Everyone born in Britain between Sept. 1, 2002, and Jan. 2, 2011, received a baby present from the government: a savings account that could not be tapped until the child turned 18, with an initial balance of between 250 and 1,000 pounds, depending on the family’s income.
This month, the oldest recipients started turning 18 and gained access to that money. Some of the accounts hold more than £5,000 ($6,480).
As any 18-year-old can tell you, money is the best of all possible high school graduation presents. It unlocks the gates of opportunity. And the British program gave money to children from families that had little of their own. The gifts were intended to chip away at the inequalities of wealth, and the resulting inequalities of opportunity, that weigh on developed nations.
Philip Murphy, the governor of New Jersey, proposed last month to create a similar program for children in his state, which would be the first such program in the United States. The “baby bonds” program would create a $1,000 savings account for each child born into a New Jersey household with an annual income below about $131,000.
The money eventually could be put toward school tuition, a down payment on a house or starting a business. Mr. Murphy’s office estimates roughly three-quarters of the state’s newborns would be eligible — around 72,000 children next year.
It is a proposal with the potential to change the trajectory of individual lives, giving New Jersey kids a better chance to thrive and prosper.
Black people are particularly disadvantaged by inequalities of wealth and opportunity in the United States — inequalities that are substantially a result of past and present racism.
Black households with children have on average about one penny in wealth for every dollar held by white households with children, according to a recent analysis by the sociologists Christine Percheski and Christina Gibson-Davis. That wealth gap has increased in recent decades and, strikingly, the gap between Black and white households with children is wider than the overall wealth gap for Black and white households.
The baby bonds program, which builds on the work of the economists Darrick Hamilton and William Darity Jr., is an elegant approach to reducing those racial gaps: Broader programs command broader support. The program would help everyone who needs it. It would create a baseline for individual wealth, limiting inequality in much the same way free public schooling limits inequalities in education. The disproportionate need among Black children would be reflected in the distribution of the benefits.
Senator Cory Booker of New Jersey has introduced federal legislation to create a national program under which children would receive a $1,000 present at birth, plus annual contributions of up to $2,000 a year based on family income. We have previously endorsed Mr. Booker’s plan, which deals in numbers large enough to make a real difference. Some children would get more than $40,000 when they turned 18.
Mr. Murphy is proposing to start small. New Jersey would give newborns a one-time payment of $1,000, with no commitment of more, although he has suggested that he’d like to do more.
The New Jersey nest eggs wouldn’t mature into game-changing sums without additional state contributions. The average cost of a year of community college in New Jersey is $6,125. The median home price last year topped $300,000.
But it’s much easier for a federal program to provide the big bucks. The real value of the New Jersey program may be in the work of hammering out the details, and the trial-and-error of implementation, which can provide lessons for creating a larger initiative.
One key question is how to invest the money. The magic of compound interest — put some money in a pot and watch it grow — isn’t so magical these days. At current rates, $1,000 invested in 30-year Treasuries for 18 years would amount to less than $1,500.
Mr. Murphy’s proposal has drawn fire from Republican legislators who argue that New Jersey cannot afford the roughly $80 million annual price tag. They note that Mr. Murphy is proposing sharp spending cuts, tax increases and borrowing to deal with the fiscal effects of the coronavirus pandemic, which has hit New Jersey harder than any other state.
Some conservatives also warn that children would be spoiled by the state gifts — a concern that oddly has not led those critics to demand the revival of estate taxation.
(In Britain, the Conservative Party phased out the government’s gifts after taking power in 2010, offering similar arguments: The government didn’t have enough money; the children were better off without it. A version of the savings accounts still exists, as tax advantaged vehicles for rich people to save their own money and pass it along to their children.)
The coronavirus crisis instead should be seen as the strongest argument for baby bonds. It has exposed and exacerbated the inequities of life and death in New Jersey and the rest of the nation. Job losses are concentrated among lower-income workers. Their families are struggling to avoid eviction. Their children are struggling to connect to virtual schools. All the while, stock prices keep on rising.
The urgency of the need for government action to check inequality has never been greater. As Mr. Murphy said in introducing the baby bond proposal, “You can’t ignore tomorrow.”
Every new birth is a chance to begin remaking the nation’s future, to help every child realize his or her potential. Without action now, future inequalities will only yawn wider.
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