States eye "baby bonds" to address wealth gaps
Democrats around the country are launching or discussing state-formed "baby bond" programs — government-backed funds created at birth for some young Americans to access after they turn 18.
The big picture: As President Biden's economic agenda stalls in Congress, some Democrats are turning to individual states to enact social policies to address the racial wealth gap and intergenerational poverty.
What we're watching: Lawmakers in Connecticut and the District of Columbia have set up programs that place the initial capital in a broad range of asset classes, much like a pension plan.
- In D.C., qualifying babies start with $500 and receive as much as $1,000 for each year their parents’ income doesn't exceed three times the federal poverty threshold.
- In Connecticut, babies that qualify for the state's Medicaid program receive $3,200.
- Massachusetts has set up a task force to explore issuing baby bonds.
- Washington state and New Jersey have also considered proposals. A California bill would create a version of the program for children who have lost a parent to COVID-19.
Wisconsin's "401Kids" program relies heavily on family contributions, with an initial contribution of $25 from the state.
- Sarah Godlewski, Wisconsin's state treasurer and a candidate in the state's Democratic primary for U.S. Senate, told Axios the concept has been discussed among her peers in the National Association of State Treasurers — and is something she hopes to champion at the federal level.
How we got here: Advocates tie the inspiration for baby bonds all the way back to Thomas Paine's 1797 pamphlet, "Agrarian Justice."
- The concept has been championed in modern times by Darrick Hamilton, professor of economics and urban policy at The New School, and William Darity Jr., an economics professor at Duke University, among others.
- Hillary Clinton in 2007 floated the idea of giving each American newborn a $5,000 bond at birth. Sen. Cory Booker's (D-N.J.) presidential campaign platform in 2019 featured a federal baby bonds program.
- The idea gained momentum as lawmakers searched for ways to address racial inequality after the murder of George Floyd in May 2020.
- In Congress, Booker and Rep. Ayanna Pressley (D-Mass.) have introduced federal legislation that would create funds of up to $46,000 for children born into the poorest families.
What they're saying: "The idea is that, over time, as full generations of kids receive this, some of this wealth inequity, especially this racial wealth divide, will begin to narrow because there is this basis for everybody to begin building that wealth," Shira Markoff, policy fellow at Prosperity Now, told Axios.
- "This is exactly the kind of policy and meaningful opportunities that I'm really interested in continuing to keep in mind," Erick Russell, who's running for Connecticut state treasurer, told Axios.
- Booker told Axios he is pleased that states and local jurisdictions are taking up the cause. "What's happening is really positive," he said. "I'm happy to see it taken to the laboratories of democracy."