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US The Case Cory Booker Should Push for Baby Bonds to Succeed | Opinion

12:44  24 february  2021
12:44  24 february  2021 Source:   newsweek.com

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Senator Cory Booker's "baby bonds" bill, also known as the American Opportunity Accounts Act, would provide every U.S. newborn with a $1,000 savings account. It would be topped up each year by up to $2,000, depending on the families' income in comparison to the poverty line.

Cory Booker wearing a suit and tie: Democratic Senator from New Jersey Cory Booker speaks during a Senate Foreign Relations Committee hearing on January 27, 2021. © MICHAEL REYNOLDS/POOL/AFP via Getty Images Democratic Senator from New Jersey Cory Booker speaks during a Senate Foreign Relations Committee hearing on January 27, 2021.

The U.S. Treasury Department administered accounts would earn interest of about 3 percent a year, which would be released to the child upon their eighteenth birthday for permissible purposes, such as paying for university, buying a home, or starting a business.

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The bill aims to fix America's racial wealth gap, which continues to grow. Analysis by Columbia postdoctoral researcher Naomi Zewde estimated that in 2015, the median white person aged 18-25 had a net worth of $46,000 in stark comparison to that of a median Black person who had a net worth of $2,900.

This estimate makes white young people nearly 16 times richer than young Black people. In 2019, the Survey of Consumer Finances found that the average white household's median wealth was $188,200 compared to $24,100 for Black households and $36,100 for Hispanic households.

The reasons for the racial wealth gap are multifaceted but economists Darrick Hamilton and Dandy Darity concluded that inheritances and intergenerational transfers "account for more of the racial wealth gap than any other demographic and socioeconomic indicators." Essentially, wealth begets wealth.

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For Americans that recognize how the wealth disparity impacts child poverty, education, racial equality, home ownership and more, baby bonds seem like an obvious way to give all children a fair chance at success.

For white, middle-to-upper class Americans that will be taxed for this venture, it may not seem as appealing. Their hard-earned tax dollars will be used to fund an arrangement that will cost the federal government an estimated $60 billion annually. Most likely no more than $2,000 of those tax dollars would go to their own children. Low-income kids could receive about $50,000 by age 18 via the initiative.

While Senator Booker and 15 other co-sponsors in the Senate, including Majority Leader Chuck Schumer, eagerly encourage the Biden administration to adopt baby bonds as an economic priority, they are going to have to push harder to convince Republicans and middle class white Americans that this bill is more than just a racial gap closer. They need to be persuaded that the bill would benefit them too.

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It is widely agreed that cutting poverty is not only good for the individual trapped in poverty, but for society as a whole.

Childhood poverty costs the American economy $1 trillion per year. It robs us of a strong middle class with purchasing power. It strips away children that could elevate the U.S. in productivity and global competitiveness. We do not win when the poor get poorer and the rich get richer. Everyone loses.

Most of the discussion around baby bonds revolves around a moral assumption that racial wealth divides are unjust and should be rectified. But for those to whom this is not a priority, and for those that view baby bonds as a socialist idea that undermines democracy, Senator Booker must appeal to the future of America's economy when promoting his bill.

Senator Booker may gain support if he were to outline a plan for how to build in financial education for children, those in poverty and not, so that when they receive their allowance at 18 they not only have the power of money, but the knowledge to use it as a tool for progression.

The strongest argument for baby bonds is the moral one.

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"To truly 'build back better' our economy, we cannot ignore the extreme and persistent wealth inequality that deprives kids of economic opportunity right out of the gate," Senator Booker said. "Baby Bonds will start to level the playing field. In a country as wealthy as ours, every person should have access to economic opportunity and the chance to build assets and create wealth."

If the American Opportunity Accounts Act has any chance of passing Congress, the public must be reminded that the economic ramifications of fighting poverty benefits all Americans.

Lauren Crosby Medlicott is an American freelance journalist who now lives in the U.K. and writes about human rights issues. Follow her on Twitter, Instagram and Substack.

The views expressed in this article are the writer's own.

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