The High Cost Of Racial Preference

Hans Bader, who comments here (always wisely) from time to time, is an attorney with the Competitive Enterprise Institute. He has a post on the CEI blog about the cost of racial preferences that is required reading.

He mentions, by way of example, the Domar Electric case,

in which Los Angeles accepted a bid for almost $4 million to complete a contract rather than the lowest bid of approximately $3.3 million, at a cost to taxpayers of more than $650,000. The lowest bidder was rejected solely because it failed to engage in affirmative action in subcontracting.

Proposition 209, Bader points out, barred this sort of racial favoritism.

A number of state affirmative-action programs have since been struck down under Prop. 209, saving taxpayers hundreds of millions of dollars.

Supporters of racial preferences often argue that are necessary because racism is so pervasively endemic in American society that ending preferences would result in “re-segregation,” or something like it. This argument has always struck me as odd (among other things) because the major power centers — big business, unions, the press, the universities — are such avid supporters of racial preference.

Indeed, because of the support of such interests for maintaing preferences, the supporters of the Michigan Civil Rights Initiative, which like Prop. 209 would ban them, will be heavily, dramatically outspent in Michigan. As Bader writtes,

In California, big business largely sat out the battle over Prop. 209, to avoid offending either moderate Republican Governor Pete Wilson, who strongly supported Prop. 209, or liberal legislators and interest groups, who opposed it.

In Michigan, by contrast, few politicians openly support the MCRI, for fear of denunciation in the press, and the state’s Governor, Jennifer Granholm (D), is an avid defender of race preferences who is vociferously opposed to the MCRI.

Big business in turn is seeking to curry favor with Governor Granholm, who pushed through a $2 billion corporate welfare scheme to dole out taxpayer money to favored businesses, even while vetoing $1 billion in business tax cuts available to all businesses, big and small.

Here’s a thought, and a market-oriented one at that (blame this on me, however, not Bader or CEI). Since the argument that racial preferences are wrong, immoral, and in violation of the core American value that people should be treated “without regard” to race falls on so many deaf ears in major centers of the American economy and society, and since they impose such a high unlegislated expense on normal consumers and taxpayers, perhaps an alternative to MCRI/209-like bans on preferences would be a movement to make the devotees of preferences pay for the privilege of discriminating. These incentives could be in the form of a discrimination tax, with rates tracking the degree or number of preferences offered, or tax credits to those organizations that don’t discriminate.

This approach has been tried with some success in environmental regulation. It seems only fair to make those organizations that are determined to practice racial discrimination — a socially harmful and cost-imposing activity that is a form of moral and social pollution — pay for the privilege.

Say What? (14)

  1. Chetly Zarko June 1, 2006 at 3:49 pm | | Reply

    Bader’s work makes a superb point. I’d like to see more work like it, in quantifying the costs, done everywhere. It’s powerful stuff.

  2. Gina June 1, 2006 at 6:05 pm | | Reply

    “make the devotees of preferences pay for the privilege of discriminating.”

    Unfortunately that is about as likely to happen as an affluent tenured, affirmative action supporting white professor being for to give up his spot at a university for a minority. It’s only others they screw over for their *principles*.

  3. Cobra June 1, 2006 at 9:29 pm | | Reply

    Let’s stop the bus for a second and look at the “Domar Electric” situation.

    >>>”The good faith effort outreach program was established by a directive from Mayor Tom Bradley in 1989. It mandated bidders for city contracts had to demonstrate they had made a “good faith effort” toward subcontracting to minority and women-owned businesses. This included placing advertisements to attract such companies and advising companies how to obtain the necessary bonds and credit…

    During summer 1992, the City of L.A.’s Board of Public Works put out a request for proposals for a contract to design and install a computer-based control system for the Hyperion Treatment Plant, a sewage plant in Playa del Rey…

    …Lake Elsinore-based Domar Electric Inc. submitted the lowest bid but did not file a statement with the board indicating what it had had done to comply with the good faith outreach requirement.

    The Board of Public Works awarded the contract to Cleveland, Ohio-based Bailey Controls Co., the second lowest bidder – but the lowest among those that had complied with the city’s good faith outreach program, said Bailey’s attorney Gerald Palmer…

    …Domar filed suit against the city, asking the Los Angeles County Superior Court to take the contract away from Bailey. The court declined, stating the Department of Public Works had the authority to award the contract to Bailey.

    Domar appealed to the state’s 2nd District Court of Appeals, which reversed the lower court’s ruling. The city’s good faith outreach program is not a valid part of the contracting program because it is inconsistent with the city charter, the court stated.

