California Reparations Of $5 Million Each Will Throw Thousands Of Black People Back Into Poverty

Here's what's being discussed in San Francisco by the board on reparations for slavery: 

SAN FRANCISCO (AP) — Payments of $5 million to every eligible Black adult, the elimination of personal debt and tax burdens, guaranteed annual incomes of at least $97,000 for 250 years, and homes in San Francisco for just $1 a family. There are currently 100 items under discussion to present reparations to black people in San Francisco.

As of the most recent census, the black population in San Francisco was approximately 55,000 people. The board is talking about reparations for 50,000 people and while we don't know all the details of who would qualify for 50,000 out of the 55,000 population. If in fact, there are 50,000 qualifying blacks and each was to get $5 million, the cost of this item would be $250 billion. Keep in mind that at the time of the Civil War California was not a state and it did not have any laws on permitting slavery.

Now let's move on to $97,000 a year for 250 years.  I want to start with the raw numbers; first, the cost would be a best guess of $1.2 trillion. I think the negotiators would want to have an inflation adjustment probably annually something like the rate of inflation that's measured by San Francisco’s city consumer price index. I can assure you there is nobody who can project what the rate of inflation would be in San Francisco for the next 250 years. If inflation were at 2% for the next 250 years, then over that period the family's income would increase from $97,000 a year to $485,000 a year or perhaps more.

There might be a problem with this particular provision. I would guess all the 50,000 qualified participants as of today would most likely be gone within 100 years. The question that should be asked concerning this provision is what happens if all the beneficiaries die do we continue the income and if so, who gets it? If the family members all die before 250 years where does the money go?

According to TEMER Center for housing innovation, San Francisco has 94,500 single-family residences. Under the proposal, each qualified person would be entitled to a home for $1 and all the expenses and taxes for the house would be paid for by the city. Currently, with an average price of $1.4 million, it would take about $70 billion to buy 50,000 homes. Half of the housing in San Francisco would change hands into this new program. What happens if people don't want to sell their homes? Is there space for the city to build 25,000 to 40,000 new units? Should the city declare eminent domain and take the homes and then give it to blacks after they fix them up?

During my career on Wall Street, I developed a program to assist individuals who were about to receive a significant amount of money because of a personal injury settlement. One of the things that I learned about the $5 million is that it would be paid in a lump sum to the individual. I worked with some of the preeminent liability attorneys in the United States who were advocates of structured settlements for people who had little experience managing large sums of money.

Studies have shown that people who have little or no experience in managing significant sums of money see it disappear within five years. It seems to me that if you're going to give people in the lower economic sector $5 million you must provide investment counseling services for these people.

One of the problems of putting 50,000 people in a city of 800,000 each with $5 million with no protections, a lot of people we'll get rich by finding ways to steal their money. For those of you that are reading this section, I do not want it to be interpreted that I'm saying black people can't manage money and would be susceptible to having it stolen. What I am saying is that regardless of your race or education if you've never had exposure to $5 million, by and large, you don't know how to manage it.

The implementation of a reparations plan will by design not include all blacks. I believe this separation will create tension between the non-reparation blacks and everybody else. If this plan is implemented on a national basis, I think it will further divide our nation.

I have seen estimates for San Francisco that it will cost on average about $600,000 per person to fund the reparation program as currently suggested. I believe very few people in the city of San Francisco we'll have the resources to write a check for $600,000 and banks do not make loans to people. The big question on the table is how it will be paid for.

Perhaps this article could help the leadership in the City of San Francisco better understand the risks that they are taking with people's lives and resources in making the decision.

I want to finish this article with one thought. The American Civil War did not start out being fought for slaves, but after Lincoln issued the Emancipation Proclamation the objective of the war changed. The north adopted as the objective of the war the elimination of slavery and that all men were created equal under our Constitution ultimately regardless of their skin color. That war took the lives of 600,000 northern soldiers on the battlefield who were fighting for the freedom of blacks. They gave up their lives hoping that through their efforts slavery would be ended. So, if we think about reparation what about all the families who lost sons, fathers, and uncles fighting to abolish slavery, should their families be entitled to reparations as well?