What are 'baby bonds'? Cory Booker and Ayanna Pressley push Joe Biden to pass law to bridge racial wealth gap
The American Opportunity Accounts Act calls for children to get $1k at the time of birth and up to $2k each year thereafter until they become 18 and is expected to help bridge America's wealth gap
Democratic leaders are pushing President Joe Biden to bring into force a measure in the next economic recovery package that could give kids up to $46,000 in their bank accounts by the time they attain 18 years of age. Last month, New Jersey Senator Cory Booker and Massachusetts Representative Ayanna Pressley, a member of the Squad, have urged the Biden-Kamala Harris presidency to include the American Opportunity Accounts Act.
If passed, it would set up a federally funded saving account that would give all children in the country a fixed amount of money at the time of their birth and continuous payments each year, California-based financial technology and services company Acorns reported on Monday, February 1.
The American Opportunity Accounts Act, introduced in 2018, calls for children to receive $1,000 at birth and between $0 and $2,000 each year, depending on their family income, until they turn 18. The money would remain in a low-risk, federally insured saving account managed by the treasury department, the report added.
Booker and Pressley wrote in a letter in January addressed to President Biden and Vice President Harris: “By investing in Baby Bonds, along with critical income support measures like rental assistance, SNAP, and the child tax credit, we can ensure that struggling families not only weather this economic crisis but also have the resources to bounce back from future ones as well.”
They also said that in the wake of the Democratic Party’s victories in the two Senate runoff elections in Georgia on January 5, the time was ripe to ensure people that they not only survived but even thrived. “On the heels of historic Democratic victories in Georgia just last week, now is the time to act to ensure people can not only survive, but thrive.”
'Impact would be transformative'
The lawmakers continued: “The impact would be transformative: at a cost of approximately $60 billion annually, less than 10 percent of what we currently spend to subsidize wealth-building through the tax code, we can give every American a stake in our economy and agency over their future,” they said.
By their estimates, a child who gets $1,000 at birth and $2,000 every year since then would end up getting more than $46,000 by the time they turned 18, given an annual interest of three percent.
When Booker announced his presidential run in February 2019, Vox cited a study to say that the idea of baby bonds embraced by Booker, who ran for the 2020 presidential nomination, would almost entirely bridge the wealth gap between young Black and White people. Also, recent studies by Columbia University and Morningstar have found that the baby bonds program would reduce the racial wealth gap considerably among young American adults.
It was also cited that in the 2019 Survey of Consumer Finances, the median White family has eight dollars in wealth for every one dollar which is held by Black families and that the members of the Forbes 400 wealthiest Americans own more wealth than all Black families in America combined.
But there are also other interpretations. Ian Rowe, a resident fellow of Domestic Policy Studies at the American Enterprise Institute said the baby bonds idea is not particularly aimed at helping children of color since those who stand to gain from it are mostly from “low-income families”.
In a report published on Tuesday, February 2, Newsmax cited experts as saying that under the previous administration of Donald Trump, baby bonds were a longshot but could be approved now since the party of Booker and Pressley are in control of both the chambers of the Congress besides the White House. Biden, it may be mentioned here, has called to raise the child tax credit to $3,000 for kids below 17 and $3,600 for those below six.