This Thanksgiving, families across the country will gather around dining room tables to share home-cooked food, reminisce, talk politics (unfortunately), and give thanks. One thing a family shares, however, will likely linger unsaid. It’s something that binds each and every member of a family together for good or ill: the money that flows under the table, from parents to children, from cousin to cousin, and between in-laws. Most families share everything, including wealth, or their lack of it.
It should come as no surprise that certain types of families have more wealth than others. The median white American family is worth 10 times the median black family — and this wealth gap is a problem for everyone.
Sen. Cory Booker, D-N.J., recently rolled out his plan to address the racial wealth gap, the American Opportunity Accounts Act. The Booker bill creates a system of “baby bonds” that works something like this: Every child born in America receives with their Social Security number an investment account containing $1,000. Changes to the tax code would send annual deposits into that account, capped at $2,000 and relative to a family’s income. The money sits, grows, and then you get access to it at age 18 for restricted use on education, home-buying, or retirement savings.
This approach to combating poverty takes a longer view at the problems of America’s most perpetually poor communities. It acknowledges that economic prosperity is bound to what you own and that which can accumulate value, and that for black Americans, this is a matter of catching up.
The issue of wealth is radically different and more politically volatile than that of income. Politicians are nearsighted and prefer to debate how much money people are taking home in their paychecks. It’s a cleaner and simpler issue. They are reluctant, however, to raise questions over wealth — and adding race to the conversation is its own can of worms.
The consensus is that if you have wealth, you earned it. The prosperity of free-market economies is evidence enough that this belief is worth preserving, but with a big caveat. There is one reliable indicator of how an individual is likely to do economically over the course of their life — the level of wealth they were born into. Outliers exist and rags-to-riches stories are real, but the truth is that poverty usually leads to more poverty, generationally.
Conservative scholars rightly look to family stability within impoverished families as a predictor of future success, while progressives tend to focus on race. Both are right.
If you’re thinking this is another wild progressive scheme to expand the size and role of government into the lives of ordinary people, you’d be only half right. Tackling the racial wealth gap through Baby Bonds would be expensive. William Darity Jr., an economist at Duke University, estimated the average account would end up containing $20,000, with as much as $60,000 for the poorest recipients. The price tag comes out around $80 billion a year, or about $1 trillion over 10 years with inflation.
That sounds like a lot, but the U.S. has invested $2.8 trillion in military operations in the Middle East since 2002 with nothing to show for it. You have to wonder, where would our country be if we got our spending priorities straight?
Proponents of small government have to grapple with the notion that Washington has already leveraged its power to endow a certain class of people with access to wealth-building assets — and not others. Just two years after its signing in 1944, the G.I. Bill had extended mortgages to 67,000 veterans in the New York and New Jersey suburbs, but only 100 of those mortgages went to black serviceman and their families. It wasn’t because of a lack of trying, it’s because of the spirit of goodwill behind the G.I. Bill was simply not built to co-exist with Jim Crow laws. Wealth begets wealth, and black families have been set back again and again by legal and illegal discrimination since our nation’s founding.
The importance of having enough wealth to absorb an unexpected financial blow cannot be understated. When you’re poor or living paycheck to paycheck, one unexpected mess can set you back for years. You get in a car wreck, you get sick, you have an unexpected child — these are real and relatable hurdles that for many, the family unit is there to help with in more ways than one. But what about for the others, whose families simply don’t have enough wealth to do so?
Conservatives and libertarians are rightly wary of the welfare state. The Great Society approach of eliminating poverty by fostering subsistence has been an abject failure. However, this country has decided that we should support people who need a leg up, so we should refocus in terms of investment, not payoffs or handouts. It’s past time we acknowledge the ways in which our government has held some back while giving a boost to others.
It would require some serious compromises, but Sen. Booker’s Baby Bonds proposal is a credible and thoughtful way of reducing generational poverty, government dependence, and, by extension, our out of control welfare spending.
Stephen Kent (@Stephen_Kent89) is the spokesperson for Young Voices and host of Beltway Banthas, a Star Wars & politics podcast in D.C.
