Will Baby Bonds Help Close the Wealth Gap?

Before the COVID-19 pandemic, the American economy was progressing past the downturn of the Great Recession and the collapse of the housing market. Unemployment was steadily decreasing, the median household income was continuing to grow, and homeownership was increasing across the nation. However, one facet of the economy remained unchanged: income inequality and the growing wealth gap. While many politicians have proposed solutions to this such as a universal basic income, an increased minimum wage, and a more progressive tax code, none of these potential solutions have ever been implemented on a national scale, and would not appeal to both conservatives and progressives. The United States has always prided itself on individualism and personal freedom, so for some, these far-reaching programs would never be favorable. Yet, there must be a way to curb the wealth gap--a solution that lies in the middle of complete government intervention and a laissez-faire attitude, like that of the time before the Great Depression.

The baby bond policy is one potential solution, and while it has its pros and cons, it has come back into the Congressional conversation with a new bill that promises to stop wealth inequality at birth. While this bill is more progressive, the ideas that it lays out can be modified to create a policy that pleases both sides of the aisle and combats the growing divide. 

So what exactly IS a baby bond? Any American citizen with a social security number can purchase a government bond for themselves, or a bond as a gift for a newborn baby. The value of bonds grows over time, and they are a stable investment that can provide security for the future. While this bill does not outline for babies to receive an actual bond, the concept is the same. The nationalized “baby bond” program would provide every child born in the United States with a $1,000 bank account with 3% yearly interest, left untouched until adulthood. Depending on the income of the child’s family, the government would add $2000 or less into the account yearly, so by the time they reach adulthood, the child has the wealth to their name. Many notable Democrats like Senator Cory Booker and Representative Ayana Pressley avidly support this bill. As expected, there has been a lot of pushback against this bill as conservatives view it as a major overreach of government power so most of them are unlikely to support the bill or any of its modifications. Some critics think that it is not the government's role to distribute this type of money, and others raise questions about how the money will be used. All of these criticisms are well thought of and probable, and they show that the policy outlined in the bill is not moderate enough to ever be implemented. In order for sweeping reform to ever take place, either from the left and the right, bipartisanship is necessary. The widespread rejection of this idea by the right and then the converse rejection of a similar bill by the left proves that such agreement is not exactly feasible and that partisan lines trump change. However, there is another take on the proposed baby bonds program that is a little bit more down the middle, less interventionist, and perhaps a little bit more appealing for compromise. 

Instead of the government setting up a savings account for every child and adding to it, at birth, every newborn will receive a government-issued bond depending on their family’s financial status. Depending on their income, babies will get a bond of less or more value. According to a hypothetical study, the amount that the bond will yield will also depend on the family’s status too. Middle-class and wealthy families would still be eligible for this because it is a national program,  however, a way to decrease the expense would only be granting bonds to families that need the wealth and setting an income cap for who is eligible. This is a way to make the program more bipartisan as opposed to the Democrats’ bill because it would cost less if only certain people qualify. Additionally, it requires less action from the government, because bonds accrue value on their own. In an ideal Congress, both parties would work together to pass sweeping legislation and reforms that would end the wealth gap, but with a bipartisan system as divided as this, that is just not feasible. So, the answer is something that is more gradual, less expensive, and less all-encompassing than proposed solutions. 

While this is not the perfect solution to end income inequality and will not get rid of the racial wealth gap along with other challenges the children will face, it is a step in the right direction and is a more moderate proposal than any of the other ones. Essentially, all the government is doing is distributing wealth, which has been proven to be more important than any other factor. Wealth is not the same as money, wealth is made up of assets. It cannot be spent immediately and it is better left untouched so its future value can be unlocked. With the “baby bonds” bill, children will gain access to their money once they turn 18, and there is no control or restrictions over how they spend it. A bond is an investment--in other words, it’s not spendable-- and for that reason, bonds can ensure future stability more so than a full bank account as a young adult. Stability does not equal equality, but through financial stability, the poorest Americans can accumulate generational wealth and 

As with any social policy, the path towards implementation is arduous and slow. But like any other program, such as social security or food stamps, once put in place, it will become a fixture of the safety net for generations to come. There is no guarantee if a concrete baby bond or wealth granting program will ever come to fruition, but if so, it will undoubtedly make a stride towards closing the wealth gap. 

Jordyn Ives is a junior from New Jersey. She is passionate about civic engagement, human rights, mental health advocacy and loves to get involved in her community. She is co-editor of the Congress-Sc section of the blog and NGP’s new social media director.