Baby Bonds: A Universal Path to Ensure the Next Generation Has the Capital to Thrive

Bond certificate

Key Findings

  • If current trends continue, by 2020 the median white household will own 86 times more wealth than the median black household.
  • The Baby Bonds policy (as outlined by Cory Booker’s Opportunity Accounts program) would provide every child in America an account seeded with $1,000 to $3,000, an amount allocated in inverse proportions to that child’s family’s income. Each subsequent year, children would be eligible for additional payments based on family income until at age 18, when they would be able to access these accounts for specified uses including education, homeownership, and retirement.
  • The average Baby Bond account for black Americans is estimated to sum to roughly $29,000 at age 18; the equivalent white Baby Bond account would contain about $15,800. Overall, the proposal would cost approximately $82 billion annually, or less than 10 percent of the annual expenditure on social security.
  • Currently, black America has nine cents to every dollar of wealth that white America possesses: Booker’s proposal would increase that proportion to twenty-three cents on the dollar. (At the median, Black Americans would rise from possessing ten percent of the wealth of white Americans to having sixty percent.) Greater remedies would likely require a multi-pronged approach to addressing economic mobility for these long-marginalized communities.

For the vast majority of the population, the “American Dream” has always been just that: a dream. Because of societal constraints based on race, gender, and physical ability, as well as the spiraling effects of wealth transmission across generations that benefit smaller and smaller portions of the citizenry, America has now become the most unequal developed country in the world.

However, while the U.S. government has enabled the development of many of these wealth disparities, it similarly possesses the capacity to remedy them. One universal, race-conscious policy that can do this is Baby Bonds, a version of which has been proposed by New Jersey senator Cory Booker, a 2020 Democratic presidential candidate. This paper explores the roots of racial wealth inequality and demonstrates the expected impact of Baby Bonds on these disparities, while also acknowledging the limitations of just one policy to overcome the vast racial wealth gap.