Bonds of Hope
Baby Bonds are bonds of hope, and if you haven’t heard much about them, you will soon. They are a tool to give young people, especially those from low-income families, access to the capital they need to build wealth over the course of their lifetime.
I first learned about them from Gary Cunningham, a senior advisor at the Institute on Race, Power and Political Economy at the New School. I have known Gary for over 20 years and have tremendous respect for him and his commitment to create economic prosperity for those who have historically been denied it. Gary was a senior leader at the Northwest Area Foundation, which is working to create racial, social and economic justice, served as the president and CEO of MEDA (the Metropolitan Economic Development Association) and most recently, was president and CEO of Prosperity Now. When he said that Baby Bonds are a game changer for closing the racial wealth gap, I had to learn more.
A Baby Bond is an amount of money put aside by the government at the beginning of a child’s life. The money is invested and contributions are made to it on the child’s behalf as they grow. Once the child becomes a young adult, they can then use the money to continue to build wealth and experience the benefits of the economic security that come with it. Just as social security is a safety net that Americans have access to at the end of their life, Baby Bonds are a safety net at the beginning of it.
Baby Bonds are the brainchild of economist Dr. Darrick Hamilton, the Henry Cohen Professor of Economics and Urban Policy and the founder of the Institute on Race, Power and Political Economy. In an interview with Bloomberg News, Dr. Hamilton says the idea for them came from his experience growing up in the Bedford-Stuyvesant neighborhood in Brooklyn and attending an elite private school. This created for him the experience of living in two different worlds. His friends from the neighborhood had dreams and goals for a good life, just as his friends at the elite high school he attended did. The only difference was his high school friends had access to wealth that pretty much guaranteed the good life they wanted. Dr. Hamilton also saw how much his parents sacrificed for him and how hard they worked for the economic security they never achieved with both passing away when he was in his teens.
Giving Access to Capital
Connecticut launched CT Baby Bonds in 2023, which was the first in the country. All children born on the state's medicaid program on or after July 1, 2023, are automatically enrolled in it. The Office of the State Treasurer manages the funds for program participants, and the initial investment is expected to grow to somewhere between $11,000 - $24,000. Participants can access the money between the ages of 18 - 30 and use it to buy a house or start a business in Connecticut, or pay for retirement, higher education or job training.
The Institute on Race, Power and Political Economy provides technical assistance to states and communities wanting to learn more about and implement a Baby Bonds program, and their phone is ringing off the hook. They provide research, sample legislation and help states customize a program that works for the resources they have to put toward it. In addition to Connecticut, Washington D.C. launched its own Baby Bonds program and 16 states have bills moving through their legislature to implement one. Several states, including Minnesota and Hawaii, are in the process of learning more about them. Federal legislation to create a nationwide Baby Bonds program hasn’t gotten traction, so states are leading the way.
Bipartisan Support
Baby Bonds have bipartisan support in the states working to enact them. Progressives and conservatives understand that they help stem population loss, especially in rural and urban areas, retain future workers and help create a prosperous economic future for the state. They are prioritizing their programs for their most vulnerable and low income residents, many of whom come from communities who historically have been denied access to wealth building programs, as a way to have the greatest impact given their limited resources. State officials understand that people who have economic stability put less pressure on the health, education, criminal justice and human service systems they operate. Nonprofits and foundations are important partners, especially in helping to prepare young people to make informed financial decisions with their money. There is hope that what states are doing will result in federal legislation finally passing to create a nationwide Baby Bonds program for every child born in the U.S.
Income and Wealth
Gary Cunningham
Currently, the racial wealth gap stands somewhere between $12 - $17 trillion depending on the economic model. That means the typical Black family has a dime for every dollar the typical white family has. While there are a lot of programs that exist to reduce the racial wealth gap, Gary says Baby Bonds are the first to “actually operate at the scale of the problem.”
Baby Bonds alone won’t eliminate the racial wealth gap, though it is estimated that they could close it by as much as 60%. People need income and wealth in order to thrive. Gary believes the families of children receiving Baby Bonds need help as well and universal basic income, which has proven to work, would do that. He is encouraged by a pilot program in Georgia providing guaranteed basic income to select low income urban and rural families to help them gain financial stability that is also raising funds to start a Baby Bonds program.
The U.S. has always prided itself on its economic mobility yet today our neighbor to the north has greater economic mobility than we do. Baby Bonds are a chance to change that by investing in people early on, so they can create better lives for themselves in the future. Baby Bonds will help provide the economic mobility we need and that will benefit us all, because in the words of Senator Paul Wellstone, “We all do better when we all do better.”
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