This paper is a product of the "Changing Domestic Priorities" project which has examined the shifts taking place in the nation's economic and social policies under the Reagan Administration and is now focusing on the major economic and social problems facing the nation over the coming decade. The following topics are discussed in this paper: (1) trends in black economic progress; (2) how these trends may have contributed to the development of an underclass; (3) new estimates of the size and growth of the underclass in a non-technical way; and (4) the implications of these trends for policies aimed at reducing some of the remaining disparities between blacks and whites and assisting the most severely disadvantaged blacks. Three tables, three figures, and 41 references are included. (JS)