Andrew Dempsey
Econ Blog Post
A Newborn Idea to Fix Wealth Inequality
It is not an unknown fact that when it comes to wealth in the United States it is not equal but when you look into the statistics, even more, they are staggering. In America, the 1% owns 40% of all of America's wealth and the 1% own half of America’s stocks, bonds, and mutual funds. (politizane). This shows how hard it is for the poor, middle class and even the rich to grow their wealth. In fact, Nearly a third of American households now have $0 in wealth, according to Deutsche Bank. This is the worst it has been since the early 1960s when the US government started to keep this statistic. Many economists have been trying to solve the problem of Wealth Inequality but have not concerned it. However, Darrick Hamilton of The New School and William Darity of Duke University has proposed a start to fix this problem. The idea is that to give every newborn in the country a “Baby Bond” account that would range from $500 to $50,000. Neither the parents or the kids would be able to touch the money until the child turns 18. They could then spend the money on college, buying a house or starting a business. “The key ingredient of how successful you will be in America is how wealthy your family is,” Hamilton says and baby bonds are one way to fix the gap. The proposal would give families who are extremely wealthy $500 and families who are extremely poor would receive $50,000. Hamilton says the average middle-class family will receive $20,000. If Baby Bonds were to go through it would not fix the wealth inequality in this country but it could be a good start.
Many people would be concerned with how the US would fund this program but Hamilton has an answer for that. Hamilton estimates that Baby Bonds would cost $80 billion a year which is about 2% of America’s $4 trillion in annual federal government spending. If the plan was to go through Hamilton says it will not be implemented for 18 years so that there could be time to build up a budget for Baby Bonds.
People of color have also struggled to decrease the gap in wealth inequality in that past years. The median net worth for white family households is 10 times greater than a family of color. Hamilton says “People like to argue if only poor black and Latino families were more responsible and made better decisions than inequality could be dramatically reduced,” but Hamilton shows examples that do not support this. Most college-educated African Americans have less net wealth than whites who dropped out of high school. Having Baby Bonds would help these people do something with their degree out of college.
Baby Bonds will not fix all of the problems in wealth inequality but it is worth looking into. With people who are under 55 having less wealth than in past generations, it shows how the middle class is falling behind today and needs a change. This could be one of many solutions to get back on track.
Works Cited
Long, Heather. “Economist Proposes Giving Every US Baby $20,000 or More.” Economist Proposes Giving Every US Baby $20,000 or More, 8 Jan. 2018, www.msn.com/en-us/money/markets/economist-proposes-giving-every-us-baby-dollar20000-or-more/ar-BBI7yhb.
politizane. “Wealth Inequality in America.” YouTube, YouTube, 20 Nov. 2012, www.youtube.com/watch?v=QPKKQnijnsM.
Nice job Andrew! After conducting some research myself, I discovered that the underlying goal of Baby Bonds is to dramatically lessen wealth inequality in the United States. Under the proposal, children of incredibly rich parents, such as Bill and Melinda Gates or Beyoncé and Jay-Z, would receive the lowest amount ($500) while babies born into extremely poor families would receive the highest amount ($50,000). While there are a number of criticisms about Baby Bonds, in regards to affording them, presidents and prime ministers around the world are trying to figure out ways to reduce inequality. Yet, critics still flag concerns about the formula to determine how much each baby receives and the rules pertaining to when and how the money could be spent when a child turns 18. Improving the lives and finances of the bottom 90% of Americans is bound to take time and dramatic changes; these changes go beyond the federal spending of $80 million on Baby Bonds each year.
ReplyDeleteThis is a very relevant topic in terms of the Insight agenda videos last week. I find myself easily dumbfounded by how different the money in the United States is distributed, both unequally and completely skewed in relation to the average estimate. I do agree that Baby Bonds are an act of moving forward progressively, however, some difficulty may be prevalent with determining bond amounts and other specifics. Looking at this economically though, some bond amounts might be an incentive for individuals to work hard so they can use that money responsibly. On the flip side, some may wait to turn eighteen and spend it carelessly, in a way. There definitely has to be more ideas that can help aid this unfair financial distribution, however, the government needs to keep it regulated, fair, and non-harmful to the country’s economy at large.
ReplyDeleteI would agree with Kate. There are a lot of things that could go wrong with Baby Bonds like people not spending the money wisely, figuring out how much per person, etc. What about the little kids now in poorer households? It seems that it would be unfair to those families who have their kids just before this is put into place. There also may be more of an incentive to have kids to get the extra money which could cause potential problems. It is a good idea to get on track to finding ways to help the wealth inequality but as Kate said, the government would need to find ways to keep it fair and regulated so the country doesn't get hurt in the long run.
