Vox, October 22, 2018: An exclusive look at Cory Booker’s plan to fight wealth inequality: give poor kids money
America has a massive, growing racial wealth gap. The median white family today holds nearly 10 times the wealth of the median black family.
Sen. Cory Booker (D-NJ) is introducing a bill aimed at closing that gap. His idea is to give lower-income kids a sizable nest egg that they could use for wealth-building purchases, like a down payment on a house or college tuition.
These “opportunity accounts” would, theoretically, make sure all children have significant assets when they enter adulthood, rather than just those who grow up in wealthier homes.
Similar ideas have swirled around think tanks since the early 2000s, but Booker appears to be the first high-profile senator to introduce legislation to create such a program. As possible 2020 presidential nominees like Booker begin to unveil ambitious policy ideas, Booker appears ready to focus on racial inequality in America, and how to solve it.
Specific government policies have driven the racial gap by making it specifically harder for minorities to accrue wealth.
His American Opportunity Accounts Act would give each child born in the United States a savings account with $1,000. Each year, until the child turns 18, the government would deposit as much as $2,000 into that account. The size of the annual payments would depend on the child’s family income, with lower-income families receiving larger checks.
These accounts would be off limits until the child turns at 18, at which point the child could use them for specific “asset-building” purchases, like a down payment on a house, for example, or college tuition.
Booker’s office estimates that a child who remains in the lowest income bracket of the program (meaning she gets the largest, $2,000 payments each year) would accrue $46,215 by her 18th birthday. A child in the highest income bracket of the program would end up with $1,681 — just the original $1,000 payment plus earnings accrued from the government investing it in low-risk funds.
One of the things that struck me about Booker’s proposal is that it’s a much more aggressive and sweeping version of what Hillary Clinton proposed in her 2008 presidential run: a lump sum of $5,000 given to every child born in the United States that could be used to pay for college or a down payment in the future.
Booker’s version is a much bigger program, and one with different goals: not just making college and housing affordable, but making college and housing affordable to a specific population that has long struggled with higher education costs.
