Democratic lawmakers have re-introduced a Baby Bonds bill that would provide yearly payments for every child from birth until age 18.
The American Opportunity Accounts Act was initially submitted by U.S. Sen. Cory Booker (D-NJ) and Rep. Ayanna Pressley (D-MA). It would give every child $1,000 at birth and up to $2,000 a year until they reach the age of 18.
Booker and Pressley claimed in a letter to the chair of the Treasury Department Advisory Committee on Racial Equity that the proposal would cost taxpayers “approximately $60 billion annually,” according to AL.com.
If passed, the bill would provide every American child with an American Opportunity Account. The accounts would be federally insured and managed by the Treasury Department, earning around 3% interest.
After the initial taxpayer-funded deposit of $1,000 in federal funds at birth, the annual allotments thereafter would depend on the child’s family’s income.
A family of four with an income of less than $25,100 could see the account appreciate to $46,215 per child by age 18. For a family of four with an income of $125,751, the account would grow to just $1,681. This only includes the initial sum of $1,000 at birth plus interest, as the family’s income is too high to be eligible for later taxpayer-funded allotments.
“Baby Bonds are one of the most effective tools we have for … breaking the cycles of poverty and trauma that have prevented Black and brown folks from thriving in this country,” claimed Pressley, per The Grio.
The money in the account would not be accessible until a child reaches age 18. Then the funds would become available only for what has been deemed a “qualified expense” by the secretary of the Treasury, such as costs relating to home ownership, trade school, or higher education.
The funding for the baby bonds would come from an increase in inheritance and estate taxes, according to a February 15 press release from Booker’s office.
While the bill was first introduced in 2019, it failed to advance. Instead, states and federal districts have introduced their versions of the American Opportunity Accounts Act. Connecticut was the first to enact it, followed by Washington, D.C.
Nevada is also considering its own baby bonds program, introduced by State Treasurer Zach Conine.
“In Nevada, we recognize that baby bonds are one of the most fiscally responsible ways in which we can reduce the racial gap and provide opportunities for children to succeed. That’s why I’ve proposed legislation to establish our own baby bonds program at the state level to complement the work that’s being done in Washington D.C.,” Conine wrote in an email to The Dallas Express.
“I’m hopeful that we can find ways to work together to make baby bonds a reality in America, so we can increase economic opportunity across the board,” he added.
Baby bonds legislation was also introduced in California, Delaware, Iowa, New Jersey, New York, Washington, and Wisconsin, according to the Urban Institute, a think tank.
But not everyone is convinced that Baby Bonds are a good idea.
State Senator Michael J. Testa Jr (R-NJ) said in reference to the proposed bill in his state that it was “a feel-good measure that accomplishes nothing,” per The New York Times.
“It’s not even a down payment on a car,” Testa added.
Others, like Rachel Greszler, a research fellow in economics at the Heritage Foundation, have suggested that the policy might even have the opposite effect than what is intended.
If the baby bond proposal were implemented, “you might have less incentive to save, less incentive to get an education, knowing that this account is sitting there,” Greszler said, per YR Media.
