Suggestion: Give each baby $1,000

Should every baby get $1,000? Senator Cory Booker says yes.

Here’s what you need to know.

Baby Bonds: “Stimulus Checks” for Babies

In February, Sen. Cory Booker (D-NJ) and Rep. Ayanna Pressley (D-MA) reintroduced the American Opportunity Accounts Act. Under the proposed legislation, every American child would receive a federally funded savings account — also called a baby bond — that would grow each year based on family income. The goal is to make economic opportunity a birthright for every American and to help close the racial wealth gap.

How baby bonds work

Here’s how baby bonds, called baby “stimulus checks,” would work:

  1. Each new baby receives a $1,000 savings account at birth;
  2. Additional deposits of up to $2,000 based on household income are added to the account each year.
  3. The savings account would earn 3% interest per year.
  4. The savings account can be accessed from the age of 18.
  5. The savings account can be used for things like buying a home, paying for college, or starting a business.
  6. The funds are paid for by the federal government.
  7. The savings account would be administered by the US Treasury Department

According to Booker, baby bonds under this proposal could cost the federal government $60 billion to $80 billion, which could give some moderates and conservatives pause. By age 18, the amount in a savings account can vary significantly based on income. For example, by the age of 18, low-income individuals could have a savings account of up to $50,000 while according to According to CNBC, a high-income person could have a $1,600 savings account. As of February, the proposed legislation received support from several Democratic senators such as Senate Majority Leader Chuck Schumer (D-NY), Sen. Elizabeth Warren (D-MA) and Sen. Bernie Sanders (I-VT), among others. “To truly ‘rebuild’ our economy better, we must not ignore the extreme and persistent wealth inequality that deprives children of economic opportunities from the very beginning,” Booker said. “…Baby Bonds will start to level the playing field. In a country as prosperous as ours, everyone should have access to economic opportunity and the opportunity to build wealth and create wealth…opportunity for all Americans.”

Baby Bonds: The Research

Accordingly research by Morningstar, “baby bonds” could help close the racial wealth gap in the US. The Federal Reserve found that “average white families had more than 7 times the wealth of average black families”. Morningstar says home equity may have an impact on how effectively baby bonds can bridge the racial wealth gap. For example, “When home equity is included in a family’s wealth, the gap is larger than when measuring household wealth without it.” Morningstar also suggested that baby bonds could be improved through a variety of measures, including additional payments for older children , Options for long-term investment and integration with 529 College Savings Plans. Integrating with a 529 plan — a savings vehicle you can use to pay for your education expenses — is especially important because, given the cost of higher education, baby bonds alone are unlikely to be financially sufficient to pay for college.

Student loan cancellation: relationship to the baby loan stimulus

President Joe Biden has now canceled $3 billion in student loans. Some have argued that foreclosure on student loans can not only provide economic stimulus but also help close the wealth gap. while there is various proposals for canceling student loans, the leading proposal in Congress, would cancel up to $50,000 in student loans for federal student loan borrowers who make up to $125,000 annually. However, the two policy proposals — student loan cancellation and babybonds — offer different approaches to closing the wealth gap. Cancellation of Student Loans is a retrospective measure in the sense that the policy would cancel student loans after Student loan borrowers have already borrowed them. However, large-scale student loan forgiveness is not helping student loan borrowers In front They borrow student loans to defray the cost of higher education. However, baby bonds are a proactive policy: they help children save for college, buy a home, or start a home birth to 18. In this regard, baby bonds can defray the cost of higher education and help student borrowers borrow less on college student loans In front they always participate.

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