President Biden has spoken out often, eloquently and passionately against the “ugly poison” of discrimination and racism in our government.
So a ruling by a federal district court in Texas this week was particularly jarring: Judge Reed O’Connor found that the Biden administration engaged in systemic gender and race discrimination to implement COVID-19 relief for American restaurants.
Café owner Philip Greer had claimed in a lawsuit against the Small Business Administration (SBA) that, while white, he needs the same rescue as minority restaurateurs under the newly enacted American Rescue Plan Act.
Greer’s Ranch Café reportedly lost over $100,000 during the pandemic. Like many restaurateurs, Greer was delighted to hear about the Restaurant Restoration Fund approved by Congress. However, he soon learned that, due to his race, he could not be considered until other applicants were allowed to seek funds.
The White House and the Democratic-controlled Congress insisted that various groups should be first in line, including women, minorities and “socially and economically disadvantaged” people.
The government confirmed that $2.7 billion already has been distributed through the fund and that there are almost 150,000 pending applications from owners with preferential treatment. As a result, owners like Greer fear not just delayed payments but the exhaustion of the $28.6 billion allocated under the program. The SBA confirms it already has requests for $65 billion in payments under the fund.
The Biden administration agreed that such classifications, particularly based on race, must satisfy the highest constitutional burden of “strict scrutiny.” That means such classifications are unconstitutional unless they are “narrowly tailored” to serve a “compelling governmental interest.”
However, the Justice Department cited studies that women and minorities historically have fewer lender resources and, before the pandemic, often were less likely to receive credit. There is ample support for that claim.
The legal question is whether historical disparities are enough to justify a system of race and gender preferences when all restaurants were impacted by the pandemic.
In 1989, the Supreme Court ruled that a minority set-aside program in Virginia was unconstitutional under the Equal Protection Clause. The government cited historical barriers for minority enterprises, but the court balked.
It noted that “identified discrimination” in the past “would give … government license to create a patchwork of racial preferences based on statistical generalizations about any field of endeavor.” When using racial classifications, the divided court stressed that “simply legislative assurances of good intention cannot suffice.”
Judge O’Connor relied on such precedent to declare the enforcement of the criteria for COVID-19 relief to be raw racial and gender discrimination.
His ruling can be appealed, but it highlights a concern over a variety of state and federal COVID-19 programs enforcing racial and gender criteria.
In Oregon, a state COVID-19 program for black businesses, called the Oregon Cares Fund, was challenged by a Mexican-American café owner and others under the Equal Protection Clause.