"Baby Bonds" is a Big Idea
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2008 Election, Democratic Presidential Candidate, Hillary Baby Bonds, Hillary Clinton,
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Senator Clinton's suggestion last week that we create "Baby Bonds" is a good, big idea which is already working in Great Britain--and would work here. These $5,000 bonds for newborns would be a starter kit for success, a kind of early IRA helping children of all income brackets go to college, buy a house, invest in the market, or the like.
Predictably, thrifty right-wingers who've never complained about W's excesses immediately started yelling about its cost and its supposed similarity to McGovern's $1,000 "Demogrants" to all in 1972, but this proposal deserves substantive debate. It shouldn't get buried in a presidential race filled, so far, with endless media thumb-sucking about polls and money. The national, economic and individual benefits of Baby Bonds are too significant to ignore:
- *Great Britain's "Child Trust Funds": Though the British program only began in 2005 for children born after Sept. 1, 2002, administrators are already seeing unprecedented jumps in savings rates in poor families. The head of one of the largest fund providers tells how one family deposited 30 baptism checks along with their bond. If we followed the UK's program, the government would provide parents with vouchers or bonds to start a child savings account for each baby. Parents could then decide how to manage these long-term savings accounts or have the government manage them.
Families would be encouraged to add to these tax-free accounts with additional vouchers available to low-income families who can not make the same contributions that wealthy families can as a child grows. Savings could only be withdrawn only when a child turns 18. In order to protect low-income families and the usefulness of Baby Bonds, households will not become ineligible for any tax credits they may otherwise receive when a child turns 18 and claims the funds. (The New Democracy Project, a non-profit I head, co-published a similar proposal last year as part of a 40-point "Democracy Protection Act." You can read it here.) - Fiscal & Economic Implications: With 4 million newborns annually, this proposal could cost some $20 billion a year. When Republicans need to find that much and more for subsidies to an oil industry making record profits or a war costing $10 billion a month or a drug prescription benefit for seniors, no problemo. Reagan-Bush 41's deficit financing in effect stole from Bill Clinton's budget and Bush 43 is stealing from (perhaps) Hillary Clinton's budget--but why should Republican administrations have all the fun? Why can't Democrats too propose new spending, especially since pay-as-you principles can still achieve balanced budgets. That is, just as a cigarette tax would have entirely funded the SCHIP expansion, a budget bill could deduct $20 billion from fossil fuel subsidies and transfer it to all newborns--or perhaps only those born to families with, say, under $1 million in net assets (exclusive of homeownership).
Much like the 1944 G.I. Bill, which invested in millions of veterans by helping them attend college or buy a house, Baby Bonds will ultimately build a stronger American economy and society. (Time's Richard Stengel upped the ante when he proposed a similar program that tied access to the bond to a year of national or military service.) Children participating in financial decisions as they approach 18 will likely pay more attention to the market and their government--one becomes more involved if one's own money is at stake. And since the American savings rate in 2006 went negative for the first time since the late 1940s, a savings account will naturally teach children to save from a young age, encouraging life-long financial planning. - Equal Opportunity means Economic Opportunity: In the past 30 years, real median income has remained flat while the top 1% has seen their income and wealth double. Authors like Kevin Phillips in his 2002 Wealth and Democracy and Robert Reich this month in Supercapitalism have documented the cavernous and growing divide between the rich and everyone else in our winner-take-all economy.
One way to increase opportunity for middle-class families is to allow their children to enjoy the magic of compound interest just as wealthier offspring do. This isn't about making everyone rich or letting young adults go on graduation trips and buy big flat-panel TVs; it's about partially leveling the playing field and returning to the meritocracy that has long defined our democracy. Take it from author and self-made multi-millionaire Peter Barnes: "I was lucky enough to have parents who paid for my education at Harvard, helped me purchase my first home and invested in my first startup. Now I've established trusts funds for my sons to do similar things. But what about the millions of American children who aren't as fortunate as mine?"
Since all sides of the political spectrum believe in economic opportunity, let's help 18-year-olds with a modest nest egg to start their adult lives. In 2005, 1 in 5 American families had zero or negative net wealth. America has the steepest inequality of any Western economy. If we wisely help those at the sunset of our lives with Social Security and Medicare, how about at the dawn of our lives with Baby Bonds?
