Should Each Baby Receive $ 1,000? Senator Cory Booker says “yes”.
Here’s what you need to know.
Baby ties: “stimulation checks” for babies
In February, Senator Cory Booker (D-NJ) and Representative Ayanna Pressley (D-MA) reintroduced the American Opportunity Accounts Act. Under this bill, every American child would get a federally funded savings account – also known as Baby Bond – that would increase each year based on family income. The goal is to make economic opportunity a birthright for every American and help close the racial wealth gap.
How baby ties work
Here’s how baby ties, called âstimulation controlsâ for babies, would work:
- Each newborn gets a savings account of $ 1,000 at birth;
- Each year, additional deposits of up to $ 2,000, depending on household income, are deposited into the account.
- The savings account would earn 3% interest per year.
- From the age of 18, the savings account is accessible.
- The savings account can be used for things like buying a home, paying for college education, or starting a business.
- The funds are paid by the federal government.
- The savings account would be managed by the US Treasury
According to Booker, baby bonds under this proposal could cost the federal government $ 60 billion to $ 80 billion, which could result in a moderate and conservative pause. At age 18, the amount in a savings account can vary widely depending on income. For example, low-income people might have a savings account of up to $ 50,000 by age 18, while, according to CNBC, a high-income person might have a savings account of $ 1,600. . In February, the bill won the support of several Democratic senators such as Senate Majority Leader Chuck Schumer (D-NY), Senator Elizabeth Warren (D-MA) and Senator Bernie Sanders (I-VT ), among others. âTo truly ‘rebuild better’ our economy, we cannot ignore the extreme and persistent wealth inequality that deprives children of economic opportunities from the start,â Booker said. “… Baby Bonds will begin to level the playing field. In a country as wealthy as ours, every person should have access to economic opportunities and the ability to build assets and create wealth …” This legislation represents an ambitious, factual and practical approach to laying the groundwork for creating wealth and opportunity for all Americans.
Baby links: research
According to Morningstar research, âbaby bondsâ could help narrow the racial wealth gap in the United States. The Federal Reserve found that “average white families were more than 7 times the wealth of average black families.” Morningstar says home equity can have an impact on how effectively baby bonds can close the racial wealth gap. For example, “when you include home equity in a family’s wealth, the gap is larger than when you measure household wealth without it.” Morningstar also proposed that Baby Bonds could be improved through several different measures, including additional payments for older children, long-term investment options, and integration with 529 education savings plans. Integration with a 529 plan – a savings vehicle that helps you pay for education costs – is especially important because given the cost of higher education, baby bonds on their own are unlikely to be enough to save you. pay for university studies.
Student loan cancellation: relationship with the relaunch of baby bonds
President Joe Biden has now canceled $ 3 billion in student loans. Canceling student loans, some argue, can not only boost the economy, but can also help close the wealth gap. While there are different proposals to cancel student loans, Congress’ main proposal would cancel up to $ 50,000 in student loans for federal student loan borrowers who earn up to $ 125,000 per year. However, the two policy proposals – student loan cancellation and baby bonds – offer various approaches to closing the wealth gap. Cancellation of student loans is retroactive in that the policy would cancel student loans after student loan borrowers have already borrowed them. Large-scale student loan cancellation does not help student borrowers, however. before they borrow student loans to help pay the cost of higher education. However, Baby Bonds are a proactive policy: they help kids save for college, buy a home, or start a business. birth to 18. In this regard, baby bonds can cover the costs of higher education and help student borrowers to borrow less student loans for college. before they never attend.