DeleteThis connects to the current unit of study in AP econ by talking about the wealth of the families in The United States. I thought it was interesting that 2016 was the worst year with families that have negative or zero non-home wealth. I agree that Baby Bonds are a step to progressively moving this country forward. However, I agree with Kate that this is an incentive that could make people work harder. I think there should be a program that can help families and the more richer families should earn less because they are able to afford the expenses, while on the other hand the families that can't afford these expenses should get more money. To move this country forward, the people in poverty must be taken care of because that will move our economy forward in the long run.
ReplyDeleteI agree with you Ian and like Ian I agree with Kate. I also think there should be a program that can help families. It's not right that a small percent is able to control so much of the market. This is a problem in America and something needs to change. The 1% as Andrew says owns 40% of the shares. That is not right because a more percent should have those shares. This post connects very well with our unit.
DeleteI agree that this would definitely help, but I also think there are flaws with this. Obviously, you have to get the money for these bonds from somewhere, which likely would be through taxation, and the only way for this to make sense to do, is to tax the wealthy people the most, because otherwise you would just be giving people their money back. This isn't necessarily a bad thing, but there would definitely be controversy about it. Also, there would need to be regulations on the spending of this money, because obviously some people wouldn't use this money towards education or other positive reasons.
ReplyDeleteThis is a very interesting solution to the wealth inequality issue. As with previous comments, I agree that there will likely be flaws with obtaining the money for the program and regulating people's spending. Another potential issue I would consider is whether the flood of money at 18 years old would truly benefit people the most. For example, the money is meant to help with college, but without proper high school education it is difficult to get into college. Discrepancies between the rich and the poor become noticeable even in high school, where wealthier students can afford private tutors to improve their ACT score or their GPA. This program only seems particularly effective after improvements have been made on current conditions.
ReplyDeleteThe article you have written is very interesting and something I enjoyed reading about. With wealth inequality becoming and being a major issue, the solution they proposed or more specifically, William Darity of Duke University proposed is rather interesting. I think that Baby Bonds may be effective if every family of that baby uses the money correctly and in the most effective way when he/she turns 18. However, like other people have commented, some may use this money for other things that wouldn't be the most effective. Thus, having all the money saved for ever newborn in the United States causing ineffectiveness for most families. This serious proposal to give babies born in the United States $20,000 or more doesn't seem to address the whole point of Baby Bonds to dramatically lessen wealth inequality in the United States. Personally I just see it as a "trust fund" that some could use the money more.
ReplyDeleteGood job connecting this article to the unit we just learned about in econ. It's crazy to see how unequally the wealth is shared among people in America. Just like the other comments above state, Baby Bonds could be effective unless the child uses the money ineffectively after 18 years. It is good to see that our government is taking steps to try and fix this income inequality in America but they still have a long way to go when it comes to helping those with less income.
ReplyDeleteI think this idea you wrote about it very interesting. However, you said that 1/3 of American houses have 0 wealth. This means that if you are going to budget $50,000 for every third house in America, some serious donations are going to need to occur. Not to mention that the majority of Americans have more than 1 kid, some even have up to ten! That's about $500,000. Again, I enjoyed the article as it would be nice to see this generous plan fall into place, but the chances could be a little unlikely.
ReplyDeleteI think that this is a very interesting topic choice and it's cool to see how you connected it to our most recent unit in econ. It's insane how the wealthy is shared in America and how unequal it is. It's good to see the government is taking steps to try and improve how the wealth is spread across the country.
ReplyDeleteThis was an interesting article because I've never heard of the Baby Bond. I this this plan would cause a lot of controversy, but could be something good for the common wealth. I could see a problem with this occurring because when would the Baby Bonds start and how would it be fair to give someone money for their bond, but then someone who's one year older than these newborns won't get any money. Overall, good job with this very relevant topic for our AP econ class.
ReplyDeleteIt is crazy to believe how money is handled and distributed throughout the United States. I find that there are so many ideas that people try to come up with to try and fix the distribution and some of then are quite creative, like the baby bond. I think this concept is very interesting, yet I don't think it is something that would be best benefiting or improving the distribution of wealth in the economy.
ReplyDeleteAfter watching a video on this topic in class, I was super surprised how unequally distributed income really is. I agree that it should not be so piled up in the top 1%, but is our country able to afford giving out money to a bunch of kids? How will we know where this money is going? I also think that people will feel like it is unfair if some kids are getting more than others and people will complain about that. I know I would put this money towards college, but are all kids going to use this money towards something beneficial? If we had some kind of regulation on the bond, then I would change my opinion.