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It is interesting that the comments are "abusive" this morning. I am a child of the WW2 generation. My parents and grandparents invested in defense bonds for me and my sister. I was also encouraged to open a bank savings account and put my "earnings" in that account. It amazed me to see how 25 cents or fifty cents a week could accumulate. Those bonds did assist me in getting a college education. The savings account paid for expenses such as meals and housing, and allowed me to purchase a used car to get to my part - time jobs. (I went before all the federal grants and finacial aid). I also won a competitive scholarship which helped me to finish a four year program. One of the problems that concerns me the most is to read all the hate, fear, and negativity that exists in this country. This idea might work. Give it a chance!
this is just another attempt by hilliary to kowtow to the investment bankers in ny. Just as phoney as bush's attempts to privaitze social security. thank God that one did not catch on. no need to wonder where all of hilliary's campaign contributions are coming from. she is a bought and paid for lackey of big money.
Perhaps, but this isn't "investment". This is the government stealing money from childless people and giving it to people with children. It is coercive. It is illegal. It is immoral. It is pure evil.
I have been behind this idea for decades.
Even better would be an almost entirely automated society where goods are produced by machines and every American own a piece of the new Automated economy.
Alternative energy and an automated economy would free people to work on important things instead of just going thru the daily grind in order that a minute percent of the population can have most of the resources.
Please. Who do you think would manage the automation? Political hacks? Most people are uncreative, undisciplined, and uninterested. The few talented, and/or highly motivated individuals will always rise above the sheep, no matter what utopia you try to impose.
a better use of this money would be doubling it to 10000 dollars and using it as a universal healthcare account that guarantees healthcare for the remainder of ones' life post birth. of course, its a lot more complicated than that as congress would find a way to filch it like they do to the social security account and catastrophic childhood and adult illnesses but it would take care of the difficulty of assuaging profit driven healthcare companies in any other universal healthcare scheme.
I think everybody should get $1000000. Then we can all be millionaires and be happy. Yahoo!!!
Can't we just fix our trade policies so we don't bleed jobs? Giving each kid 5G is not a 'big idea' and it won't solve our economic woes. We need to fix our trade policies so they actually, really and truly benefit the people not just large corporations operating out of tax-sheltered countries.
A 5G bond isn't going to do jack shit to get a kid through college when it matures. It won't even pay for their books. And what career will be left for that kid by the time he/she grows up if our trade policies continue to degrade our wages and standard of living?
A real 'big idea' is what Dennis Kucinich has proposed - end NAFTA, no more trade agreements that benefit Big Biz at the expense of workers' quality of life. But Hillary 'I Love Me The Lobbyists' Clinton wouldn't dare propose an idea that would actually do some good. Instead she's trying to bribe voters. Typical old school politicking we just don't need anymore.
(Perhaps someone has already said this...)
We should pay people for NOT having kids!
"If we wisely help those at the sunset of our lives with Social Security and Medicare, how about at the dawn of our lives with Baby Bonds?"
If we wisely compel those who die before reaching retirement age to pay for those who do; if we're going to wisely compel those who don't have children to support the offspring of those who do (which they already do in the form of property taxes for schools) ... why not keep going? Let's have those who work pay to support those who don't want to work. What's that, we do that already? Great! But let's expand it; from now on, everyone has the choice: work, or guaranteed welfare, whichever you feel like doing (or NOT doing).
How about the gov't starts buying up every foreclosed home and gives them away to families with 5 or more children? How about we change the national motto from "In God We Trust" to "You Work For Us" (or is that "US"?). How about we start painting 30 ft. tall pictures of Hillary on the sides of gov't buildings, including all of those new ones we'll soon have to build, and begin issuing federal -- sorry, I mean "state" (in the big sense of the word) school uniforms?
How about we continue to take from those who try and give to those who don't try? How about we dig up Stalin, Khrushchev, and Brezhnev, and tell them "You had the right idea all along; now, if you just hadn't been so mean about it. ..."
The reason why this works in Great Britain and
the other Socialist countries of Europe is that
they already have elaborate social-welfare
programs for the health & education of all
their citizens.
We have almost nothing of the sort, by comparison.
