Connecticut Has Found a Novel Method to Close the Racial Wealth Gap

More than two years after then-presidential hopeful Cory Booker floated the idea of baby bonds—a program that would give each child born in the U.S. cash in a savings account that they could then draw upon when they turn 18—as a way to help close the racial wealth gap, Connecticut is about to become the first state in the country to create its own baby bond program. This is good news for quite a lot of kids and their families and bad news for me, as I cannot insult the state as I normally would and must give credit where credit is due.

Unlike Booker’s plan, which was based off of a proposal by the economist Darrick Hamilton, Connecticut’s baby bond program will be solely targeted to low-income families. More details, via the Hartford Courant:

Beginning July 1, babies born to low-income mothers who rely on Medicaid insurance would receive $3,200 in a special savings account under the $600 million Connecticut Baby Bond Trust program included in a bipartisan state bonding bill.

The measure was championed by state Treasurer Shawn Wooden, who oversees the state’s investments and said the “Baby Bonds” would be key to breaking the cycle of poverty in Black and brown families as the children, upon turning 18, would have access to funds to pursue higher education, purchase a home, invest in a business or contribute toward retirement.

“The most direct way to narrow this [racial wealth] gap, and to build a stronger economy here in Connecticut, is for the state to establish a savings account for children who otherwise would not have access to generational wealth,” Wooden wrote in testimony to the legislature’s appropriations committee in March.

Connecticut’s Democratic Governor Ned Lamont is expected to sign the legislation into law. According to an analysis by the state legislature, about 15,00o babies are born to mothers covered by Medicaid each year, and it’s expected that the initial investment of $3,200 would grow to almost $11,000 by the time each child turns 18. As the Connecticut Mirror noted, while the program will benefit all children born into poverty, it will have its largest impact on Black and Latinx children and families in the state.

Connecticut state treasurer Shawn Wooden, who championed the program, described the baby bonds as a way to help reduce, as he put it, “the wealth gap and economic disparities [that] have only been exacerbated as a result of the pandemic and have disproportionately impacted communities of color.”

“I witnessed firsthand how generational poverty holds a community and individuals back. I was able to make it. I am the exception,” Wooden said in announcing the program earlier this year. He added, “I know it’s not simply about kids not working hard enough. It’s about opportunities and access. Oftentimes, we talk about people pulling themselves up by their own bootstraps. Well, the truth is, in the communities that we’re trying to target, there are simply not enough bootstraps.”

Hamilton, the New School economist who pitched the idea of baby bonds at a conference in 2018, commended Connecticut for taking action. “This is something to congratulate Connecticut for,” Hamilton told Jezebel. But he also noted that the amount of the endowment needs to be, as he put it, “large enough so they can have a down payment on a home, large enough so they can have enough capital to start a business.” “That’s the thorny issue,” Hamilton added. And while more states should continue to implement similar programs, to truly use the idea of baby bonds to help close the racial wealth gap, the federal government needs to act. As Hamilton told Jezebel, “At the end of the day, this has to be a right implemented by the federal government, but states shouldn’t wait.”