Md. governor candidate’s pitch to fight poverty: Trust funds for babies - The Samuel DuBois Cook Center on Social Equity at Duke University

Wes Moore October 19, 2022

Washington Post

If Democrat Wes Moore is elected Maryland’s governor, tackling childhood poverty is a “day one” priority for which he’s pitched an arsenal of expensive policy tools, including what could be the country’s largest “baby bonds” program to date.

Moore’s trust fund program would cost roughly $100 million per year and be seeded with $3,200 for every child born on Medicaid, which amounts to nearly 40 percent of Maryland’s infants, disproportionately those from Black and Latino families.

The goal is to ensure infants born in poverty arrive at adulthood on closer economic footing with their richer peers.

The proposal is among the most expansive interventions Moore has pitched to build a more equitable society in his “leave no one behind” campaign that, so far, has resonated in deeply blue Maryland. He holds a 32-percentage point lead in a recent poll over his Trump-backed opponent, Del. Dan Cox (R-Frederick).

But like many of his proposals, Moore has not identified a specific way to pay for baby bonds and broadly said he would work it out with the legislature. Instead of specifics, he points to a historic infusion of federal aid and a $2 billion surplus generated in large part by Maryland’s richest residents growing richer.

There’s a serious proposal to give babies born in the United States $20,000 (or more)

It’s not clear if the money will be there in the future to pay for it, and the scope of the pitch is far bigger than other programs quickly undertaken in Maryland, which just last year accomplished a long-sought goal to provide dental coverage to all adults on Medicaid.

Moore, former CEO of the poverty-fighting nonprofit Robin Hood Foundation, is undeterred, saying: “I believe deeply in making sure that we are being aggressive in terms of … making our state more competitive while also making it more equitable.”

The road to the 2022 Maryland Midterm Election

While about 12 percent of Maryland’s children live below the poverty line, according to 2020 data from the Annie E. Casey Foundation, many more qualify for Medicaid — 28 percent come from homes living at or below 200 percent of poverty. And aside from income disparities, minorities broadly hold less wealth: Nationwide, the typical White family holds eight times the wealth of a Black one and five times the wealth of Hispanic family, according to the Federal Reserve.

Baby bonds are designed as a race-neutral way to shrink that gap, giving a promise of a lump sum of cash to anyone born near the poverty line.

Developed by economists studying inequality a dozen years ago, the baby bonds concept has gained awareness since the 2020 racial justice protests. It infuses capital into the lives of young people encountering pivotal life choices about college or work, starting a business, saving for retirement or buying a home — times when wealthier counterparts may be able to count on a boost from parents.

Sen. Cory Booker (D-N.J.) helped popularize the idea during his 2020 presidential campaign and has unsuccessfully tried to create one at the federal level since 2018.

Booker planned to raise long-term capital gains and high-value estate taxes to pay for the $60 billion-per-year plan, drawing some criticismabout whether it would be politically possible or financially sustainable. The United Kingdom launched similar but more modest trust funds for babies born 2002 to 2010, but eliminated it as an austerity measure during the Great Recession.

But the program, never fully tested in the United States, has become a favorite liberal policy idea. It aims to weaken a pervasive wealth gap rooted in policies and laws that left families of color with fewer resources to pass on to their children than White families, who were not subject to centuries of economic discrimination.

The scope of endowments varies widely across proposed plans, with economists Darrick Hamilton and William Darity Jr., who developed the idea, suggesting that up to $60,000 in federal-government backed trusts and more-modest state proposals offer a maximum benefit closer to $11,000. An analysis by Morningstar found Booker’s proposal, which would yield up to $50,000 when recipients turn 18, could cut the racial wealth gap in half.