ReplyDeleteI agree with Nicole. After watching the same video in class, I was also shocked to realize how unequal income is in America. An idea such as the baby bond is very interesting and it's good to see that people are thinking about future ways to fix this issue, however, I don't know how people will feel about this. I believe that many will find this technique unfair and will not be in support.
DeleteAs good of an idea as it sounds I agree with the following statements above about how we cant just give out money. It would be great to see everyone get what they wanted but in order to do that you would need to take money from those who earned it. If only it was as simple as making more money so we could all be happy.
ReplyDeleteI found the video interesting, and I find this article equally interesting. The Income inequality is a result of the American dream. People want to be rich and continue to expand their wealth.This isn't a bad thing. To benefit off of this the government should impose an Income tax and use the money from that to issue baby bonds to everyone.
ReplyDeleteI do agree with you that the Income inequality is a big concern in our country as of right now. I also agree that it has been harder for the poor to get out of their poverty. I remember in Culinary Arts, we watched a video in which a poor family had trouble getting out of their poverty and no matter where they worked or how much they worked, they could never get out of their poverty. This income inequality can also become a great problem for families as if some individuals are not bringing in the money, they will have a hard time paying their bills, buying groceries, etc.
ReplyDeleteI agree with your argument on wealth inequality. It's really surprising to see how the wealth is indeed distributed throughout American workers. Also, it's possible that the average worker might work just as hard, if not harder, than a top CEO who makes 10 times as much. Next, it's concerning to hear the statistics about income inequality between genders and races. If someone isn't the right gender or doesn't have the right skin color means that they aren't good enough to earn top wages according to some statistics.
ReplyDeleteI agree that income equality is a very important problem rights now, especially after watching the video in econ. I think it's crazy that the 1% have 40% of the nation's wealth. Your article was very interesting as I'd never heard about the Baby Bond idea. It would be hard to make it work, especially with distributing the money to families, however it could be a solution to the problem.
ReplyDeleteI think it is an interesting and ingenious way to help combat the income inequality using the baby bond. This solution will actually help the problem because it will not be giving the rich more help than the poor. This will be beneficial in allowing poorer people to have access to education and be able to get higher level jobs and hopefully bridge some of the gap will income inequality.
ReplyDeleteAfter watching the video in class, I too was very surprised about the extent of the wealth inequality in America. The Baby Bonds sounds like a very interesting idea, but I'm not sure how the government would regulate what the money goes to to ensure the children receive it for college funding or post-secondary education life. Additionally, while it is a noble idea to ensure children can have the funding to succeed on their own, I feel like children growing up in poverty may be set up for more success if their families received money to ensure they are getting the necessary utilities and beneficial childhood experiences of a better-off family.
ReplyDeleteThis topic is extremely interesting as it touches on many subjects such as poverty and inequality throughout. Although this idea of Baby Bonds serves as a great solution to the issues I just mentioned, it does not mean that the idea will be successful. It would be amazing if the wealth distribution in the United States could become more even among all, however if there are babies born every second, where will we get the money from? Creating money to give to the families will only create inflation and make the value of each dollar less and less everyday. And in addition to that, more taxes would likely be imposed on everyone. Based off of your research on the baby bonds, it seems like it would be a great idea, however I guess we wouldn't see the result of its success until it would be implemented in 18 years.
ReplyDeleteIf fixing poverty were as simple as giving poor people money, inequality wouldn't exist. The issue is of why people are poor and helping them to help themselves. Society needs to teach people how to fish, not give them enough fish for one meal. While being born into a poor family is undoubtedly one of the most consistent predictors of future poverty, it is not set into stone. It is possible for somebody in poverty to make a comeback--to find work and education in small quantities and slowly build a life--but simply giving them money does not encourage this hard work; it encourages reliance, and reliance encourages complacency.
ReplyDeleteThis topic is very interesting to read about and see how much poverty fills our country by the unfairness of distribution of money. I'm glad to see that they are taking steps to make this not a problem, but I do believe that the line of equality is so far off and they need to fix it sooner than later. However, I don't think that they should just be handed money because they are poor, they still need to work for it and build a better life for themselves.
ReplyDeleteI definitely agree that income equality is important, and it really is crazy to see how the wealth was distributed in America. It's good to see that action is being taken to try and fix this problem and think the idea of baby bonds is a very good idea, but it would be hard to start up. Overall a great blog post.
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