Rep. Ayanna Pressley (D-MA) and presidential candidate Sen. Cory Booker (D-NJ) reintroduced Booker’s baby bonds legislation on Friday aimed at giving all American children an opportunity to generate wealth.
Other Democratic presidential contenders seeking to cut into former Vice President Joe Biden’s lead with Black voters have proposed a raft of new policy ideas in the past few weeks. These range from setting up multibillion-dollar funds to support minority-run businesses to expunging criminal records for marijuana arrests.
The New Jersey senator first introduced baby bonds in the Senate in October and it had no other sponsors. Now, as he reintroduces the bill, Pressley is joining him to introduce companion legislation in the House,
The legislation — the American Opportunity Accounts Act — would give every American child $1,000 at birth. Each year, children would receive up to $2,000 more deposited in their American Opportunity Account, depending on family income. These funds would sit in a federally insured account managed by the Treasury Department, achieving 3 percent interest. Account holders can access the money at age 18 and use the funds only for qualified purposes such as homeownership and higher education — “the kind of human and financial capital investments that change life trajectories,” — Rep. Pressley said in a press release.
Baby bonds are not a new idea, and they’re not Booker’s. They’re the brainchild of economists William “Sandy” Darity of Duke University in Durham, North Carolina and Darrick Hamilton of The New School in New York City. Darity and Hamilton published a 2010 paper in The Review of Black Political Economy, where they proposed “a bold progressive child development account type program that could go a long way toward eliminating the racial wealth gap.”
In 2016, the median Black family had about $17,000 in wealth compared to the typical white family, which had about $170,000, according to Rep. Pressley.
For a family of four with an income of less than $25,000, a baby bonds account could reach an estimated $46,215 on maturity.
The baby bonds idea has yet to pick up much momentum, Boston.com reported. Some progressive think tanks and writers say it wouldn’t reduce the racial wealth gap as much as estimated.
Wealth inequality has worsened dramatically over the past 50 years, Booker said in a statement. In 1963, families in the top 10 percent had six times more wealth than families in the middle. By 2016, the top 10 percent had 12 times more.
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Pressley has often said that her Boston-area district is one of the most diverse and unequal in the country. The median net worth of white households in the city was $247,500 while Black families had $8, according to a 2015 report by the Federal Reserve Bank of Boston.
“For too many of my constituents, that inequity begins before birth,” Pressley said in a statement.
The baby bonds bill would increase the median net worth for both white and Black young adults significantly, a Columbia University study found.
“This is a universal race-conscious program that will benefit all children with families in the lowest bracket,” Pressley told Yahoo Finance, which first reported her sponsorship of the bill Friday. “So the program will inevitably have a positive disparate racial impact that will impact black and brown adults. Because they are disproportionately the most disadvantaged.”
To tackle racial injustice and wealth inequality, Booker and Pressley also support legislation to study reparations for African-Americans as well as criminal justice and education form. They teamed up in May to introduce legislation to reduce maternal mortality in the U.K., where Black mothers
are three to four times more likely to die in childbirth than white.
Pressley told Yahoo that she sees the baby bonds bill “as enhancement and companion legislation.”
“The reality is that these are systemically embedded and entrenched inequities,” she said. “There is not going to be a one-stop solution.”