‘Baby bonds’ bill aims to give children up to $50,000 to start adulthood

Sen. Cory Booker (D-NJ) and Rep. Ayanna Pressley (D-MA) want to address racial and wealth inequality by giving upwards of $50,000 to the country’s poorest children by the time they turn 18 and become adults.

Dubbed the “baby bonds” bill, the American Opportunity Accounts Act aims to reduce the wealth gap, which disproportionately impacts families of color by starting each American child off with money that can be used to finance their education or buy a home, among other wealth-building activities. The proposal was first introduced in 2018 under the previous Congress — it went nowhere. But the bill is being reintroduced and with Democrats in control of the House, Booker is more hopeful the bill will receive more support, and will eventually pass.

“I’m very confident that this will get through the Senate over time,”Booker said. “Obviously, not with [Senate Majority Leader] Mitch McConnell here right now,” he added. “I think especially in the House that this is the kind of bill that will get a lot of attention and support.”

Tackling the wealth gap

The wealth gap in America has continued to widen throughout the years, driven by disparities in education, investment, and income inequality. A report from the Federal Reserve says “significant wealth concentration and a clear increase in wealth concentration since 1989.” More to the point, the study notes, “in 2018, the top 10% of U.S. households controlled 70% of total household wealth, up from 60% in 1989.”

Black Americans have particularly suffered, thanks to inequities in the criminal justice system, employment, education, and healthcare. While the baby bonds bill is race neutral, it is designed to impact children of color, who disproportionately live in poverty compared to their white counterparts. According to the Economic Policy Institute (EPI), in 2016, roughly 31% of black and 27% of Hispanic children lived in poverty. That’s compared to 11% of white children.

Unemployment rates for African-Americans are twice as high as that of white workers, while adult black poverty rates are more than double that of their white counterparts. According to the EPI, the black poverty rate was 22% in 2016; the same year, it was 8.8% for white Americans. The national poverty rate, by contrast, was 12.7%.

And racial wealth inequality has only gotten worse over time. In 2016, according to the Inequality Project at the Institute for Policy Studies, the U.S. median wealth — or the total of all assets — for white families was just under $150,000, compared to the national median wealth of $82,000. In 2016, the median figure for African-Americans stood at roughly $3,500. That’s less than half the median black wealth 35 years ago.

But that’s a composite sketch across the United States. If that picture is bleak, it gets worse for people living in cities like Boston, which Rep. Pressley represents.

According to a study from the Federal Reserve Bank of Boston, white families in the city had a median net worth (the value of all assets minus any debt) of $274,000. Black families had only $8.

Pressley says many people find that figure staggering. “They can’t wrap their brains around the findings,” she said. “But if you live in Boston, you see this up close and personal and you know it’s real.”

“The median white family has 40 times more wealth than the median black family, and 22 times more wealth than the median Latino family,” she added, citing statistics from the Institute for Policy Studies.

An American birthright

So how exactly would baby bonds even work?

As a “birthright,” the bill proposes, every child would be given a $1,000 savings account. Each year, the government would deposit as much as $2,000 into the account, depending upon the family’s income level. The poorer the family, the more money the child would get.