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Baby bonds
Baby bonds are a government policy in which every child receives at birth a publicly funded trust account, potentially with more generous funding for lower-income families. Economists William Darity and Darrick Hamilton proposed the policy in 2010 as a mechanism to reduce the racial wealth gap in the United States. A 2019 analysis of the proposal by Naomi Zewde projects that baby bonds would reduce the median racial wealth gap between white and black young Americans from a factor of 16 to a factor of 1.4.
One example is the now-defunct child trust fund in the United Kingdom.
In American English, the term "baby bond" can alternatively refer to a bond with a par value of $1,000 or less.
In Hungary, babies born after December 31, 2005 receive a tax-free savings bond with a value of approximately 40,000 forints ($185 in 2005), which is kept in a special bank account until the child turns 18. Children in need receive an additional payment at age 7 and 14. Parents in Hungary can make additional tax-free deposits.
Baby bond plans have been proposed in the United States to reduce the racial wealth gap.
A one-time $5,000 baby bond plan was introduced by U.S. presidential candidate Hillary Clinton during the 2008 Democratic Party presidential primaries, but the plan was later removed from her platform. Darity and Hamilton then published their article "Can 'Baby Bonds' Eliminate the Racial Wealth Gap in Putative Post-Racial America?" in the Review of Black Political Economy in 2010, which reinvigorated the consideration of baby bonds.
The racial wealth gap in the United States is well-documented: a 2020 study by Ashman and Neumuller found, based on Survey of Consumer Finances data from 1989–2016, that the median net worth of white families was seven times greater than the median net worth of black families. Wealth begets wealth: wealthier families are more likely to finance education for their children, build ownership and stock portfolios, and bequeath wealth, which continues the cycle. A 2017 Urban Institute report quantified these impacts: among people whose parents did not attend college, those from high-wealth families were 26% more likely to attend at least two years of college than those from low-wealth families.
The root cause of the racial wealth gap is debated within the academic literature, with income inequality and differences in savings and homeownership rates being offered as potential causes. Even among quantitative studies, the percentage of the racial wealth gap attributed to any one of these causes varies widely. A 2016 analysis by Herring and Henderson which used data from the Survey of Consumer Finances, drew a dichotomy between cultural factors, such as savings rate, and structural factors, such as housing discrimination. Herring and Henderson found that structural factors explained more of the racial wealth gap than cultural factors, but that even if all factors between White and Black Americans were equal, the mean racial wealth gap would remain at around $155,000.
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Baby bonds
Baby bonds are a government policy in which every child receives at birth a publicly funded trust account, potentially with more generous funding for lower-income families. Economists William Darity and Darrick Hamilton proposed the policy in 2010 as a mechanism to reduce the racial wealth gap in the United States. A 2019 analysis of the proposal by Naomi Zewde projects that baby bonds would reduce the median racial wealth gap between white and black young Americans from a factor of 16 to a factor of 1.4.
One example is the now-defunct child trust fund in the United Kingdom.
In American English, the term "baby bond" can alternatively refer to a bond with a par value of $1,000 or less.
In Hungary, babies born after December 31, 2005 receive a tax-free savings bond with a value of approximately 40,000 forints ($185 in 2005), which is kept in a special bank account until the child turns 18. Children in need receive an additional payment at age 7 and 14. Parents in Hungary can make additional tax-free deposits.
Baby bond plans have been proposed in the United States to reduce the racial wealth gap.
A one-time $5,000 baby bond plan was introduced by U.S. presidential candidate Hillary Clinton during the 2008 Democratic Party presidential primaries, but the plan was later removed from her platform. Darity and Hamilton then published their article "Can 'Baby Bonds' Eliminate the Racial Wealth Gap in Putative Post-Racial America?" in the Review of Black Political Economy in 2010, which reinvigorated the consideration of baby bonds.
The racial wealth gap in the United States is well-documented: a 2020 study by Ashman and Neumuller found, based on Survey of Consumer Finances data from 1989–2016, that the median net worth of white families was seven times greater than the median net worth of black families. Wealth begets wealth: wealthier families are more likely to finance education for their children, build ownership and stock portfolios, and bequeath wealth, which continues the cycle. A 2017 Urban Institute report quantified these impacts: among people whose parents did not attend college, those from high-wealth families were 26% more likely to attend at least two years of college than those from low-wealth families.
The root cause of the racial wealth gap is debated within the academic literature, with income inequality and differences in savings and homeownership rates being offered as potential causes. Even among quantitative studies, the percentage of the racial wealth gap attributed to any one of these causes varies widely. A 2016 analysis by Herring and Henderson which used data from the Survey of Consumer Finances, drew a dichotomy between cultural factors, such as savings rate, and structural factors, such as housing discrimination. Herring and Henderson found that structural factors explained more of the racial wealth gap than cultural factors, but that even if all factors between White and Black Americans were equal, the mean racial wealth gap would remain at around $155,000.