Baby Bonds
- Posted by: GOOD
- on December 3, 2007 at 6:02 pm
Even in the rough-and-tumble theater of American politics, the idea of “baby bonds” enjoyed a short time in the spotlight. On the campaign trail, Hillary Clinton casually endorsed the $20-billion-a-year concept of giving a $5,000 bond to every child born in America—money that, after accruing interest, could be put toward college, a home loan, or a business when the child turns 18. Conservatives pounced, reveling in the opportunity to label Clinton another spendthrift Democrat, and when Clinton released her economic agenda a few weeks later, the idea was nowhere to be found.
But baby bonds deserve a fair hearing. Supporters point to our nonexistent savings rate. Young Americans—particularly poor young Americans—have little ownership stake in society: They have few assets and nothing to build upon. The miracle of compounded interest could turn a $5,000 bond into $20,000 over 18 years (God knows what college will cost in 18 years, but every little bit will count). And for those who fret over a government giveaway, use of the bond could be tied to national service of some kind, be it AmeriCorps or the National Guard. Our last major policy experiment of this sort didn’t fare too badly: The GI Bill, passed in 1944, cost taxpayers $5.5 billion (about $60 billion in today’s dollars), but the legislation ushered millions of Americans into college and triggered one of the largest economic booms in our nation’s history.
DISCUSSION: 4 Comments
The Baby Bonds concept is wonderful and probably too humanitarian to make it through the political battles. I sincerely hope Ms Clinton puts it back into the mix of worthwhile programs after she attains the presidency.
This is one of the best ideas I’ve heard in a long, long time. I hope whoever takes office (Yes I prefer Hillary, but I’m not here to debate that) will implement them.
However, I believe there will still be some on the far left who believe attaching it to military service is discriminatory. I don’t think it is.
Let’s do it!
Bullock!! You can’t be serious!! The only people that this is appealing to are the individuals that take advantage of the system. Why should the taxpayers pay for the children of the unmotivated?? Besides that your numbers are bad math!! A 5000.00 US Bond would have to yield an average of 7.8% to yield over 20k in 20 years. Rather than rely on our government, I would prefer to deposit the 5000 myself. Yes that would be very tough and would take some time, But it would yield so much more. Take your same 5000.00 deposit into a 12%yielding money market fund. In 18 years you would have 49,921!! more than double what the government is promising!! And if you want to trust the Government that your money will be there (I have a SS program I would like to sell you)!! Keep your money in your own hands! Invest wisely! Stay off credit! Last but Not least keep these stupid ideas out of my taxes!!
I’ve explored this idea before, but rather than maturing at 18 years, I figure it should mature at retirement. The extra years of compound interest might make it a useful retirement amount. Perhaps people could borrow against it through their life, but only for certain types of expenditures. Not sure who gets to manage the money, though.