Proposal: Give Every Baby $1,000

President Joe Biden (Photo by Sean Rayford / Getty Images)

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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, Senator Cory Booker (D-NJ) and Rep. Ayanna Pressley (D-MA) reintroduced the American Opportunity Accounts Act. Under this proposed legislation, every American child would receive a federally funded savings account – also known as a baby bond – that grows every year based on family income. The goal is to create economic opportunities for every American and to help close the racial wealth gap.

How baby bindings work

This is how baby bonds, known as “stimulus checks” for babies, work:

1. Each new baby is given a $ 1,000 savings account at birth;
2. Each year, additional deposits of up to $ 2,000 based on household income are deposited into the account.
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 borne by the federal government.
7. The savings account would be administered by the US Treasury Department

According to Booker, baby bonds could cost the federal government $ 60 billion to $ 80 billion under that proposal, which could give some moderates and conservatives a break. At the age of 18, the amount in a savings account can vary widely depending on income. For example, low-income individuals by the age of 18 could have a savings account of up to $ 50,000, while according to CNBC, a high-income individual could have a savings account of $ 1,600. In February, the bill was supported by several Democratic senators including Senate Majority Leader Chuck Schumer (D-NY), Senator Elizabeth Warren (D-MA) and Senator Bernie Sanders (I-VT). “To truly ‘rebuild’ our economy better, we cannot ignore the extreme and persistent wealth inequality that has robbed children of economic opportunity from the start,” said Booker. “… Baby bonds will begin to level the playing field. In a country as prosperous as ours, everyone should have access to economic opportunities and the ability to build and create wealth … This legislation is an ambitious, evidence-based and practical approach to building a foundation for wealth-building and Opportunity for all Americans. “

Baby ties: the research

According to a Morningstar study, “baby bonds” could help narrow the racial wealth gap in the US. The Federal Reserve found that “the average white family had more than seven times the wealth of the average black family.” Morningstar says home equity can have an impact on how effectively baby bonds can fill the racial wealth gap. For example, “including home wealth in a family’s wealth has a larger gap than measuring household wealth without it.” Morningstar also suggested improving baby bonds through a variety of measures, including perks for older children, options for long-term investments, and more integration with 529 college savings plans. Integration with a 529 plan – a savings tool that lets you pay for education expenses – is especially important because given the cost of college education, baby bonds alone are unlikely to be enough financially to pay for college.

Student Loan Termination: Relationship to Baby Bonds Stimulus

President Joe Biden has now canceled $ 3 billion in student loans. Cancellation of student loans, some argued, can not only provide economic stimulus, but also help to close the wealth gap. While there are various student loan cancellation proposals out there, the leading proposal in Congress would cancel up to $ 50,000 in student loan for federal student loan borrowers who earn up to $ 125,000 annually. However, the two policy proposals – student loan cancellation and baby bonds – offer different approaches to fill the wealth gap. Termination of the student loan is a retroactive action in the sense that the policy would cancel student loans after the student loan borrowers have already borrowed them. However, the widespread provision of student loans does not help student loan borrowers before borrowing student loans to pay for higher education costs. Baby bonds, however, are a proactive policy: they help children from birth to 18 years of age save for college, buy a home, or start a home for college before they ever attend.

Related reading

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Biden has now canceled $ 3 billion in student loans

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source https://collegeeducationnewsllc.com/proposal-give-every-baby-1000/