Someone once told me there are two types of people in the world: those born into the Lucky Sperm Club and those who aren’t.
The Lucky Sperm Club consists of those fortunate few born into economic privilege. There are ways to achieve prosperity without being in this club, of course, but membership offers an unfair edge.
Children born to wealthier families tend to have a higher college graduation rate and are shielded from economically traumatizing events, such as a major health problem or eviction. These children also tend to live in wealthier neighborhoods served by better resourced schools.
Meanwhile one out of every 7 children in the United States, almost 11 million in all, are born into poverty.
Not everyone can be born into the Lucky Sperm Club, but public policy can create more opportunity for those who aren’t. Among the most innovative approaches are “baby bonds,” government-funded trust funds for children that they can use to start their lives when they’re adults.
Senator Cory Booker (D-NJ) first introduced a baby bonds bill, the American Opportunity Accounts Act, in 2018. His Senate bill currently has 15 co-sponsors. A House version, championed by Rep. Ayanna Pressley (D-MA), has 25.
Under his plan, the federal government would deposit $1,000 into an account for every child born in the United States. Each child would then receive an additional deposit of up to $2,000 annually, depending on their family’s income level.
According to Booker, the poorest children would accumulate about $46,200 in their trusts by age 18 while the wealthiest would have around $1,700. At this point, the child could put the funds towards buying a house, getting higher education, or starting a business.
Although proposals like Booker’s have been discussed since the 1990s, they have faltered at the federal level. But now, cities and states are taking action on their own. In June 2021, Connecticut became the first state to pass baby bond legislation. Children whose births are covered by the state’s Medicaid program will have an estimated $10,000 nest egg by their 18th birthday thanks to this initiative.
In the fall of last year, the Washington, D.C. city council approved a new Child Trust Fund that will provide a $500 initial deposit for children born at or below the federal poverty line. Those who continue to fall below that income threshold will receive deposits of as much as $1,000 per year until they turn 18. New York City also introduced a more modest baby bonds program in 2021.
Most recently, the California state legislature allocated $100 million this July to seed trust funds for kids from low-income families who lost a parent or primary caregiver to COVID-19, as well as those in long-term foster care.
State lawmakers in Washington, Iowa, Wisconsin, and Massachusetts are also actively considering baby bonds programs.
Given the widening of our nation’s wealth gaps during the pandemic, baby bonds are likely to increase in popularity. In 2019, the richest 1 percent of U.S. households owned 40 percent of the country’s private wealth. This gap is even wider today, with billionaire wealth rising by more than $1.7 trillion during the pandemic.
In the long-term, our goal should be to disband the Lucky Sperm Club that gives a tiny elite such vast advantages over ordinary Americans. For now, we should try to help as many children as possible to thrive without luck in the picture at all.