ALWAYS LOOKING FOR SOMETHING FOR NOTHING
Forget baby showers. There’s a proposal to give every newborn in the United States a Baby Bond account with somewhere between $500 and $50,000 in cash. Neither the kids nor their parents would be able to touch the money until the child turned 18. Then the young adult could spend the trust fund on attending college, buying a home or starting a business.
The whole point of Baby Bonds would be to dramatically lessen wealth inequality in America, according to the economist who came up with the idea, Darrick Hamilton of The New School and William Darity of Duke University.
“The key ingredient of how successful you will be in America is how wealthy your family is,” Hamilton says. Baby Bonds are one way to change that, he argues. He presented the idea at the American Economic Association conference in Philadelphia this weekend.
Under the proposal, kids of incredibly rich parents such as Bill and Melinda Gates or Beyoncé and Jay-Z would get the lowest amount of $500 while babies born into extremely poor families would get the highest amount of $50,000. There would be a sliding scale to determine how much each baby would received based on their parents’ wealth. A typical middle-class baby would receive around $20,000.
While there are a number of criticisms about Baby Bonds, especially how to pay for it, presidents and prime ministers around the world are trying to figure out ways to reduce inequality. In the United States, inequality is back at the levels of the 1920s Gilded Age. It’s gotten so bad that Wall Street firms are warning their clients to pay attention to it because inequality is driving the rise of populism. Torsten Slok, Deutsche Bank’s chief international economist, says the United States and other nations are going to need creative thinking to address this. He called Baby Bonds an “intriguing” idea.
Nearly a third of American households now have $0 in wealth, according to Deutsche Bank, the worst situation since the U.S. government began keeping track of that statistic (wealth outside of a home) in the early 1960s.
Families of color have struggled especially hard to try to move up the socio-economic ladder. The median net worth of white households is 10 times the size of African-American households.
“People like to argue if only poor black and Latino families were more responsible and made better decisions, then inequality could be dramatically reduced,” says Hamilton. But years of data and real-life evidence don’t support that. Hamilton points to the fact that most college-educated African Americans have less net wealth than whites who dropped out of high school.