in labor force participation has actually been faster for Black Americans than the general trend. Labor force participation is the percentage of people between 18–64 that are seeking employment or have jobs. Since bottoming out in April 2020, labor force participation has risen 3.5 percentage points for Black Americans and 3.1 percentage points for Hispanic and Latino Americans, compared to 2 percentage points overall. This outcome — a broad and inclusive recovery — is the result of the policy choices we have made and the determination of the American people.

Investing in Marginalized Communities Helps All Americans

The ARP is a critical part of the President’s overall strategy to make targeted investments in underserved communities in order to unlock the unrealized potential of the American economy. There is no greater source of untapped potential in America than in our marginalized communities. Economist Raj Chetty and his co-authors have found that if women, minorities, and children from low-income families became inventors at the same rate as men from high-income families, the U.S. would have four times the level of innovation it does today.

Addressing the challenges these communities face in accessing economic opportunity is one of the most important things we can do to grow the middle class in our country and drive sustainable economic growth. The Administration’s strategy for transforming marginalized communities calls for the provision of capital to invest in small businesses and housing, expanding education and training opportunities, and removing barriers that prevent underrepresented Americans from participating in the labor market.

Access to Capital

We know that small businesses are one of the most important vehicles for job creation in our country, accounting for two-thirds of net new jobs. The lack of capital to start and grow small businesses in marginalized communities contributes to chronic underemployment in these neighborhoods. In response to the need for additional investment in small businesses, the Biden Administration — through the Treasury Department — is making a $22 billion investment in small businesses and institutions supporting access to capital in underserved communities across the country.

Over the course of the past year, I’ve visited small businesses like Hugo’s, a restaurant in Houston, Texas. Hugo Ortega, an immigrant from Mexico, worked in a kitchen for several years before starting his first restaurant. During my visit, Hugo shared with me that the ARP’s Paycheck Protection Program was critical in helping his restaurants stay in business. Instead of closing their doors, Hugo told me about their plans to expand coming out of the pandemic. Investments in small businesses like Hugo’s have the power to create a virtuous cycle in communities which are traditionally starved of opportunity.

The Emergency Capital Investment Program, or ECIP, is case in point. Through ECIP, Treasury is investing nearly $9 billion in financial institutions with a focus on providing assistance to marginalized communities. In Memphis, I had lunch at the historic Four Way restaurant with six black, female small business owners. These women were all constrained by a lack of access to the financial resources they needed to grow their businesses. This is the challenge ECIP was created to address. ECIP enables minority-owned banks, Community Development Financial Institutions (CDFIs), and other financial institutions located in marginalized communities to extend additional loans to recipients in underserved communities to create businesses, build affordable housing, or pursue other projects that help to build opportunity. The way these institutions create opportunity is clear: CDFIs use federal dollars to leverage private investment on an 8:1 ratio, and data from Opportunity Finance Network shows that its CDFI members (both depository institutions and loan funds) provided the financing needed to create or maintain more than 1.8 million jobs; start or expand nearly 450,000 businesses; and build or rehabilitate more than 2 million housing units from 1996 to 2019.

Dr. King understood the importance of getting financial resources into underserved communities. In his final speech, he called on people to support institutions like the historic Tri-State Bank in Memphis — now part of Liberty Bank, which was approved to receive money from ECIP — to help build and enable them to support the community. This Administration shares Dr. King’s view: that by supporting institutions with a track record of reaching communities of color and underserved communities, we can create jobs and bring opportunities to these communities.

We’re also providing $10 billion for states and local governments to invest in small businesses across the country through the State Small Business Credit Initiative, including $2.5 billion targeting businesses owned by socially and economically disadvantaged individuals. These funds will expand access to loans and other types of financing in communities that have traditionally been left behind — giving people in communities of color, rural communities, and many others the chance to start or build a business and deliver on ideas and innovations that might otherwise be left unrealized.

Expanding Education

Our investments in children and families, and especially in education, begin from the same premise. The evidence is crystal clear that early life economic challenges hold back children’s long-term economic potential. I’ve seen the importance of childcare investments firsthand. When I visited the Lehigh Valley in October, I stopped by the Above and Beyond Care Learning Center, a daycare that received a small business grant funded by the ARP’s State and Local Fiscal Recovery Funds. Keeping childcare centers like this one open not only gives children a better future, it also gives their parents the ability to go to work and earn a living knowing their children are well taken care of, creating additional economic opportunity in these communities.

These are some the main reasons the Biden Administration has proposed universal pre-K education for every three- and four-year-old in the country. This would be the largest expansion in the availability of education in over 100 years, benefiting five million children and saving the average family $13,000 a year on preschool tuition. These benefits would be especially potent in communities of color and low-income communities. Today, Black and Hispanic children are less likely to have access to high-quality, affordable preschool than white children, and research shows that the impacts of universal preschool on educational outcomes are larger for poor students than others.

