On Thanksgiving, families share more than just food and memories
This Thanksgiving, families across the country will gather around dining room tables to share home-cooked food, reminisce, talk politics (unfortunately), and give thanks. One thing a family shares, however, will likely linger unsaid. It’s something that binds each and every member of a family together for good or ill: the money that flows under the table, from parents to children, from cousin to cousin, and between in-laws. Most families share everything, including wealth, or their lack of it.
It should come as no surprise that certain types of families have more wealth than others. The median white American family is worth 10 times the median black family — and this wealth gap is a problem for everyone.
Sen. Cory Booker, D-N.J., recently rolled out his plan to address the racial wealth gap, the American Opportunity Accounts Act. The Booker bill creates a system of “baby bonds” that works something like this: Every child born in America receives with their Social Security number an investment account containing $1,000. Changes to the tax code would send annual deposits into that account, capped at $2,000 and relative to a family's income. The money sits, grows, and then you get access to it at age 18 for restricted use on education, home-buying, or retirement savings.
This approach to combating poverty takes a longer view at the problems of America’s most perpetually poor communities. It acknowledges that economic prosperity is bound to what you own and that which can accumulate value, and that for black Americans, this is a matter of catching up.
The issue of wealth is radically different and more politically volatile than that of income. Politicians are nearsighted and prefer to debate how much money people are taking home in their paychecks. It’s a cleaner and simpler issue. They are reluctant, however, to raise questions over wealth — and adding race to the conversation is its own can of worms.
The consensus is that if you have wealth, you earned it. The prosperity of free-market economies is evidence enough that this belief is worth preserving, but with a big caveat. There is one reliable indicator of how an individual is likely to do economically over the course of their life — the level of wealth they were born into. Outliers exist and rags-to-riches stories are real, but the truth is that poverty usually leads to more poverty, generationally.
Conservative scholars rightly look to family stability within impoverished families as a predictor of future success, while progressives tend to focus on race. Both are right.
If you’re thinking this is another wild progressive scheme to expand the size and role of government into the lives of ordinary people, you’d be only half right. Tackling the racial wealth gap through Baby Bonds would be expensive. William Darity Jr., an economist at Duke University, estimated the average account would end up containing $20,000, with as much as $60,000 for the poorest recipients. The price tag comes out around $80 billion a year, or about $1 trillion over 10 years with inflation.
Read the full article here.