DC’s ground-breaking ‘Baby Bonds’ plan aims to narrow the wealth gap | Health-med-fit

WASHINGTON (AP) — Aaliyah Manning’s dreams of becoming a psychologist were cut short during her freshman year at Potomac State in West Virginia when the cost of continuing her education became prohibitive.

“There was just no money,” she said. “I knew I wasn’t going to finish, so I just had fun.”

A year later, 25-year-old Manning returned to the nation’s capital, working in fast food. Now she lives mostly on public assistance in a two-bedroom apartment with her boyfriend, his mother and his 9-year-old daughter from other relatives. She still has student debt and a baby boy.

She sees a bright future for this child, thanks to a landmark social program first implemented in Washington. The program, called Baby Bonds, will give children from the city’s poorest families up to $25,000 when they reach adulthood. The money will be used for various purposes, including education.

“It would be such a different opportunity for him, so much different than what I had,” Manning said of her soon-to-be-born child.

In just over a decade, the idea of ​​Baby Bonds has gone from a far-left concept to real policy, with DC as the first laboratory. Lawmakers from coast to coast are watching an experiment that supporters say could change America’s growing wealth gap in a generation if it gets going at the federal level.

A week after giving birth to her second child, daughter Kali, Aaliyah Wright told The Associated Press that she didn’t expect to have much in savings to help her children when they reach adulthood, especially with about $80,000 in student loan debt.

She and her husband, Kainan, are on Medicaid despite having full-time jobs (she’s an NGO worker and he’s a hairdresser) and an estimated annual income of about $70,000.

Even at that income level, their newborn daughter could qualify for the city’s Baby Bonds program, albeit at a lower level.

“At this stage of maturity and maturity, that money can open the door to some pretty big things,” Kainan Wright said.

Despite the name, the bonds are more accurately trust funds designed to provide capital gains at a critical time in the lives of the country’s poorest children. At age 18, each enrolled child will receive a large lump sum payment that can be used to pay for higher education, business investments or a down payment on a home.

“Think about what people with money do to support themselves, or what parents do for their children,” said Kenyan McDuffie, a member of the D.C. Council who promoted Washington Baby Bonds Program last summer. The clock started ticking in October, and as of mid-August, the city had identified 833 babies born since then who will receive up to $25,000 when they turn 18.

“Think of all those young people who are going to be here in a poverty-stricken city, graduating at 18,” McDuffie said. “And then have an account with money for them.”

This is an expensive and long-term investment that, by definition, will require a generation of sustained political will to truly bear fruit. In the first four years alone, $32 million will be spent on the district program.

This idea was originally proposed by scientists in 2010 William Darity and Derrick Hamilton as a way to break the cycle of poverty by giving children from poor families a chance to build long-term capital—either real property, equity in a business, or the earning potential that comes from a college education.

It attracted attention when Senator Cory Booker, DN.J.made it a centerpiece of his 2020 presidential campaign.

“I think it’s a growing idea,” Booker told the AP. “And this is a great idea. This is at the level of social security. This is at the Medicare level. One generation would create dramatic changes.”

But for politicians, the price tag can be daunting. Booker’s national plan called for $60 billion in annual spending, which he proposes to finance by raising taxes on the wealthy.

For now, Washington’s experiment will be closely watched by other state and local governments, with Baby Bond proposals recently appearing in Wisconsin and Washington state and Massachusetts. California just created a more targeted versionfrom Baby Bonds funds specifically for children who have lost a parent due to COVID-19.

Manning and her boyfriend, Darren Gibson, say expecting their child to be part of the county’s first generation of Baby Bonds is a much-needed injection of hope. Gibson, 26, left high school three points shy of graduation. He is now the sole breadwinner for his growing family, earning less than $10,000 a year as a videographer shooting music videos for local artists.

“It takes such a weight off my shoulders,” he said. Gibson said he will raise his son to put the money to good use when he gets older. “I have to work on him and make sure he fulfills his ambitions.”

The concept’s journey from academic thought experiment to on-the-ground policy received a major boost from the national debate on pandemic-induced poverty. The economic lawlessness exposed by COVID-19 has sparked calls for a new approach to the cycle of generational poverty. And the concept of Baby Bonds, already familiar from the Booker campaign, gained new momentum with a number of proposals being seriously considered at the state level.

But most of them never saw the light of day.