    The charter states the city must award the contract to the lowest responsible bidder and doesn’t mention anything about a good faith effort outreach program, the court stated. Any amendment to the city charter must be voted on by the electorate and cannot be accomplished solely by mayoral directive.

    …A group of minority and women-owned business organizations filed an amicus curiae brief with the appellate court last week denouncing the court’s decision…

    …Groups putting their name on the brief included the Latin Business Association, the Asian Business Association, the Black Business Association, the Hispanic Contractors Association, the Filipino Business Association, the Mexican American Grocers Association, the National Association of Women Business Owners and the National Center for American Indian Enterprise Development.”

    The Facts of the Case

    This is simply not a cut and dry case of racial preferences because there are gender implications in the “good faith outreach requirement.”

    Also, the author, Hans Bader, seems to imply that:

    1) Minority owned firms and contractors in California, a majority-minority state (57%) don’t deserve a fair shot at the tax dollars from a majority-minority state.

    2) That taxpayers (minority & majority) should NOW be outraged at a $650,000 higher bid back in 1993, in the midst of today’s Bushamerica, where no spending bill (also at taxpayer cost) has EVER been vetoed, and cronyism through no-bid, ceilingless war contracts so ridiculous that even George Lucas couldn’t suspend his belief.

    –Cobra

  4. John Rosenberg June 1, 2006 at 11:56 pm | | Reply

    Cobra – I don’t see anything in your comment (despite your reproducing a good hunk of the Domar opinion — that contradicts anything Hans Bader said.

  5. Cobra June 2, 2006 at 9:41 am | | Reply

    Hans Bader writes describes the “good faith efforts outreach program” as a “racial set-aside,” when in fact it constituted no such of a thing. As defined by its creator…

    >>>”It mandated bidders for city contracts had to demonstrate they had made a “good faith effort” toward subcontracting to minority and women-owned businesses. This included placing advertisements to attract such companies and advising companies how to obtain the necessary bonds and credit.”

    It doesn’t say that bidders were compelled by law to HIRE minority and women-owned businesses. It stated that bidders should, in “good faith” show that they are at least inclusive of minority and women owned businesses in consideration for subcontracting.

    Bader apparently has a problem with “good faith outreach” and inclusiveness.

    –Cobra

  6. Hans Bader June 2, 2006 at 11:06 am | | Reply

    The whole point of my citing the Domar case was to show that even relatively mild racial preferences, ones that don’t involve fixed set-asides or quotas, still cost taxpayers (and many businesses) a lot.

    The $650,000 taxpayers lost in the Domar case was a lot, and that was just a single contract affected by a single city’s affirmative action contracting scheme.

    Of course, a racial quota excludes even more bids from non-minority contractors, and costs even more.

    As for Cobra’s suggestion that the sort of program involved in the Domar case isn’t really a racial preference, even the Ninth Circuit Court of Appeals, the nation’s most liberal federal appeals court, held otherwise in Monterey Mechanical Co. v. Wilson, 125 F.3d 702 (9th Cir. 1997), which invalidated a California statute requiring contractors to show they engaged in “good faith” outreach to minority subcontractors, on the grounds that it was a racial preference, and there is no “de minimis” exception to constitutional prohibitions on race discrimination for relatively mild racial preferences.

  7. Shouting Thomas June 2, 2006 at 12:21 pm | | Reply

    Cobra,

    The public posting of a contract offer can be read by blacks and women.

    Attempts to “outreach” beyond this are just racial and sexual discrimination.

    Unless you’re arguing that blacks and women can’t read.

    Yes, such “outreach” efforts are discriminatory, illegal and should cease. You are engaging in sophistry. You’re arguing that blacks and women should get notified numerous times of every job offer and contract posting, have their hands held and encouragement whispered in their ears, and that white men should get notified only once.

    This isn’t “outreach.” It’s racism and sexism… You just happen to approve of racism and sexism when it benefits those you support.

  8. John Rosenberg June 2, 2006 at 12:35 pm | | Reply

    Re cost, think of the enormous pot of money that could be diverted to constructive purposes if all the “diversity” and “affirmative action” staff positions all over the country were eliminated and that money spent on such worthwhile projects as scholarships, K-12 tutoring, enforcing anti-discrimination, etc., etc.

  9. Cobra June 2, 2006 at 3:02 pm | | Reply

    Three quick points:

    John writes:

    >>>”Re cost, think of the enormous pot of money that could be diverted to constructive purposes if all the “diversity” and “affirmative action” staff positions all over the country were eliminated and that money spent on such worthwhile projects as scholarships, K-12 tutoring, enforcing anti-discrimination, etc., etc.”

    There’s a REPUBLICAN majority in Congress, and a REPUBLICAN President in the White House who has YET to veto ONE spending package. What’s preventing the REPUBLICANS in power from doing exactly what you’re asking RIGHT NOW?