The proposal is just to give every kid
a birthday present (I guess): a $5K US
bond, worth $2.5K when issued. Pay for
not even a half-semester of college, maybe.
On the whole, universal health care would be
much more useful. Let's get that done, shall we?
How 'bout you go buy your own health care and keep your mitts out of your neighbors pocket?
.
Conniving Calculating Clinton's new "Chicken in every pot" - such political BS!
Yep, that's what the country needs: a $5000 INCENTIVE FOR ILLEGALS to drop their anchor babies here. The invasion should reach new levels never before seen by any country. (It would make D-Day seem like a casual gathering of folks for a picnic.)
Here's an alternative - do like Sarkozy in France who is rounding up 25,000 illegal invaders THIS YEAR ALONE and deporting them all. Sarkozy should serve as a model for the current crop of US elected weasels who won't do what is necessary to enforce the law of the land and stop the invasion.
.
First off...I have yet to see an explanation as to whether this is $5K at maturity or $5K worth of bonds that might mature to, say, $25K.
If it's the former, it's not like you're ponying up $5K per kid at the get-go...m
No matter though...t
They're all supposed to pony up tax dollars for those who CHOOSE to have kids? HA!!! There's already a backlash against 'breeders' by single coworkers who are sick of covering for these people & subsidising their benefits..
And while I agree that college is a great goal...it'
This is a non starter & can/should be used as ammunition AGAINST Hillary when opponents wanna paint her as a nanny-state tax & spender
The same "Singles..
"ponying up" is great when it's voluntary. When it's enforced with guns, it's a little less appealing (unless you are the beneficiary of the looting, of course).
The article says that it's a type of IRA so that would suggest it would mature to an amount greater than 5K.
With all due respect, I think you're taking a short term view in your argument about people not having kids/done breeding etc., paying for this. It's like me (who rarely gets sick and has insurance) being annoyed about paying taxes to fund the medical care of someone with no health insurance. I say bring it on. We don't all necessarily believe in an eye for an eye.
I think the idea behind this plan is to give the next generation an opportunity that this one didn't have. And to ultimately produce a higher earning segment of society that will ultimately pay off the five grand multiple times through higher income or housing taxes, etc.
The article also didn't say that every kid SHOULD go to college. It suggested that if the money weren't to be used for that it could be applied to the purchase of a home. Again, another form of revenue and tax generation. (Education does seem to be the preferred method of expenditure though.) And I can guarantee that there are thousands of kids out there who would kill for a college education if they had some help in getting it.
If you leave this bond thing aside, it seems to me that the education system here needs to be completely overhauled to make it accessible to everyone, regardless of income. Only then can the gap between lower and upper classes be narrowed. I'd be happy to pay an extra 10% on my taxes if I thought my kids wouldn't go into massive debt attaining what europeans get for free.
Education isn't what makes people rich. Education makes them middle class.
Every child born in the US this year will come into the world owing $30,000. That's simple arithmetic: our "national" debt of $9 trillion, is owed by "the nation", and "the nation" is us 300 million Americans. The Americans who die this year will each bequeath $30,000 worth of debt to each of the Americans who will be born this year.
Why is it "socialism" to give each newborn American $5,000 -- but it's NOT "socialism" to saddle each newborn American with a $30,000 debt?
Most of our "national" debt was accumulated during two Presidencies: Reagan's and Dubya's. They, and their Congressional allies, were the true "socialists".
-- TP
Excellent article and observations Mr. Green! It is a well known fact that even though the Republicans tout fiscal responsibility, it is Republican Presidents who have run up record deficits and recessions!
Democrats are always left cleaning up their messes! Yes we have a record deficit thanks to an unecessary war and tax cuts for the rich! Social Security is also at risk. Nevertheless, good judgement is about prioritizing. One does not get rid of good programs but just rework the budgets
This plan that Hillary has proposed IS time-tested worldwide and ensures atleast something for future generations of Americans instead of the debt they will inherit due to insane economic policies under this administration
It is a well known fact that even though the Republicans tout fiscal responsibility, it is Republican Presidents who have run up record deficits and recessions!
Democrats are always left cleaning up their messes!
'''''
Worth repeating every minute, every day, every election year!
A bond is a 'debt instrument' anyway. So look
at it this way: instead of coming into the world
owing $30K, now it'll be $35K *and* you'll get
a personalized certificate for the $5K portion.