Governor Phil Murphy, DNJ, made headlines in 2020 for supporting a Baby Bonds offer. But the Legislature cut it from his budget, and Murphy no longer proposed it.

In June 2021, Connecticut’s legislature approved the first in the nation the state-level Baby Bonds program. But in May of this year, lawmakers, in agreement with the governor, decided to delay the start of the program for two years.

This makes Washington, DC the first real test case.

Connecticut State Treasurer Sean Wooden, who championed the program, said he was surprised and disappointed by the delay in his state, but remains convinced the policy’s time has come.

“There’s quite a lot of interest in it, and always with these things we need what we call firsts,” Wooden said. For the concept to spread, “there has to be success in Connecticut. There should be success in D.C.”

Wooden discussed Baby Bonds with members of President Joe Biden’s domestic policy team. McDuffie’s office fielded requests from several state governments.

The concept is new enough that it is still being refined in real time with many models and internal debates among advocates about how best to define suitability. Washington’s program is so new that 833 eligible families have not yet been notified and will not be notified until the city hires a fund manager.

The state of Connecticut automatically enrolls any newborn in the family into the state’s Medicaid program. Booker’s proposal would get around that problem by giving every child born in the country a baby bond fund and $1,000 in seed money. In that case, all subsequent payments to the fund would be largely directed to poorer families.

Washington’s program is open to families on Medicaid who make less than 300% of the federal poverty line, which means earnings up to about $83,250 for a family of four. With these parameters, it is designed to benefit not only the impoverished, but also families like Wright’s, who could be considered lower middle class.

At their income level, their daughter would receive closer to $15,000 instead of the $25,000 limit.

There is one unavoidable feature of the system: any Baby Bonds program must set a start date that excludes those born before it. In the case of the Wright family, Kali would get help, but her older brother Khaza would not. Alia Wright was fine with that.

“Okay, I know my future is set for one child,” Wright said. “So now I need to focus on making things work for him.”

There are differences between the plans in the amount of the final payment. Booker’s proposal would pay about $46,000 to children from the poorest families, while the county expects to pay a maximum of $25,000. Connecticut’s plan would pay about $13,000 — what Wooden described as “pretty much the floor” — for a serious attempt at the Baby Bonds program.

Naomi Zeude, an assistant professor of health economics at the City University of New York who conducted an analysis of the concept in 2019, set the minimum effective payment at $15,000.

“It has to be an amount of money that’s outside of what people normally encounter,” she said.

Zewde’s analysis suggested that a nationwide federal Baby Bonds program would have greatly reduced the racial wealth gap between white and black Americans in one generation, even as it boosted the growth of both races.

Currently, the average wealth of young white Americans is $46,000, compared to $2,900 for black Americans.

For the Baby Bonds program to succeed, it needs to be national and have strong public support, advocates say.

Darity, the Duke professor who co-authored the original Baby Bonds proposal, points to Britain, which established a similar program called the Baby Trust Fund in 2005. But the program was terminated and all future payments stopped in 2010 as part of a government austerity campaign.

“I think the assessment in England was that they didn’t build mass support for the policy when they started it,” he said. “Therefore, there was no strong opposition to the elimination of the plan.”

In the United States, the program has already been strongly supported by prominent liberal organizations such as the Urban Institute and Prosperity Now.

But there are also detractors.

Veronique de Rugy, a senior fellow at George Mason University’s Mercatus Center, said the one-way nature of deposits, with no mechanism for families themselves to add money, “is not conducive to a savings culture.”

She added that the program could tie up millions that could be used to address immediate social conditions that also help fuel the cycle of poverty.

“A lot of these kids are still going to be stuck in bad schools,” she said.

Michael Strain, an economist at the conservative American Enterprise Institute, says Baby Bonds supporters will have a hard time convincing lawmakers across the country to make such a costly commitment. “I absolutely think it’s a hard sell,” he said. “An 18-year lag is less of a political obstacle than a price tag.”

Wooden rejected the notion that Baby Bonds do not pay for themselves over 18 years, saying the benefits would be immediate and measurable. The nest, he says, will inspire real-time changes in the planning, academic achievement and overall ambitions of both children and families.

“Hope should be highly valued,” he said. “We know what hopelessness looks like in our communities.

Manning, a young mother-to-be from Washington, said knowing the money is waiting for her son will change the way her family talks about his future.

“It would be much more targeted,” she said. “Do you know what you want to do? What are your plans?”

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