Economist is pushing for newborns to get up to $84k to combat income inequality
AN ECONOMIST has proposed a daring idea to reduce income inequality by giving every newborn in the US a trust fund of up to $US60,000 — that’s $A84,000.
The funds would be set aside in federally managed coffers and grow at about 2 per cent each year until the child reaches adulthood.
Professor Darrick Hamilton of The New School and Professor William Darity of Duke University made the wild proposal at a TED conference in New York last week, saying the money could be used for “asset-enhancing activity,” like pursuing education, buying a home or starting a business.
He believes every child should enter the world with at least $US25,000 ($A35,000) in the bank, the basic premise of a “baby trust” — to combat income inequality.
“Wealth is the paramount indicator of economic security and wellbeing,” the economist told the crowd.
“It is wealth that begets more wealth.”
A baby trust would give an infant anywhere from $US500 ($A700) for those born into the richest families to $US60,000 ($A84,000) for the poorest, with an average endowment of $US25,000 ($A35,000), according to TedBlog.
The child would then be able to retrieve the funds when they reach adulthood, withdrawing it for educational purposes, property or to help start a business.
Essentially social security in reverse, Prof Hamilton described it as “an economic birthright to capital for everyone”.
Business Insider reported that the single greatest cause of increasing income inequality in the US was CEO pay that was rising at a breakneck pace not in line with the rest of the economy.
Prof Hamilton said what’s “glaringly missing” from the country’s narrative about success is the role of power and capital in society and how they can be used to “alter the rules and structure of transactions and markets in the first place, Business Insider reported.
According to the publication, in the US, for example, the top 10 per cent of earners hold about 75 per cent of the wealth in the country and the wealth gap disproportionately affects people of colour.
“It is time to get beyond the false narrative that attributes inequalities to individual personal deficits while largely ignoring the advantages of wealth,” he said.
He said if his baby-trust-fund idea were to be implemented in the US today, the program would cost around $US100 billion ($A140 billion) a year.
“That’s only two per cent of annual federal expenditures and a fraction of the $US500 billion ($A700 billion) that the government now spends on subsidies and credits that favour the wealthy,” Prof Hamilton was reported as saying in the TedBlog.
“Inequality is primarily a structural problem, not a behavioural one,” he said, so it needs to be attacked with solutions that will change the existing structures of wealth.
He said it is designed to be a social safety net and it’s a system that seems to have benefited President Donald Trump. A New York Times investigation published on Tuesday found that he was a millionaire at age eight.
As for Prof Hamilton, his idea on a way to combat inequality is now up for debate — although even he admits there are “many details” to be worked out.
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