Baby Bonds in the Opportunity Economy

What Are Baby Bonds?

In last week’s post on this blog, I said that baby bonds are among the things that may be needed to make Kamala Harris’s Opportunity Economy more than a slogan. Since many of my readers may not be familiar with the idea of baby bonds, I want to explain what they are and how they would work.

The idea is that each baby born in the United States would receive at birth a treasury bond that would be held in trust for the child until he or she reaches adulthood. The amount of the bond would depend on the wealth of the child’s family. Children born into wealthy families would receive smaller bonds than children born into poor families. Darity and Hamilton, who originally proposed the idea in 2010, suggested that children in the lowest wealth quartile might receive bonds worth at least $50,000, while children in the highest wealth quartile would receive a much smaller amount.

Each bond would be held in trust for the child until it reached adulthood, and the interest earned would be reinvested. When the child became an adult, the money would then become available to pay for education, to purchase a house or for any other approved purpose. While the bond was held in trust, it would appreciate considerably in value. A $50,000 bond earning 4% interest would be worth a little over $109,000 when the child reached the age of 21.

Why Give Baby Bonds?

The point of giving children baby bonds would be make equality of opportunity more real in the United States. In the United States today, wealth is very unequally distributed, and wealth can be passed on from one generation to the next. It may be passed on directly in the form of assets that are inherited, but it may also be passed on indirectly by paying for education or training. A young woman from an affluent family who wished to become an engineer, for instance, could obtain a degree in engineering without accumulating heavy debts to pay for it, because her family would be able to pay for her education. Her freedom from debt would then enable her to save money to buy a house, to fund her retirement or to pay for the education of her children, who, like their mother, would begin their professional lives without a heavy burden of debt. Thus, the family's wealth would be passed down through the generations.

In contrast, a young woman from a poor family would have to borrow a substantial amount of money to obtain an engineering degree, and the resulting debts would hamper her ability to save all through her life. She would never become as wealthy as her peer who began her professional career without the burden of debt. The poor woman would not be able to pay the full cost of her children's professional education, and so, they, too, would begin their professional lives with heavy burdens of debt. The family's situation would improve but only slowly across several generations.  The point of baby bonds is to eliminate at least some of the disparity between the young woman from an affluent family and the young woman from a poor family and to place them on a more equal footing. Thus, baby bonds would be an important element of the Opportunity Economy.

Some States Are Doing It

The baby bond idea is actually being implemented in some states. Time magazine reports:

In July 2023, Connecticut deposited $3200 into an account for a newborn creating the nation's first ever baby bond. Over the net 18 to 30 years, the effects of time and compounding interest will give that baby up to $24,000 to pay for college, make a down payment on a home, start a business or do other things that will shape her life and build wealth. 

Baby bonds should definitely be a part of the Opportunity Economy.

Making Harris's Opportunity Economy Real

 Harris's "Opportunity Economy" Proposal

At last week’s debate, Kamala Harris presented the idea of an “Opportunity Economy,” as her approach to dealing with our country's serious economic problems. The specific proposals that she presented under that rubric had obviously been carefully chosen to appeal to the tiny minority of “moderate” voters who will decide the election in November and to counter the Republican assertion that she is too “radical.”  The proposals included:

• A tax cut for families with young children
• A tax cut for small-business startups
• A subsidy for first-time home buyers
• A commitment to go fight against price-gouging by businesses

The Proposal Does Not Go Nearly Far Enough

These are all worthwhile things to do, but they are very timid. Two of the proposals rely on tax cuts, which are right out of the Republican play book. Moreover, a tax cut for small-business startups feels suspiciously like trickle-down economics. The idea is that small businesses create jobs and therefore benefit workers. A subsidy for first-time home buyers sounds great, but it will benefit mainly real estate investors. The subsidy will probably drive up housing prices because it will increase the demand for houses without directly increasing the supply. 

Moreover, her discussion of the opportunity economy included no mention of several important issues that are related to making equality of opportunity real for working-class Americans. She said nothing about the cost of health care for working Americans. She said nothing about the way that the cost of childcare prevents working Americans from saving. She said nothing about the fact burden of student debt makes it difficult or impossible for many people to save enough to buy a house. So, her proposals, while worthwhile in themselves, will not be enough to build the Opportunity Economy.

Making the Opportunity Economy Real

In an earlier post on this blog, I argued that several progressive policies can easily be framed as policies to promote equality of opportunity, and everything that I said then fits well under the rubric of the “Opportunity Economy.” If we are serious about the idea of an opportunity economy, we will have to recognize that Harris’s proposals are far from a complete list of the things that need to be done. However, the idea of the "Opportunity Economy" is potentially broad enough to include much that needs to be done if the rubric is to be more than a slogan. Here are a few other things that we could do to turn our economy into a real economy of opportunity.

• Provide affordable childcare: If childcare were more affordable, working-class families would be able to save money to invest in their own and their children’s futures. 
• Forgive student loans and find a way to fund post-secondary education that does not require students to take on heavy debts: If people did not have to shoulder enormous debts to obtain college degrees or other advanced training, their education would bring a higher return, and they would have more money to invest in their own and their children’s futures. 
• Create a decent national health insurance system: If we had a national health insurance system, companies would not have to pay so much for their employees’ health insurance, and in that case, they would be able to pay higher wages which would in turn make it possible for workers to save money to invest in their own and their children’s futures.
• Make sure that abortions are available to those who need them: If abortions were legal in all states, working-class families would not have to fear the economic consequences of an unwanted pregnancy and could more easily save and invest for a brighter future.
• Provide Baby Bonds for all American Children: Baby bonds would go a long way toward equalizing opportunity across our social classes.

