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DC's pioneering 'Baby Bonds' plan aims to narrow wealth gap

Aaliyah Wright, Kainan Wright
Posted at 10:36 AM, Aug 21, 2022
and last updated 2022-08-21 13:36:24-04

WASHINGTON (AP) — Aaliyah Manning's dreams of becoming a psychologist ended abruptly during her freshman year at Potomac State in West Virginia when the cost of continuing her education became overwhelming.

"The money just wasn't there," said Manning, 25. "I knew I wasn't going to finish so I just had fun."

After a year, she was back in the nation's capital working fast food jobs. Now she lives largely on public assistance in a two-bedroom apartment with her boyfriend, his mother and his 9-year-old daughter from another relationship. She still has student debt and there's a baby boy on the way.

She sees a brighter future for that baby, thanks to a landmark social program being pioneered in Washington. Called "Baby Bonds," it will provide children of the city's poorest families with up to $25,000 when they reach adulthood — for use on multiple purposes, including education.

"It would be such a different opportunity for him, a lot different than what I had," she said.

The Baby Bonds idea has swiftly moved from a fringe leftist concept to actual policy — with the District of Columbia as first laboratory. Lawmakers from coast to coast are monitoring the experiment, one that proponents say could reshape America's growing wealth gap in a single generation if instituted on a federal level.

One week after giving birth to her second child, a daughter named Kali, Aaliyah Wright told The Associated Press that she didn't anticipate having much savings to help her children when they reached adulthood, especially with about $80,000 in college loan debt.

She and her husband, Kainan, are on Medicaid despite steady jobs (she's a case worker at a nongovernmental organization and he's a barber) and an estimated annual income around $70,000.

Even at that income level, their new daughter still would qualify for the district's program, although at a lower level.

"At that stage of maturity and adulthood, that money can be a door opener to some pretty big things," Kainan Wright said

The bonds are more accurately trust funds, designed to provide a financial boost at a critical time for the poorest children. At age 18, each enrolled child would receive a lump sum payment that can be used to fund higher education, invest in a business or make a mortgage down payment.

"Think about all the things that people with money do to support themselves or what parents do for kids," said Kenyan McDuffie, a District of Columbia Council member who pushed the Baby Bonds program through last summer. The city has so far identified 833 babies born since then who will receive up to $25,000 when they turn 18.

The concept, originally proposed by academics in 2010, came to mainstream attention when New Jersey Sen. Cory Booker, D-N.J., made it a centerpiece of his 2020 presidential campaign.

"I think it's an idea that's growing," Booker said. "And it's a big idea. It's on the level of Social Security. It's on the level of Medicare." He added: "One generation would create a dramatic change."

But for politicians, the price tag can be daunting. Booker's national plan envisioned annual costs of $60 billion, something he proposes funding by raising taxes on the wealthy.

Washington's program will cost $32 million for the first four years alone.

Despite the price tag, Baby Bonds proposals have recently emerged in Wisconsin and Washington state. while Massachusetts has convened a task force on the issue. California just created a version, with Baby Bonds funds specifically for children who lost parents to COVID.

The concept's journey from academia to on-the-ground policy received a boost from the national conversation on poverty brought on by the pandemic as multiple proposals put forward at the state level.

But most have failed to see daylight.

Gov. Phil Murphy, D-N.J., publicly backed a Baby Bonds proposal in 2020. But the Legislature stripped it from his budget, and Murphy did not propose it again.

In June 2021, Connecticut's legislature approved America's first state-level Baby Bonds program. But in May of this year, that same government delayed the start by two years.

Connecticut's treasurer, Shawn Wooden, who championed the program, said he remains convinced the policy's time has come. "There's quite the level of interest in this," he said. "And always with these things we need what we call first movers."

Wooden has discussed Baby Bonds with members of President Joe Biden's domestic policy team. McDuffie's office has fielded queries from multiple state governments.

The concept is new enough that it's still being tinkered with in real time, with multiple models and internal debates among advocates on issues like how best to determine eligibility.

Washington's program is open to families on Medicaid making less than 300% of the federal poverty line: about $83,250 for a family of four. Connecticut's will automatically enroll any newborn from a family on the state's Medicaid program.

Booker's proposal would have granted every newborn a Baby Bonds fund and $1,000 in seed money; all subsequent payments into the fund would have been heavily weighted toward poorer families.

There are also differences in payouts. Booker's proposal would have paid about $46,000 to children of the poorest families, while Washington expects to pay a maximum of $25,000. Connecticut's plan would pay about $13,000 — something Wooden described as "pretty much the floor" for a serious Baby Bonds attempt.

Naomi Zewde, an assistant professor in health economics at the City University of New York, said her 2019 analysis of the Baby Bonds concept suggested the program would boost the economic standing of both white and Black Americans while massively shrinking the racial wealth gap.

But there are detractors.

Veronique de Rugy, a senior research fellow at George Mason University's Mercatus Center, said the program could tie up millions that could be used to address immediate immediate needs. At the same time, she said, it "does nothing to encourage the culture of savings."

Economist Michael Strain of the conservative American Enterprise Institute says the price tag makes the program "a hard sell."

Wooden counters that the program will have an immediate impact, leading to real-time behavioral changes in planning, academics and ambition.

"How much is enough to inspire a kid and their family to think about the future," he said. "There is a high value that should be placed on hope. We know what hopelessness looks like in our communities."

Manning, the expectant mother, said knowing about the program and its payout would change the way they talk about her son's future.

"It would be much more focused," she said. "'Do you know what you want to do? What are your plans?'"


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