(New York Times) – Most children born in New Jersey would be entitled to a $1,000 state-financed nest egg under a proposal that Gov. Philip D. Murphy is set to announce on Tuesday in a bid to narrow a widening wealth gap.
The idea to give out the so-called baby bonds is a scaled-down version of legislation introduced by Senator Cory Booker, Democrat of New Jersey, to help address a disparity that, on average, has left white families in the United States seven times wealthier than their Black counterparts.
The New Jersey initiative, which Mr. Murphy’s aides believe is the first state effort of its kind, would cost an estimated $80 million a year and would require legislative approval. The $1,000 allocation, payable with interest when a child turns 18, is included in the amended state budget that Mr. Murphy is scheduled to release on Tuesday.
Mr. Murphy, a Democrat, said the move would be a small but tangible step toward confronting inequities that have been brought into particularly stark relief by the coronavirus pandemic, which has disproportionately affected Black and Latino people, who have died and lost jobs at far higher rates.
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“The inequities are too wide, too raw, to ignore,” Mr. Murphy said in an interview.
The initiative would apply to children born into families earning less than about $131,000 a year, or 500 percent of the federal poverty level — about 70 percent of all New Jersey residents, an aide to Mr. Murphy said.
At an average rate of growth equivalent to Monday’s 30-year bond rate of 1.35 percent, the investment would be worth about $1,270 after 18 years.
The legislation introduced by Mr. Booker and Representative Ayanna Pressley, Democrat of Massachusetts, would add more money to a child’s account each year, creating a fund of about $46,000 for children born into the poorest families.
The idea of creating such nest eggs has been discussed at least as far back as 2007, when Hillary Clinton, during her first presidential campaign, proposed setting aside $5,000 at birth to be used to pay for college or buy a house.
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“The source of inequality generally is that some young adults have capital and others do not,” said Darrick Hamilton, a professor of economics and urban policy who will begin teaching at The New School in New York City next month. “The difference between a renter and a homeowner is a down payment.”
“This is saying: Irrespective to the family you are born into, that you have a birthright to capital when you become an adult,” Professor Hamilton added.
The gap in wealth between the richest Americans and the middle class has grown rapidly in the last 50 years.
The financial disparities between white and Black people are also glaring. The median wealth for white families is about $171,000, compared with just $17,600 for Black families. Much of that wealth is passed down from one generation to the next.
Mr. Booker applauded the governor’s proposal, saying it could be an “igniter of dreams.”
“It immediately gives kids a stake in expanding their imagination about what’s possible for them,” the senator added.
Mr. Murphy said it was possible for more money to be added to each child’s state account in the future.
“We happily reserve the right to top it off with more money,” the governor said. “This is the start.”
The money could not be touched until a child turned 18, and then could be used only to pay for certain expenses, including college tuition or buying a home.
The expected announcement of the initiative comes just over a month after Mr. Murphy persuaded the State Legislature to approve nearly $10 billion in bond debt to cover the extraordinary costs created by the pandemic and a related drop in tax revenue.
Some critics questioned New Jersey’s ability to afford the program, while others noted that it would not yield benefits until long after many lawmakers had retired.
“I’m willing to discuss any proposal,” said Assemblyman Jon M. Bramnick, the Republican minority leader. But, he added, “I’m not sure the Democrats or Phil Murphy ever look at both sides of the balance sheet.”
Mr. Murphy, who has repeatedly sought to introduce a so-called millionaire’s tax, said the baby-bond initiative would be coupled with unspecified cuts to the $40.9 billion budget he originally proposed.
New Jersey’s fiscal year typically runs from July 1 to June 30, but the pandemic caused officials to extend the current fiscal year until Sept. 30; in July, lawmakers passed a three-month stopgap spending plan that included about $4 billion in cuts. Mr. Murphy and the Legislature, which Democrats control, must finalize the budget before the new fiscal year starts on Oct. 1.
The governor said he believed the baby-bond effort was worth the cost, even at a time when the state is financially strapped.
“This is one of those moments,” he said, “where we’ve got to see beyond what’s in front of us.”