Each of these policies would make a difference by putting money into working-class people's pockets, and the money will enable them to invest in their futures and the futures of their children. Together, these policies would be a revolution in equality of opportunity. They would change the world for working-class Americans, and they might create a real Opportunity Economy. So, let's get on board with Kamala Harris's idea, and let's make sure that it is expanded to include the things that will be needed to make it more than a slogan.

Making Equality of Opportunity Real

What Do Progressive Policies Have to Do with Equality of Opportunity? 

In last week’s post, I said that progressive policies should be framed as policies that restore equality of opportunity in our country. Today, I want to explain why talking that way makes sense. What do things like national health care or affordable childcare have to do with equality of opportunity?

Getting Ahead Takes Money

In order to have equality of opportunity, we must not only eliminate barriers like discrimination based on race or gender. We must also give people the opportunity to acquire the resources needed to invest in their futures.  In order for people to get ahead, they must be able to save money to pay for training or to invest in a business. If people are living paycheck to paycheck and barely getting by, where will they find the money to pay for tuition or to start a business? If they are working two or three jobs just to pay the rent, where will they find the time to go to school?

Working-Class People Lack the Money

Today, we live in a time where a large and increasing share of the national income goes to a small upper class and to a patrimonial middleclass. For working-class people, wages have not kept up with the cost of living. Many people work two or even three jobs and still live paycheck to paycheck. Saving money to invest in a better future has become harder and harder for many people. Young people who come from families in the upper class or the patrimonial middle class have a much easier time acquiring college degrees and marketable skills. We cannot really say that there is equality of opportunity between the upper classes and the working class when the playing field is so steeply tilted against the latter .

Progressive Policies Have Everything to Do With Equality of Opportunity

In order to make opportunity more equal, we have to make it easier for working class people to save the money that they need to invest in their futures, and that is where the link between progressive policies and equality of opportunity may be found: 

• If childcare were more affordable, working-class families would be able to save money to invest in their own and their children’s futures. 
• If people did not have to shoulder enormous debts to obtain college degrees or other advanced training, their education would bring a higher return, and they would have more money to invest in their own and their children’s futures. 
• If we had a national health insurance system, companies would not have to pay so much for their employees’ health insurance, and in that case, they would be able to pay higher wages which would in turn make it possible for workers to save money to invest in their own and their children’s futures.
• If abortions were legal in all states, working-class families would not have to fear the economic consequences of an unwanted pregnancy. Working-class families could more easily plan for a brighter future.

Each of these policies would make a difference by putting money into people's pockets. Together, they would be a revolution in equality of opportunity. They would change the world for working-class Americans.

Equality of opportunity does not exist for people who do not have and cannot obtain the resources to invest in their futures or in the futures of their children. So, if we want equality of opportunity to be more than an empty promise, we must create the conditions that make equality of opportunity real. In order to create those conditions, we must persuade America's voters that the real purpose of progressive policies is to create those conditions. By framing our policies in terms of equality of opportunity, we can help the voters to see that we can make equality of opportunity real again in our country.

Equality of Opportunity as a Frame For Progressive Ideas

Recognizing a Contradiction 

Equality of opportunity can provide a strong frame for progressive ideas. To see why, we can begin by recognizing that - as I said in last week’s post on this blog - our people are suffering from a crisis of meaning and identity because of a deep contradiction between our values which stress opportunity and achievement and the reality of life in our country. That reality is that the structure of our economy limits opportunity and makes achievement extremely difficult. 

Fortunately, there are policies that would reduce the contradiction by changing the circumstances under which our people live. We can restore equality of opportunity. Things like a national health system or a better way of financing post-secondary education would make success easier by making people’s financial lives more secure. However, implementing such policies will be difficult because the Republican Party is strongly opposed to them.

Framing Our Ideas Using Widely Held Values to Persuade Voters

In order to overcome that opposition, we have to persuade a lot of voters[1] to support the kinds of reforms that we support, and to do that, we must frame our proposals in terms of values that the voters already accept. It has been shown that people vote their values. They do not vote directly for programs or policies; they vote for the values that they believe those programs or policies represent. Successful political appeals make use of values by claiming that certain widely accepted values demand that we enact certain policies. Successful political appeals repeat the claim over and over again in many different contexts until it becomes a part of what “everyone knows.”

We can appeal to the widely held values of fairness, a level playing field and equality of opportunity to frame the policies we support. Here is an example:

We believe that everyone ought to have the same opportunity to succeed, but our system has become rigged against hardworking Americans. Today, the children of rich people have a much better chance of succeeding than regular, hardworking Americans do, and that is unfair. We need to restore a level playing people that gives ordinary folks a chance to succeed, and to do that, we need to provide affordable childcare to give families a chance to get ahead.

Thus, we can counter the Republicans' claim that such a program would be a giveaway that unfairly taxes hardworking people to provide unearned benefits to lazy people.

Repetition is the Key

We need to state this over and over and over until it becomes part of what “everyone knows.” The reason for doing this is to get the voters to see affordable childcare from a new perspective. However, we wouldn't use this framing for affordable childcare only. We would use it in the same way for each of our policy proposals with the result that we would not merely be proposing affordable childcare, national health insurance or forgiveness of student debts. We would be proposing to restore equality of opportunity. We would be proposing to unrig a rigged system.

We Might Really Win

By framing our policy proposals in terms of widely accepted values, we would accomplish two things. First, we would acknowledge the lived reality of working-class Americans. They know that the system is rigged against them, and by framing our policies in terms of equality of opportunity, we would be saying that we understand the unfairness of their lives. Second, we would offer them the possibility that their lives could really be improved. Our narrative would be a believable alternative to the narrative presented by the MAGA Republicans. With such a narrative, we might really open the door to restoring equality of opportunity.

---

[1] We don’t need to persuade everyone. We only need to persuade a small percentage of the voters because elections are won by small margins.