February 25, 2010

The "race" for stimulus money

By The "race" for stimulus money

Author: Ralph W. Kasarda

The American Recovery and Reinvestment Act was signed into law by President Obama just over a year ago, on February 17, 2009.  The Recovery Act distributes $787 billion dollars through tax benefits, contracts, grants, loans and entitlements.  Soon after the Recovery Act became law, an argument emerged that the stimulus money should be distributed proportionally by race. (See here herehereor here.)   


In response to concerns expressed by minority businesses that they are not getting their fair share of the money, the federal government now provides a map with a “diversity index” on the Recovery Act’s website, which shows the racial and ethnic diversity of each state.  Presumably, this allows us to determine if federal money is being distributed fairly to those states with large minority communities.  


Before the government starts redistributing wealth based upon race, there is one slight problem it must overcome: the United States Constitution.  The Fifth Amendment applies to action by the federal government and provides that “No person shall … be deprived of life, liberty, or property, without due process of law.” The Equal Protection Clause of the Fourteenth Amendment applies to actions by states, and mandates that, A[n]o state shall . . . deny to any person within its jurisdiction the equal protection of the laws.”  Interpreting these two amendments together, the Supreme Court declared in Adarand Constructors, Inc. v. Pena, “that all governmental action based on race . . .  should be subjected to the most vigorous and exacting judicial inquiry to ensure that the personal right to equal protection of the laws has not been infringed.”


This means that whenever the government classifies people on the basis of their race, as would be required were stimulus money to be doled out according to some racial diversity index, the racial classification, regardless of purported motivation, is presumptively invalid and can be upheld only upon an extraordinary justification.  Through such cases as Adarand, and City of Richmond v. Croson, the Court has made clear that in the context of public contracting, the only extraordinary justification allowed is to remedy the effects of past or present racial discrimination.  But that discrimination must be identified with some specificity before it may justify race?conscious relief. 


Those in favor of apportioning stimulus dollars by race usually quote statistics to justify a race-based distribution of funds.  While the use of statistical disparities may create the appearance of discrimination on the part of government officials or prime contractors, they alone cannot prove intentional discrimination.  In Maryland Troopers Ass’n v. Evans, the Fourth Circuit warned that “[i]nferring past discrimination from statistics alone assumes the most dubious of conclusions: that the true measure of racial equality is always to be found in numeric proportionality.” 


According to Croson, if statistics are used to create an inference of discrimination, they must measure the disparity between minority contractors who are qualified, willing and able to perform a particular service and those minority contractors who are actually hired.  An examination of these factors demonstrates why the use of statistics is an unreliable measure of intentional discrimination.  For construction work, “qualified” firms usually refers to firms that have appropriate licenses, bonding, credit, work experience and often statutorily required prequalification.  When special qualifications are required to fill particular jobs, such as on various highway transportation projects, comparisons to the general population rather than to the smaller group of individuals who possess the necessary qualifications may be meaningless.


A subcontractor may be qualified, but unwilling to bid on certain jobs.  Several non-discriminatory factors for why minority owned firms might be unwilling to bid on a public contract are: 1) the subcontractors might recognize that they are too small to complete certain projects; 2) the firms might have committed all of their resources to other projects; 3) more profitable opportunities may exist elsewhere in the private market; or 4) the firms may recognize that they lack the expertise to complete the specific projects. 


Furthermore, firms may be qualified and willing, but unable to work on certain projects.  Small minority firms may be concentrated in certain geographical areas of a state, rendering them unavailable for work far away.  Firms may also be unable to work on projects based upon their current work load, their current work forces, or their current equipment.  Another factor is the firm’s finances, that is, whether a firm has the financial ability to pay its workers and purchase required material and supplies during the project. 


This is not to suggest that we should minimize efforts to identify and eradicate race discrimination.  But in the race for stimulus money, no one should be allowed to hurdle the Constitution.  And when statistics are used in an attempt to justify the granting of racial preferences, those statistics must first factor out all non trivial, non racebased disparities.

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