This year, Connecticut announced that more than 7,800 babies had been automatically enrolled in the state’s baby-bonds program since it launched in July 2023. At $3,200 invested per baby born eligible for Medicaid, the program—one of the first of its kind in the nation—is meant to slash long-term poverty in one of the wealthiest but most unequal states in the country. Fifteen-thousand babies are expected to qualify annually out of approximately 69,000 births per year, or about 1 in 5 newborns, while the bonds are projected by the state’s treasurer to reach a value of between $11,000 and $24,000, depending on when eligible children access the funds as adults. The program is also presented as a targeted way to mitigate the racial wealth gap: In a state that is 78 percent white, roughly 6.5 percent of whites are in poverty, compared to 14 percent of black and nearly 19 percent of Latino residents.

Connecticut’s pioneering status has generated buzz over baby bonds as a novel way to shrink America’s socioeconomic disparities. Since the curtain fell on pandemic-era emergency welfare measures, center-left policymakers and advocacy groups have sought new ways to halt rising poverty rates, particularly among families with young children. But however well-intentioned, Connecticut’s program reinforces an unfortunate dynamic of American welfare policy: In place of a more expansive approach to family policy, baby bonds effectively augment existing state and federal means-tested welfare. Its proponents have unintentionally said as much, conceding it is “a piece to a much larger puzzle” in a state whose declining child population has been attributed to soaring housing and childcare costs. 

Despite its progressive aura, the baby-bonds concept thus conforms to the neoliberal approach to welfare. By tying payouts to a business investment or job training, higher-education tuition, a mortgage, or retirement account, the bonds are designed to prepare children from disadvantaged families to have a well-defined stake in the market economy and their future prosperity. Connecticut’s program also stipulates that these investments must be made within the state—presumably to contain the region’s cost-of-living brain drain, as well as stem any potential backlash from budget hawks and small-government conservatives. If other states follow suit, it is highly probable they will emulate this nonuniversal, conditions-attached model.

The program’s generosity is further muddled by uncertainty over what it can actually achieve. At the technocratic level, baby bonds are designed to help—but not guarantee—that children from poor families have some access to upward mobility; it seems reasonable to infer that one goal is to lessen intergenerational dependency on Medicaid, food stamps, and traditional welfare payments. But it is unclear how much long-term wealth generation is in the offing for qualifying children. Higher education has become prohibitively expensive, while the housing market has priced out the middle class—trends that show no signs of abating anytime soon.

“Baby bonds are of a piece with progressives’ fashionable ‘equity’ paradigm.”

At the political level, meanwhile, baby bonds are of a piece with progressives’ fashionable “equity” paradigm. Economist Darrick Hamilton, one the idea’s progenitors, has promoted it as an “economic birthright to capital.” To some ears this may sound radical or in the spirit of Nordic social democracy. But one reason other states are considering similar legislation is because the concept satisfies a patrician-liberal need to temper the glaring economic and professional advantages enjoyed by children of privileged backgrounds. Dressed in the rhetoric of social justice, the program effectively ennobles President Richard Nixon’s famous pledge to give minorities “a piece of the action” in American capitalism. In practice, however, such “action” will very much depend on a host of other policies that maintain a tight labor market, tackle various supply-side deficits, and raise working-class purchasing power. 

The baby bonds model looked like a pathbreaking idea when it first gained traction in progressive policy circles back in 2010. The Great Recession and foreclosure crisis had rapidly swallowed an enormous amount of black wealth that had been painstakingly built up in the decades since the civil-rights era. A slack labor market made worse by the loss of high-wage manufacturing jobs all but ensured that working-class minorities would have a harder time rebuilding their lives. 

Hoping to break the cycle of despair, Hamilton and his mentor and fellow economist William Darity proposed federal baby bonds as a feasible way to restore some of that lost wealth to future generations, while also giving working-class minorities some hope that not every dollar in their life was spoken for. Their vision called for bonds of up to $60,000 for the poorest children, with a projected “average trust” of around $20,000 per child. It aimed to reach 3 million newborns, or around 3 in 4 every year. 

The primary goal was to tackle inequality arising from much higher intergenerational wealth transfers among white families. But another priority was to mitigate some of the insidious and quotidian ways in which working-class minorities’ real purchasing power was diminished. Research in the burgeoning field of stratification economics demonstrated that black Americans disproportionately suffered from market predation, from the preponderance of pay-day loan companies in black neighborhoods to higher fees for black bank customers and more burdensome interest rates for black homeowners. In effect, baby bonds would squirrel away wealth for children whose parents faced a difficult local business environment and long-term labor-market disadvantages. 

