The government has not appealed the decision, which echoes the Supreme Court's landmark decision last summer that invalidated race-based college admissions. The MBDA announced in a March 20 memo that it would comply with the order, directing staff at 40 business centers nationwide to avoid racial considerations when screening applicants. Instead, candidates must sign a statement of disadvantage under penalty of perjury identifying themselves as a “minority business.” No supporting documentation is required.
It's the latest sign that the government is trying to separate its definition of social disadvantage from broader racial and ethnic categories, a premise increasingly threatened by legal challenges. Last year, the Small Business Administration was forced to overhaul its program for minority government contractors, now requiring applicants to prove their disadvantages in an essay. The Department of Transportation's program's use of racial categories has also come under legal scrutiny, and dozens of other federal and state programs targeting minorities face similar threats.
MBDA's new customer engagement form requires applicants to demonstrate disadvantage in order to secure assistance in accessing capital and government contracts. The agency said social disadvantage applies to anyone who is exposed to racial prejudice because of their identity. Economic disadvantage, on the other hand, speaks to the inability of individuals to compete in a free enterprise system because their identity undermines their access to capital and credit.
Commerce Secretary Gina Raimondo said in a statement that the agency “has complied with the ruling and will continue to comply with the ruling in accordance with the law in order to serve communities across America,” adding that she was disappointed in the court's decision. . She said, “To realize our full economic potential, all Americans, regardless of background, geography, or demographics, must be able to start and grow a business.”
But Dan Lennington, an attorney with the Wisconsin Institute for Law and Freedom, who sued the MBDA on behalf of three white plaintiffs, warned in an email that the agency's response could lead to a “culture of dishonesty.”
“MBDA avoids responsibility for determining who is eligible for assistance by using a nonstandard process and delegating decision-making to individual applicants,” he said. “Apparently, applicants can qualify for federal aid if they simply feel disadvantaged. However, it is important to understand that recipients of such programs make decisions based on emotion. Instead, it is the MBDA who should make decisions about eligibility based on the facts.”
The changes to the MBDA mark the second time the federal government has abandoned racial classification after a court ruling. In July, a federal judge in Tennessee presumed that certain minorities were at a disadvantage to the SBA's 8(a) program, which helps minority-owned businesses secure government contracts. I refrained from doing so.
Following this decision, which the government did not appeal, the SBA is now requiring applicants to prove that they were disadvantaged through an essay detailing a specific experience in which their race or identity hindered their success in the business world. I am asking you to prove that.
The changes are part of the ongoing fallout from the Supreme Court's June 29 decision against Harvard University and the University of North Carolina, which upended race-conscious college admissions. The high court's decision condemning Harvard University's use of racial classifications as “inaccurate” and “overbroad” was in relation to university admissions, but the rationale is that it prohibits the use of racial classifications in government programs. Subsequent court decisions have weighed heavily on the matter. M.B.D.A.
In March, the Office of Management and Budget revised the racial categories it uses for data collection for the first time since 1997, combining questions about race and ethnicity and adding a new category: “Middle Eastern or North African.” Other federal agencies are expected to adopt the new system as well. And in March, the Smithsonian Institution settled a lawsuit alleging that an internship at the National Museum of American Latinos hired only Latino students and made it clear that the program was open to all. promised.
Prior to this order, the MBDA had established a list of socially and economically disadvantaged groups including Blacks, Latinos, Native Americans, Asians, Puerto Ricans, Eskimos, Aleuts, and Hasidic Jews. I assumed there was.
Now, according to the March 20 guidance, MBDA centers “must not apply these statutory or regulatory presumptions.”
MBDA was established in 1969 by President Richard M. Nixon's Executive Order and made permanent in 2021 under the Infrastructure Investment and Jobs Act, significantly increasing its funding to $550 million over five years. MBDA customers secured $1.6 billion in private and government contracts in fiscal year 2022, according to MBDA data. The agency also helped companies raise $1.2 billion in capital and create or retain about 16,000 jobs. Black-owned businesses won $680 million in contracts, the most of the group, followed by Hispanic-owned businesses with $526 million.
Before the court order was issued, minority business owners were required to sign customer agreements proving their detriment, even if they had benefited by presumption. The difference is that the new form states that “individuals of any race or ethnicity may meet the definition of socially or economically disadvantaged person under the MBDA Act.”
According to the March 20 guidance, a company's eligibility for aid will also be determined based on race-neutral criteria such as the company's age, the applicant's net worth and the company's sustainability.
Sarah Hinger, deputy director of the racial justice program at the American Civil Liberties Union, said the changes to the MBDA show that the agency is not moving away from its mission to support socially and economically disadvantaged businesses.
“It’s good to see that,” she said. “And in fact, what the agency seems to be doing here is clarifying the scope of who is included in the companies it serves.”
Richard Kahlenberg, director of the Progressive Policy Institute's American Identity Project, said the shift away from race could help the MBDA focus more on socioeconomic status. But he said the use of the form to prove an applicant's detriment probably won't help the agency achieve its goals, and that it should use a dissertation process similar to universities and the SBA to focus on the individual's needs. We proposed to the authorities that it be adopted.
Kahlenberg, who testified for the plaintiffs in the Harvard case, has long criticized race-based affirmative action and advocated instead a class-based approach.
“If you care about racial diversity, as I do, you want to find more equitable ways to get the same results,” he said.
“And because of this country's history of discrimination and the ongoing realities of racism, communities of color stand to disproportionately benefit from a needs-based approach to affirmative action. “Deaf,'' he added. “There's nothing constitutionally wrong with that.”