    Hans Bader:

    The 9th Circuit Court case you cite was NOT a unanimous decision, and the impassioned dissent by Judges Reinhardt, Pregerson and Tashima is MUST reading for every “Discriminations” regular. Here’s some snippets:

    >>>”Although California has enjoyed almost 20 years of experience under the outreach provision, there is not a single suggestion in the record that any white male has ever been the victim of any discrimination of any kind. Nor does the opinion purport to identify any such occurrence. Instead it simply concludes that affording fair opportunities to minorities and women necessarily violates the rights of the white majority, and thus offends the Constitution. In fact, the plaintiff here, the contractor who was

    not awarded the bid, complied with the “outreach” provisions in all essential aspects, and cannot legitimately complain that it was injured thereby. The only reason it did not receive the contract is that it did not file the necessary reports with the

    state.8/ In any event, because all contractors must file forms,it is beyond question that the contractor, whether or not it should have received the award, was not the victim of invidious

    discrimination.9/

    To the contrary, it is California’s effort to

    be fair to minorities and women that is the victim in this case.”

    Circuit Judge Reinhardt on Case

    It’s interesting to note that your statement about the 9th Circuit Court being liberal actually came up in the review, as the question of Reagan/Bush appointments was documented on this very case.

    Stephen writes:

    >>>”You are engaging in sophistry.”

    Main Entry: soph·ist·ry

    Function: noun

    Pronunciation: ‘sä-f&-stre

    1 : subtly deceptive reasoning or argumentation

    2 : SOPHISM 1

    Come on, Stephen. You’ve read my stuff for years. You know I’m anything BUT “subtle.”

    –Cobra

  10. Michelle Dulak Thomson June 2, 2006 at 4:05 pm | | Reply

    Cobra,

    May I ask what the heck is a “majority-minority state”? So far as dictionary definitions go (and you seem to respect them, at least so far as your posts in this thread go), a body broken into several groups none of which constitutes a majority is by definition an all-minority state.

  11. Cobra June 2, 2006 at 10:56 pm | | Reply

    Michelle,

    I borrowed “majority-minority” from articles on the subject.

    >>>”Majority-minority state is a term used to describe a U.S. state in which a majority of the state’s population differs from the national majority population. Hawaii has long been such a state, but more recently New Mexico, California, and Texas[1] have entered the category.”

    Did not make this one up, either

  12. Michelle Dulak Thomson June 3, 2006 at 12:25 am | | Reply

    Cobra,

    That’s the sort of awkward definition you get when people don’t quite want to say what they mean. “A majority of the state’s population differs from the national majority population”? Along what axis? Height? Taste in condiments? Liking for bolo ties? Propensity for surfing? Taste for grits? Number of layers required when venturing outside in winter?

    Yes, yes, I know what it’s meant to mean. I just think it’s silly.

    Have you by any chance ever referred to, say, UCB as a majority-minority campus? Because, y’know, it is one by this definition, as are several other UCs.

  13. Hull June 6, 2006 at 12:35 pm | | Reply

    So, the argument here is that affirmative action (i.e. the effort to require business and schools to include groups other than white males) is expensive, so we should abandon it?

    I guess my response to that is, what do you think the cost of diminished opportunity is?

    Which is more expensive, being inclusive or allowing businesses to remain predominantly white male?

    On the one hand, yes, taking the lowest bidder for all contracts would save taxpayers a great deal of money. On the other hand, decreasing support for minority business increases poverty which also ends up costing taxpayers money. I wonder which is more expensive: A society where one small group of people control most of the resources or a society where more people have more opportunity?

    AIDS research is expensive. If we stop AIDS research the people that contract the disease will die and they will be less of a burden on society. Does that mean we should stop trying to cure AIDS?

    Along the same lines, I’d be interested in seeing a cost benefit analysis for desegregation. If desegregation is more expensive than segregation, perhaps we should consider re-establishing Jim Crow.

  14. dom June 7, 2006 at 2:50 pm | | Reply

    “Which is more expensive, being inclusive or allowing businesses to remain predominantly white male?”

    If segregation is state enforced, then it is very expensive. If, however, you are looking at nothing more than the fact that different people have different interests, then this “segregation”, if you can call it that, is not expensive at all.

    AA, especially the “diversity” variety, that only looks at proportionate representation, does not distinguish between the two. If fact, it often makes a point of saying that anything other than an exact mathematical match-up is de facto segregation.

    “AIDS research is expensive. If we stop AIDS research the people that contract the disease will die and they will be less of a burden on society. Does that mean we should stop trying to cure AIDS?”

    That is totaly off the mark of this post.

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