Hamilton’s and Darity’s perspective was steeped in realism, despite their more radical inclinations. Notwithstanding the price tag, their proposal was conceptually tailored to win over left neoliberals and pragmatic business conservatives. At the time, prospects for a New Deal- and Great Society-style developmental agenda were grim: President Barack Obama had blown his political capital on the Affordable Care Act, while the Tea Party insurgency was pushing the GOP even further to the right on fiscal and welfare issues. The 1996 welfare reforms enacted under the Clinton administration also constrained progressive policymakers’ approach to social policy. Despite the ravages of the Great Recession, welfare skepticism remained deeply entrenched in American politics. In an era marked by free-market bromides, a concept oriented toward the future, not monthly cash transfers, Hamilton and Darity hoped, could eventually gain momentum among political leaders normally adverse to expanding “government entitlements.”

The sense of possibility has undoubtedly widened in the wake of the pandemic. From 2020 to 2021, enhanced unemployment insurance, multiple stimulus checks, and the temporary expansion of the child tax credit radically altered perceptions of what the federal government could do to make American families more economically secure. Although the pandemic-based emergency welfare state has since been rolled back, dogmatic austerity proponents no longer hold as much sway in Washington. Meanwhile, growing media coverage of baby bonds suggests it is the next “big” antipoverty idea to be embraced by policy wonks and Beltway journalists. Much as Hamilton and Darity had hoped, commentators from the The Atlantic to the The Wall Street Journal have declared baby bonds a cost-effective, pro-market way to reduce intergenerational poverty.

This momentum suggests that welfare economics is no longer taboo the way it was 15 years ago. From intensifying bipartisan support to reinstate an expanded child tax credit to the spread of municipal basic-income trials, cash grants of one variety or another are now seen by more and more of our political class as a legitimate tool to fight poverty. Part of the allure no doubt stems from their relative expediency. After decades of stagnant working-class wages and mounting household debt, a mixture of policies aimed at offsetting the cost-of-living crisis and establishing childhood savings could go some way to advancing a post-neoliberal consensus beyond questions of industrial policy.

Yet the appeal of baby bonds very much illustrates the enduring strength of neoliberal welfare. As opposed to classic social democracy, which typically combines universal subsidized services, generous paid family leave, stipends for essential baby goods, and other forms of social insurance, neoliberal welfare prioritizes a combination of household spending and financial discipline. Outside Great Society-era programs like Medicaid and Head Start, most means-tested programs, including annual tax rebates like the earned-income tax credit, pump supplemental household income back into the basics. It’s a form of bill-management, not a system to strengthen families through more free time and in-kind transfers.

Baby bonds aren’t designed to change this dynamic. What working American families need—what all American families need, in fact—is a system that encourages both parents to engage in more at-home activities while supporting and expanding family-based public recreation; and in-kind subsidies and labor-market regulations that alleviate the stress of working parents, especially those dependent on hourly wages. If more essentials were covered in early childhood, and new parents were less compelled to return to full-time employment (or “on-call” part-time employment), the country might have better odds at reversing many disturbing developmental trends, from drug abuse to teenage suicidal ideation to the decline of two-parent homes. 

“Nothing suggests that baby bonds will dramatically alter family formation.”

On that note, nothing suggests that baby bonds will dramatically alter family formation in the United States. The reality is that it has become extraordinarily expensive to raise a family on a “high-wage” blue-collar or middle-class income since at least the early aughts; indeed, these costs have likely contributed to the declining fertility rate, which economist Melissa S. Kearney has traced to the Great Recession and its lingering effects. Baby bonds might instill the working poor with more optimism, but as structured, they are unlikely to incentivize marriage or inspire confidence that America’s political class, Democratic and Republican, is really focused on making it easier to parent

None of this is to say baby bonds couldn’t be part of a far-ranging social-democratic transformation of the American economy. Wealth and income inequality in all its forms should be tackled. Society would be much better off, moreover, if poorer families faced neither the stigma of “dependency” nor a “fiscal cliff” that terminated family assistance once they entered a higher wage bracket. If its advocates scaled back the heavy emphasis on race, and promoted its benefits to the rural and urban poor alike, momentum might actually build behind the current baby-bonds legislation sitting on the backburner in Congress.

But as presently conceived, baby bonds correspond to the odd synthesis that has dominated progressive politics: left-wing identity politics married to market-based solutions. To enjoy the fruits of their labor, working families need time and opportunities to structure their lives outside the market’s logic. Forward-looking politicians less beholden to the conventional paradigms of the modern left and right have a lot to gain by advocating a more holistic family agenda.

Justin H. Vassallo is a Compact columnist specializing in American political development, political economy, party systems, and ideology.


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