Affordable Housing

Just as education can bolster opportunity, housing instability can just as easily destroy it. Research has shown that housing instability early in life leads to poor health and educational attainment over the long run. A few weeks ago, I met Diamond Harris, who received assistance from Treasury’s Emergency Rental Assistance (ERA) program. Like so many Americans, Diamond lost her job during the pandemic and fell behind on rent. She expressed her deep gratitude that the funding from ERA allowed her daughter to remain in the same school because their family could stay in their home. During the pandemic, Diamond signed up for additional training and received her real estate license, and now she is helping other people find homes. People like Diamond and her daughter are why we’ve made available $46 billion in Emergency Rental Assistance (ERA), and why we’ve worked to make sure that ERA programs are accessible to families in need — to keep families in their homes, keep children in their schools, and give these children a fair shot. To date, more than 40 percent of households receiving this assistance are Black and more than 20 percent are Latino. Furthermore, 80 percent of funds have gone to low-income households.

In addition to helping people remain in their homes, we also know there is a need for additional housing in this country, especially affordable housing. This is why we made the construction and rehabilitation of affordable housing an eligible use for the $350 billion State and Local Fiscal Recovery Funds, which the Treasury Department is administering. The lack of housing supply is a challenge that impacts all Americans, but the poor and people of color are the most likely to experience housing insecurity. This is why we are focused on encouraging states to use the funds we have provided through the ARP to build more affordable housing, and why we are working with Congress to ensure that ARP funds can be used to support the Low Income Housing Tax Credit.

Access to Employment

We are also focused on expanding opportunities in the labor market for Americans of all races, regions, and backgrounds, especially those who have too often been left behind. As a corporate executive once told me, “Talent exists everywhere, but opportunity doesn’t.” We are focused on working to change that. While this labor market recovery has been historically inclusive, it remains the case that Black and Hispanic unemployment stand at levels above white unemployment, as has long been the case. Over the past 50 years, the Black unemployment rate has consistently been double the white unemployment rate.

Addressing this disparity starts with investing in training and skills for American workers, especially those in communities of color and others where barriers too often lock them out of employment opportunities. President Biden has called on Congress to make a generational investment in training and workforce development programs. This includes a new Dislocated Workers Program, apprenticeship opportunities, and sector-based training to ensure American workers are prepared to compete in the jobs of the future, such as clean energy and advanced manufacturing.

Taking these steps will not only create economic opportunity for Black and Brown Americans, it will also help create an economy that works for everyone. Investing in small businesses, education, training, and housing is important to all Americans, especially those that have traditionally been left out of earlier investments. Equity requires that we ensure federal investments reach those that need them most.


Finally, we must include in our pursuit of economic equality consideration beyond what government can accomplish on its own. While over the last year the federal government has made historic investments to create economic opportunity, it is critical to remember the important role the private sector must play — both as a stakeholder in our society and a beneficiary of the growth that will come from unleashing America’s economic potential.

We know there is a desire among the private sector to do more: Since George Floyd’s murder, the private and philanthropic sectors have pledged at least $215 billion toward racial equity initiatives. Many companies have already put some of these funds to work, committing resources to support CDFIs and MDIs; enhancing the diversity of their workforces and suppliers; and expanding training opportunities, new facilities, and other forms of re-investment in some of our country’s most underserved communities. For those still considering their next steps, we encourage them step up and follow through — not only to make good on their commitments, but because investing these resources in communities of color will be to the benefit of the country as a whole, including these companies.

I often talk to executives worried about our tight labor market. But for Black and Hispanic Americans, the labor market still has some slack that these commitments can help address through investments in skills and training, broadening the base of workers and customers these businesses can tap into. And when the private sector supports access to capital in these communities, they help build businesses that can become their partners and suppliers.

Last December, Secretary Yellen and I hosted a conference to commemorate the Freedman’s Bank, which was intended to help newly freed Black Americans navigate their financial lives. A group of business leaders came out of the conference committed to ensuring that the murder of George Floyd does not become only a moment when corporate America made commitments to underserved communities, but that it marks start of a movement in corporate America to invest in the potential of all communities.

Our challenge is for the public and private sectors to work together to expand the supply of economic opportunity in this country, to make available routes to prosperity for Americans across regions and races. All that we have accomplished over the past year demonstrates what is possible when we take these challenges seriously.

As I think about my trip to Memphis this week, I want to return to the words of Dr. King in his Memphis speech, because they ring as true today as they did in 1968: “And let us move on in these powerful days, these days of challenge to make America what it ought to be. We have an opportunity to make America a better nation.”




78th Secretary of the Treasury. Former Fed Chair. Always an economist.

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78th Secretary of the Treasury. Former Fed Chair. Always an economist.

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