A Method for Closing the Racial Wealth Gap: Baby Bonds
Imagine this scenario.
At the time a child obtains a Social Security number, the government sets aside one thousand dollars for her/him in a trust account.
Depending on overall family income, the government adds more to the account each succeeding year up to age eighteen.
Upon reaching majority, the beneficiary then can direct the trustee to disburse funds for wealth-building purposes (only): funding for higher education, buying a first home, starting a business, or -- my favorite – depositing into a Roth IRA.
This is not my idea. It was proposed by professors William A. Darity, Jr. and Derrick Hamilton. (1)
The concept presently is before Congress as the American Opportunities Account Act. (2) At the moment, its chances are nil: the proposed legislation is in committees. And the 117th Congress ends, of course, in less than a month.
Ah, but get this: the District of Columbia already has implemented such a program. (3) Connecticut will undertake a comparable project beginning in 2024. (4) “Similar baby bonds legislation has been introduced in state legislatures in California, Delaware, Iowa, New York, New Jersey, Washington and Wisconsin.” (5)
Detractors will hiss that baby bonds represent a misguided and hugely bloated governmental giveaway.
To me, however, baby bonds represent the continuum of a long progression of economic programs for empowering citizens.
If you think about it, the first such program actually predates the Constitution. In the 1787 Northwest Ordinance (which governed development and administration of lands west of the Appalachians and east of the Mississippi, and which was enacted under the Articles of Confederation), each newly created township would have one of its thirty-six sections of 640 acres each set aside for a school. (6)
The Homestead Act of 1863 “...granted 160 acres (65 hectares) of unappropriated public lands to anyone who paid a small filing fee and agreed to work on the land and improve it, including by building a residence, over a five-year period.” (7)
“Forty Acres and a Mule” was an 1865 idea for slavery reparations. It never was adopted. (8) A exceedingly faint line can be drawn from this concept to a reparations plan enacted in 2021 by the city of Evanston, IL. (9)
“The New Deal was a series of programs and projects instituted during the Great Depression by President Franklin D. Roosevelt that aimed to restore prosperity to Americans. When Roosevelt took office in 1933, he acted swiftly to stabilize the economy and provide jobs and relief to those who were suffering.” (10)
“Officially the Servicemen’s Readjustment Act of 1944, the G.I. Bill was created to help veterans of World War II. It established hospitals, made low-interest mortgages available and granted stipends covering tuition and expenses for veterans attending college or trade schools.” (11)
In the end, two of the most basic obligations of government are, I daresay, the economic empowerment of citizens and the closure of wealth gaps. We should add baby bonds to our noble pantheon of programs.
Sources:
(1) https://sanford.duke.edu/story/big-idea-baby-bonds-leg-everyone/
(2) https://www.congress.gov/bill/117th-congress/senate-bill/222 and https://www.congress.gov/bill/117th-congress/house-bill/835/text
(3) https://www.newsy.com/stories/baby-bonds-program-aims-to-close-wealth-gap/
(4) https://portal.ct.gov/OTT/Debt-Management/CT-Baby-Bonds
(6) https://www.britannica.com/event/Northwest-Ordinances
(7) https://www.britannica.com/topic/Homestead-Act
(10) https://www.history.com/topics/great-depression/new-deal
(11) https://www.history.com/topics/world-war-ii/gi-bill
Background:
https://www.forbes.com/sites/alisondurkee/2021/02/04/baby-bonds-bill-introduced-would-give-every-newborn-a-1000-savings-account/?sh=112332585e00
https://www.morningstar.com/articles/1057260/baby-bonds-turning-the-next-generation-into-investors