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The Viability of “Baby Bonds” on the Road to Reparations

In the midst of the country’s perennial discourse on such policy issues as health care, climate change, and gun control, the question of reparations for slavery has emerged as an unlikely, hotly contested entrant into the contemporary political conversation. Despite receiving ringing endorsements from 2020 presidential contenders on the stages of the Democratic primary debates, the issue remains polarizing and complex, with little indication that Congress will capitulate to these calls for reparations in the foreseeable future. However, in light of this newly reignited topic, the less well-known concept of a nationwide “baby bonds” program has been touted as a feasible companion to reparations, seeking to offer desperately needed capital to communities that have perpetually endured substandard living conditions. While the specifics of individual plans vary, “baby bonds” propositions foundationally aim to issue government bonds to children from birth until age 18, with the magnitude of forthcoming bond payments contingent on the financial status of a given child’s family. These proposals show genuine promise in their potential to catalyze improved social mobility for poorer communities and, moreover, to mitigate the racial wealth divide that has pervaded the US since the dawn of slavery.

The “baby bonds” system initially gained attention among lawmakers on Capitol Hill last year, when New Jersey Senator and Democratic presidential candidate Cory Booker introduced the American Opportunity Accounts Act. Under the Act, newborns would be entitled to federally regulated savings accounts with initial deposits of $1,000. Additional yearly deposits would be incrementally adjusted based on household income; for example, a child whose family possesses an aggregate income at or below the poverty level would earn the maximum amount of $2,000 per annum, whereas a child with a household income totaling five times the poverty line would earn no added savings. It is estimated that, for children from the lowest income bracket, American Opportunity Accounts would accrue over $46,000 in savings by age 18.

This type of enterprising plan has true potential to spur greater racial equity by targeting historically underserved Black youth. In fact, among racial classifications, Black children were most likely to be impoverished in 2018, as 32 percent lived in families with incomes below the poverty line. Thus, in accordance with the legislation that Booker and others have backed, these African-American children would be eligible for the maximal “baby bonds” account contributions and would be most positively impacted by this income redistribution design.

A “baby bonds” system would therefore serve to alleviate the vast racial wealth disparity ingrained in the socioeconomic status quo, which is especially urgent considering that, today, white youth possess roughly 16 times the wealth of Black youth. Astonishingly, using Panel Study of Income Dynamics (PSID) statistics and simulating wealth growth for current young adults under a “baby bonds” scheme, an analysis concluded that the program could decrease this alarming wealth inequality between Black and white young adults to a factor of just 1.4; this signifies a potential reduction in the racial economic divide of upwards of 90 percent. Naturally, rollout of such a far-reaching plan would be costly, with this particular scheme entailing an approximated price tag of $80 billion per year. While certainly no small amount, this figure constitutes only 1.7 percent of President Trump’s fiscal year 2020 federal budget request, and it would undoubtedly offset a sizable proportion of the more than $350 billion annually that the US government has spent on safety net programs in recent years.

A multitude of factors have coalesced to create the present-day economic chasm that “baby bonds” would strive to curtail. Fueled by stolen Black labor worth as much as $97 trillion over nearly 250 years, the “original sin” of slavery was a tragic launching point for the pattern of discrimination and economic exploitation that African-Americans would continue to experience in the form of structural racism, a phenomenon that also commonly underlies arguments in favor of reparations. In arguably the most blatant instance of this structural racism, the Federal Housing Administration’s 20th-century redlining practices blocked residents of Black neighborhoods from acquiring private mortgage insurance, an unscrupulous arrangement that came to permeate the US mortgage lending industry as a whole. Separately, following World War II, policies like the GI Bill facilitated college enrollment for primarily white service members, further engendering an atmosphere of institutionalized racism that has hindered long-term wealth accumulation among Black communities and has, in turn, widened the racial wealth gap.

“Baby bonds” effectively address this deep-seated history of economic discrimination by extending enhanced social mobility to young Black populations. Booker’s proposed bill, for one, specifies that “baby bond” account funds must be used to invest in education, home ownership, or related sectors. By providing mainly Black, underprivileged individuals with augmented savings for designated uses, this enables these communities to accumulate the cross-generational wealth that has unjustly evaded them for so long.

From a politically pragmatic standpoint, perhaps the strongest asset of the “baby bonds” model is indeed its intrinsic race neutrality. This renders irrelevant the misgivings of reparations opponents—like Senate Majority Leader Mitch McConnell—who decry the potential logistical challenges of reparations and believe that such an initiative would unfairly punish whites for the crimes of their ancestors. Consequently, the unconditionality of the “baby bonds” mechanism as it pertains to race presents an inherent counter to those who are currently unwilling to embrace full-fledged reparations. Because all Americans would accrue some level of capital under this framework, and because the tiered nature of the system would alter holders’ account contributions based not on race but on cumulative household wealth, “baby bonds” benefit from being racially impartial on paper, even if they serve the practical ulterior purpose of mostly aiding Black families.

At the same time, in line with what its supporters have been quick to delineate, “baby bonds” should by no means be perceived as a substitute to long-overdue reparations. Whether it be the monetary penance paid by Germany to Jews in the wake of the Holocaust, or by South Africa to apartheid victims, or even by the US to Japanese-Americans interned during World War II, the movement to grant reparations to the descendants of slaves seems intuitive and is rooted in historical precedent. Even still, the lack of current popular support among Americans—two in three of whom oppose reparations—is significant, so “baby bonds” can best be viewed as a more expeditious way to achieve the egalitarian goals set forth by reparations proponents, and to thereby accelerate the nation’s path towards racial progressivism. In this way, modern “baby bonds” proposals are envisioned as complements to reparations, bearing the advantageous ability to more immediately cater to the hardships faced by predominantly Black and minority communities.

Photo: Image via Gage Skidmore (Flickr)