DC’s Pioneering ‘Baby Bonds’ Plan Aims to Close the Wealth Gap

DC’s Pioneering ‘Baby Bonds’ Plan Aims to Close the Wealth Gap

WASHINGTON (AP) — Aaliyah Manning’s dreams of becoming a psychologist came to an abrupt end during her freshman year at Potomac State, West Virginia, as the cost of continuing her education became overwhelming.

“The money just wasn’t there,” said Manning, 25. “I knew it wasn’t going to end, so I had fun.”

After a year, she was back in the nation’s capital working fast food jobs. Now she lives largely on public assistance in a two-bedroom apartment with her boyfriend, his mother and their 9-year-old daughter from another relationship. She still has student debt and there’s a baby boy on the way.

She sees a brighter future for this baby, thanks to a referral social program being launched in Washington. Called “Baby Bonds,” it will provide children from the city’s poorest families with up to $25,000 when they reach adulthood – to use for a variety of purposes, including education.

“It would be such a different opportunity for him, very different from what I had,” she said.

The Baby Bonds idea quickly moved from a leftist fringe concept to real politics – with the District of Columbia as its first laboratory. Lawmakers coast-to-coast are monitoring the experiment, which proponents say could reshape America’s widening wealth gap in a single generation if instituted at the federal level.

A week after giving birth to her second child, a daughter named Kali, Aaliyah Wright told the Associated Press that she didn’t expect to have much savings to help her children reach adulthood, especially with about $80,000 in loan debt from college.

She and her husband, Kainan, are on Medicaid despite steady jobs (she is a social worker at a non-governmental organization and he is a barber) and an estimated annual income of around $70,000.

Even at that income level, her new daughter would still qualify for the district’s program, albeit at a lower level.

“At this stage of maturity and adulthood, that money can be a door opener to some very big things,” said Kainan Wright.

Bonds are more precisely trust funds, designed to provide a financial boost at a critical time for the poorest children. At age 18, each enrolled child would receive a one-time payment that could be used to fund higher education, invest in a business, or make a mortgage payment.

“Think of all the things people with money do to support themselves or what parents do for children,” said Kenyan McDuffie, a member of the District of Columbia Council who spearheaded the Baby Bonds program last summer. So far, the city has identified 833 babies born since then who will receive up to $25,000 when they turn 18.

The concept, originally proposed by academics in 2010, drew attention when New Jersey Senator Cory Booker, DN.J., made it a centerpiece of his 2020 presidential campaign.

“I think it’s an idea that’s growing,” Booker said. “And it’s a great idea. It’s at the Social Security level. It’s at the Medicare level.” He added, “One generation would create dramatic change.”

But for politicians, the price can be daunting. Booker’s national plan called for annual costs of $60 billion, something he proposes to finance by raising taxes on the rich.

The Washington program will cost $32 million in the first four years alone.

Despite the price, Baby Bonds proposals have recently surfaced in the states of Wisconsin and Washington. while Massachusetts convened a task force on the matter. California has just created a version, with Baby Bonds funds specifically for children who have lost their parents to COVID.

The journey from the academy concept to local politics has received a boost from the national conversation about pandemic-driven poverty, as various proposals have come forward at the state level.

But most failed to see the light of day.

Governor Phil Murphy, DN.J., publicly supported a Baby Bonds proposal in 2020. But the Legislature took it out of its budget and Murphy did not propose it again.

In June 2021, the Connecticut legislature passed America’s first state-level Baby Bonds program. But in May of this year, that same government delayed the start by two years.

Connecticut treasurer Shawn Wooden, who championed the program, said he remains convinced the time for politics has come. “There’s a lot of interest in it,” he said. “And always with these things we need what we call pioneers.”

Wooden discussed Baby Bonds with members of President Joe Biden’s domestic policy team. McDuffie’s office responded to inquiries from several state governments.

The concept is new enough to be modified in real time, with various models and internal debates among advocates on issues such as how best to determine eligibility.

The Washington program is open to Medicaid families earning less than 300% of the federal poverty line: about $83,250 for a family of four. Connecticut will automatically enroll any newborn in a family into the state’s Medicaid program.

Booker’s proposal would have given each newborn a Baby Bond fund and $1,000 in seed capital; all subsequent payments to the fund would have been heavily targeted to the poorest households.

There are also differences in payments. Booker’s proposal would have paid about $46,000 to children from the poorest families, while Washington expects to pay a maximum of $25,000. The Connecticut plan would pay about $13,000 — something Wooden described as “pretty much the ground” for a serious attempt at Baby Bonds.

Naomi Zewde, assistant professor of health economics at the City University of New York, said her 2019 analysis of the Baby Bonds concept suggested the program would increase the economic position of white and black Americans, while massively reducing the racial wealth gap.

But there are detractors.

Veronique de Rugy, a senior fellow at the Mercatus Center at George Mason University, said the program can link millions that can be used to meet immediate immediate needs. At the same time, she said, “it does nothing to encourage a culture of savings.”

Economist Michael Strain of the conservative American Enterprise Institute says the price makes the program “hard to sell.”

Madeira says the program will have an immediate impact, leading to real-time behavioral changes in planning, academics and ambition.

“How much is enough to inspire a child and their family to think about the future,” he said. “There is a high value that must be placed on hope. We know what hopelessness is like in our communities.”

Manning, the mother-to-be, said knowing about the program and its pay would change the way they talk about their son’s future.

“It would be much more focused,” she said. “‘Do you know what you want to do? What are your plans?'”

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Follow Ashraf Khalil on Twitter at http://twitter.com/ashrafkhalil

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