The goal is to ensure that infants born into poverty reach adulthood on an economic footing closer to their wealthier peers.
The proposal is among the broader interventions Moore has launched to build a more equitable society in his “leave no one behind” campaign that has so far resonated in deep blue Maryland. He holds a 32 percentage point lead in a recent poll over Trump-backed opponent Del. Dan Cox (R-Frederick).
But like many of his proposals, Moore did not identify a specific way to pay the baby bonds and broadly said he would work it out with the legislature. Instead of specifics, he points to a historic injection of federal aid and a $2 billion surplus generated largely by Maryland’s wealthiest residents who are getting wealthier.
It’s unclear if the money will be there in the future to pay for it, and the scope of the field is far greater than other fast-moving programs in Maryland, which last year hit a long target. sought to provide dental coverage to all. adults on Medicaid.
Moore, former CEO of the anti-poverty nonprofit Robin Hood Foundation, is undeterred, saying, “I believe deeply in making sure we’re aggressive in terms of…making our state more competitive while making it fairer.”
While about 12% of children in Maryland live below the poverty line, according to 2020 data from the Annie E. Casey Foundation, many more are eligible for Medicaid – 28% come from households living at or below 200 % of poverty. And income disparities aside, minorities generally hold less wealth: Nationally, the typical white family holds eight times the wealth of a black family and five times the wealth of a Hispanic family, according to the Federal Reserve.
Baby bonds are designed as a racially neutral way to close that gap, promising a lump sum cash payment to anyone born near the poverty line.
Developed by economists studying inequality a dozen years ago, the concept of baby bonds has gained notoriety since the 2020 racial justice protests. It injects capital into the lives of young people facing choices crucial life moments regarding college or work, starting a business, saving for retirement or buying a home – times when their wealthier counterparts can count on a helping hand from of their parents.
Sen. Cory Booker (DN.J.) helped popularize the idea during his 2020 presidential campaign and has tried unsuccessfully create one at the federal level since 2018.
Booker planned to raise long-term capital gains and high-value property taxes to pay for the $60 billion-a-year plan, drawing criticism as to whether this would be politically possible or financially viable. The UK launched similar but smaller trust funds for babies born from 2002 to 2010, but phased them out as an austerity measure during the Great Recession.
But the program, never completely tested in the United States, has become a favorite idea of liberal politics. This aims to reduce a pervasive wealth gap rooted in policies and laws that left families of color with fewer resources to pass on to their children than white families, who were not subject to centuries of economic discrimination.
The extent of endowments varies considerably through the proposed plans, with economists Darrick Hamilton and William Darity Jr., who developed the idea, suggesting that up to $60,000 in federally backed trusts and smaller state proposals provide a benefit maximum closer to $11,000. A Morningstar analysis found Booker’s proposal, which would yield up to $50,000 when beneficiaries turn 18, could halve the racial wealth gap.
A handful of states have debated or adopted smaller versions, and the idea has garnered enough attention that the New York Federal Reserve convened an event last month called “Exploring Baby Bonds as a Tool to Improve economic security”.
The version considered by Moore would start with an initial investment of $3,200 for every child born to parents with Medicaid in Maryland, which in 2020 was nearly 27,000 babies, according to the Kaiser Family Foundation. With so many potential beneficiaries, it would be the largest baby bond program adopted to date in the country.
“This is a unique opportunity, and a data-driven opportunity, to show how exactly we can both solve the problem of child poverty and also solve the problem of the racial wealth gap. all at once,” Moore said.
Nationally, the median black family owns about 12 cents of wealth for every dollar a median white family has, according to the most recent estimate from the Federal Reserve Bank of St. Louis, which calculates the disparity at the help from the Fed’s triennial survey of consumer finances. This disparity has changed little since 1989.
Not only were black people excluded from many lucrative professions and educational opportunities for about a century by Jim Crow laws, but biased government policies regarding land acquisition, asset ownership and mortgages – among many others. strengths – have systematically hindered the ability of black families to create wealth to pass on to their children, Hamilton and Darity wrote.
The economists also noted separate academic studies that showed family wealth was the best predictor of a child’s future wealth, and that black families have higher savings rates.
Rodney Brooks, author of “Fixing the Racial Wealth Gap,” wrote in a recent Washington Post article that “the history of racism, discrimination, and violence runs deep. Every time black Americans have made strides , they were removed legally… or violently.
Brooks points out that the City Council of Manhattan Beach, California, used eminent domain in the 1920s to seize a resort operated by and serving black people and that the middle-class community of Tulsa, known as the name of Black Wall Street, and dozens of other Black communities across the country were torched by a white mob.
“The result is that black Americans lag far behind white Americans in all economic statistics,” Brooks wrote.
The goal of the program is to create a taxpayer-funded trust that grows in value over time and gives a child born into poverty a lump sum of cash as an adult, a sum that would be substantial enough to changing a young adult’s choices. limited to a handful of uses, perhaps to pay for college, buy a house, or start a business. Moore suggested recipients should take a financial literacy course before receiving the money.
The nature of the endowments means the state would set aside huge sums for nearly two decades before any money would flow back into the economy, a political hurdle when there are other pressing needs for public funds. But Moore and other advocates say the payoff is worth it financially and for fairness, and that the money would eventually recirculate back into the economy as children reach adulthood and spend their baby bonds.
“We have to have the courage to do things that we know will be important long-term investments to be able to meet many challenges,” Moore said.
Moore said the $3,200 investment would be a starting point for discussion and he would defer to negotiations. with Maryland’s General Assembly — which is dominated by Democrats and led by lawmakers who wholeheartedly approve of it — to determine the scope and extent of the proposal, as well as who would be eligible. Some state senators have started working on similar ideas, and a spokesman for Senate Speaker Bill Ferguson (D-Baltimore City) said Ferguson “is in favor of anything that helps reduce child poverty. in Maryland”. A spokesperson for House Speaker Adrienne A. Jones (D-Baltimore County) did not respond to a request for comment.
Two other jurisdictions — Connecticut and DC — have adopted similar baby bond initiatives, but on a smaller scale. DC’s plan for $500 accounts is estimated at $32 million over the first four years. Connecticut, meanwhile, pushed back the start date on its $3,200 accounts for two years. California has launched one to help children who have lost a parent to the coronavirus. The Massachusetts Treasurer has set up a task force to develop a program. In Washington state, the treasurer travels through rural counties to sell his idea of baby bonds as a way to eradicate rural poverty.
Economists have developed a slightly different tool than states pursue, aiming for a universal national agenda which gave each child a trust, with children from poorer families receiving the most and those from wealthier families receiving a nominal amount.
State governments, which typically must have balanced budgets, lack the ability to borrow to create a universal baby bond program that would have as big of an impact as the federally backed one, Naomi Zewde said. , Assistant Professor in the Department of Health Policy. and management at UCLA. But, she said, state-level efforts would provide proof of concept.
“The difference between the haves and the have-nots is crucial. The difference between a tenant and a landlord is a down payment,” Zewde said.
If children born into poverty in the early 1990s had received trust funds at birth, Zewde argued in a 2019 analysis, the wealth gap between young whites and blacks would have been significantly reduced: a young white would hold 1.4 times the wealth of a young black, rather than 16 times the wealth, as they do in real life.
