Connecticut’s Baby Bond Program Combats the Racial Wealth Divide
The new state law could help build momentum for the American Opportunity Accounts Act which seeks to create a similar program at the federal level.Juneteenth celebrates the end of chattel slavery in the United States. But over 150 years later, discriminatory public policies have prevented African Americans from closing the racial wealth divide in this country they helped build.
Policy created that divide—and policy can close it. One state is showing how to move forward in advancing racial economic equality. This year, Connecticut is launching the country’s first “Baby Bond” program. This program will invest $3,200 for every baby born into poverty in the state. The bonds are projected to grow to between $10,000 and $24,000 in value, depending on when they’re used.
When they reach an age between 18 and 30, these Connecticut residents will be able to use that money to start a small business, get a higher education or job training, or buy a home.
That money goes to poor residents regardless of their race. But because Black and Latino residents of the state are poorer than their white counterparts, the program will significantly address the state’s racial wealth gap—even as it gives young people of every race in the state a path out of poverty.
I’ve been researching and writing about the racial wealth divide for the last 20 years. In my view, Connecticut’s Baby Bond program is the most significant step forward in public policy I’ve seen yet. It should be an example for the country.
The program builds off decades of analysis and advocacy. In 1959, over 50 percent of African Americans lived in poverty—a figure that had fallen to less than 19 percent by 2019. That’s still more than twice the rate for non-Hispanic whites, but it’s an example of substantial economic improvement for African Americans.
How did this happen? By removing barriers to economic and social opportunities and investing in those facing poverty.
The Black freedom movement of the 1950s and 1960s pushed for important legislation like the Civil Rights Acts of 1964 and 1968. The movement also helped advance the War on Poverty and its associated programs—including SNAP, Medicaid, and the Earned Income Tax Credit, all of which dramatically decreased poverty for the entire country.
Today we see Connecticut taking the next big step forward.
The idea for Baby Bonds came out of the wealth-building movement popularized by Michael Sherraden’s 1992 book Assets and the Poor: New American Welfare Policy. The book’s theme was the need to shift from simply supplementing people’s income to helping them build real assets—to help poor people get beyond day-to-day survival.
Child Savings Accounts under the Saving for Education, Entrepreneurship, and Downpayment (SEED) Initiative were one step in that direction.
By 2017, there were 54 of these programs serving 382,000 children in 32 states and Washington, D.C. At that time, the most common initial deposit for a Children’s Saving Account was $50—not enough to make a significant difference in reducing poverty or the racial wealth divide.
Connecticut’s Baby Bond program was inspired by a vision to address racial economic inequality first proposed in 2010 by economists William Darity and Darrick Hamilton.
Though the return of $10,000 to $24,000 for all babies born in poverty would not bridge the nearly $150,000 wealth divide between Blacks, Latinos, and whites, it would about double the median wealth of Black and Latino households in the state.
Hopefully this is the beginning of states nationwide creating similar wealth-building programs.
It could also build momentum for the national American Opportunity Accounts Act introduced by Senator Cory Booker (D-NJ) and Rep. Ayanna Pressley (D-MA). That law would provide a Baby Bond of $1,000 for every American child—with an annual addition of up to $2,000 for the lowest income Americans.
For generations, we’ve done little to bridge the racial wealth divide or get families out of multi-generational asset poverty. Connecticut’s Baby Bond program, which launches in July, and similar proposals across the country show that we may finally be willing to take the next step.
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