For at least two years, Sen. Cory Booker (D-NJ) has been promoting baby bonds as a way to address the racial wealth gap. In September 2020, he and Rep. Ayanna Pressley (D-MA) reintroduced Booker’s baby bonds legislation in the House of Representatives.
The plan, called the American Opportunity Accounts Act, proposes that every U.S. child is given a savings account of up to $2,000 at birth. “The funds would sit in an interest-bearing account that would receive additional deposits each year depending on family income. At age 18, account holders could access the funds in the account for allowable uses like buying a home or paying for educational expenses. The legislation is fully paid for by making common-sense reforms to federal estate and inheritance taxes, including restoring the estate tax to 2009 levels,” according to Booker’s website.
Booker and Pressley plan to bring up the issue with President-elect Joe Biden, according to a tweet from Washington Post reporter Jeff Stein.
Stein tweeted, “New detail: @CoryBooker, @AyannaPressley to ask Biden to include ‘Baby Bonds’ proposal — seeding $1K for every newborn — in covid relief package coming this week Would cost $60B/yr; Booker & Pressley say would “virtually close the racial wealth gap”.
He added, “Treasury would put b/w $0-$2K in each child’s account every year, depending on family income Accountholders could access funds at 18, but “only for wealth-building activities” such as homeownership, education, and entrepreneurship, per Booker & Pressley6:09 PM · Jan 12, 2021“
While some experts support the concept of baby bonds, reparations advocate, economist and scholar Dr. Sandy Darity said only reparations will work.
Political commentator Briahna Joy Gray tweeted in 2019, “#ADOS need to figure out if their goal is closing the wealth gap or getting reparations, because those goals are related but not the same. Baby Bonds would help to close the racial wealth gap. As would a tax on the 1%. But those things aren’t reparations.”
Darity replied, “Baby bonds, in its current forms, would close about 20% of the racial wealth gap. Why are you fixated on non-reparations solutions to closing the racial wealth gap? Taxation without redistribution cannot close the racial wealth gap, while redistribution without taxation might.”
Darity went to explain why baby bonds won’t entirely close the wealth gap. “Since “baby bonds” are paid out to each newborn cohort of infants, anchored on the median household’s wealth, it simply cannot close the racial wealth gap in the short or long term — unless white wealth collapses entirely,” he tweeted.
It’s not that Darity is against baby bonds. They were, in fact, his brainchild along with economist Darrick Hamilton of The New School in New York City. In a 2010 paper they co-published in The Review of Black Political Economy, they proposed “a bold progressive child development account type program that could go a long way toward eliminating the racial wealth gap.”
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In 2018, Darity advocated The Baby Bonds Proposal. “If we were to give an endowment to a newborn child of Oprah Winfrey or Bill Gates we would give the child $50,” explained Darity at the time. ” But for kids born in the lower end of the wealth distribution, we’d give them an endowment of $50,000-to-$60,000 and we’d guarantee them a 1 percent real rate of interest on the account. The kids could access it when they turn 18.”