Obviously, the government would need to borrow
the money for such a program anyway. It all
just goes on the tab, these days.
All just pieces of paper, anyway.
You may have a valid point to make, but you're not making it. That might be because you misunderstand the difference between OWNING a bond, and owing a debt.
Oh, and look at your mortgage, your credit card bill, even your paycheck. All those are "pieces of paper", too.
-- TP
Excellent, and I agree. So let's cut govt. spending to eliminate the debt, and not have the "theft for babies" program.
Should only give the $5000 to kids born to parents who are at or below the 300% of the poverty level line.
Those who are above 300% but below 400% don't get it.
Those who are above 400% must fund the $5000 per child for those below 300%.
Good idea. Create incentives for the poor have lots of kids. Brilliant. Oh, by the way: stealing from the affluent is still stealing.
According to recent studies, the US is now the most class-divided country among the G8. Measured by where kids end up relative to their parents, more kids in the US have a higher probability of ending up where there parents were. In other words, the rich beget rich. The poor beget poor.
Forget about all the "land of opportunity" drivel. America is now more class-divided than Europe.
As for all the talk about "redistribution" and "socialism
The rich are rich because of specific policies of the government, tax laws, corporate subsidies, etc, etc. It's funny how nobody screams "socialism" when the government grants billion-dollar subsidies to industries that all already raking in billions of dollars. THAT's called re-distribution.
The rich are rich because they work hard to be sucessful.
Then why do they need all the tax breaks and special benefits? Surely their hard work alone should be enough.
Then the reverse must hold true, as G. W. Bush stated in college, people are poor because they are lazy.
Oh, sure, they "work hard"... working the system rigged in their favor, that is. I always told my kids, who at some time in their lives stated that their goal was to "get rich", that most riches are accumulated at the expense of others, and that most rich became that way on the fruits of others' labor. This was true then, and it's still true. It takes ruthlessness to become rich.
not true. most of the real wealthly americans were born wealthy or were the inheritors of wealth. the stories of created wealth are quickly diminishing. there is a saying that the first million is the toughest, well, the first 100 thousand is tougher. the most common story of wealth is the example the author used of a guy who's parents paved the way for him. the stories of wealth truly created from scratch are stories of brains and balls. they are in short supply.
I could see where this might be a good idea in a country that did not already have a nine trillion dollar deficit, a bankrupt Social Security System, a tanking Medicare System, an energy and global warming crisis on the horizon and an increasingly low wage service based economy. In light of the severe financial crises we are facing in coming years, this just sounds like George Bush offering 300 dollars to anyone who will vote for him all over a gain.
The answer, it seems to me, for making the future of our children brighter is to actually face the problems we have already created head on. Not create yet another unfunded mandate that our children will have to pay for with compound interest accrued to Red China or whoever is actually paying our bills these days.
No, it's a bad idea regardless of any fiscal scenario. It is fundamentally immoral.
This idea is stupid.
Give $5000 to "every" child born in the US.
First of all this would include greatly incourage illegal immigration along other attempts to take advantage of our numerous guest worker programs. All babies born on US soil are considered US citizens due to a faulty intrepretation of the 14 admendment that needs to be rectified either by legislation or appeal to the SCOTUS. Until this issue is resolved the idea of "Baby Bonds" legislation is unsupportable.
Second it is another huge entitlement that will be available to rich and poor alike. How do you predict the future financial well being of parent(s) a decade or more into the future? Why promise to give money to families who may be well off in the future? Especially when, our existing social welfare programs need to be protected from future finanicial default? I also see huge problems administering this program.
There is a big difference between this proposal and well thought out New Deal Social welfare legislation like Social Security that binds the public with a Social contract.
This is bad idea is a prime example of corrupt old fashioned Tammany Hall Democratic pandering.
Let all politicians who write books fund the children health insurance program.
She got an early advance to avoid Senate ethics rules on sources of income.
Maybe John Edwards could pay taxes on his law suit revenues. I am not in that income level, so I may not word this very well. But Edwards managed to pay himself about $15,000 a year, which he paid income taxes on, but he was able to push several million dollars a year through some loophole, into a foreign bank account, that allowed it to become tax free.
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