0:01

Good to go? All

0:05

right. So,

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good afternoon, everyone. I

0:10

am thrilled to be here today to...

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Yesterday, Connecticut's

0:14

Treasurer Eric Russell stood up

0:16

to a podium to make an announcement. Our

0:19

first in the nation initiative to

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invest directly in Connecticut kids is

0:24

closer to becoming a reality.

0:26

Maryland state lawmakers had broken

0:28

an impasse over a program that

0:30

was designed to address entrenched

0:32

poverty.

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And it's really a shot to help break

0:35

the cycle of generational poverty

0:37

for so many who have lived

0:40

in it.

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This program is known as Baby Bonds.

0:44

Two years ago, the state passed a bill to

0:46

invest cash in a trust for

0:49

each child born into a low-income

0:51

family. And when the child reaches 18,

0:54

they can collect that investment.

0:57

The idea is to provide financial

0:59

footing to some of the state's poorest

1:01

people.

1:02

This is sending a resounding message that your

1:05

future can be bright, regardless of what zip

1:08

code you were born in.

1:10

The idea behind Connecticut's program

1:13

is one that's gaining traction around the country.

1:16

Washington, D.C. and California have

1:18

also approved Baby Bond programs. And

1:21

at least eight other states are considering

1:23

them too. But in Connecticut,

1:26

the path to actually funding the program

1:29

has been a long one.

1:31

Welcome

1:33

to The Journal, our show about

1:36

money, business and power. I'm

1:38

Kate Leinbach. It's Wednesday, May 17th.

1:42

Coming up on the show, the

1:44

Baby Bonds program and the state trying to get

1:46

it off the ground.

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2:37

The idea of baby bonds, of

2:39

using an investment trust for low income

2:42

children, goes back a few years.

2:44

So this idea was first envisioned by

2:46

economist Derek Hamilton of the

2:48

New School and William Darity

2:51

of Duke University. That's our colleague

2:53

Brenda Leon. And their idea is,

2:56

what if children who come from poor families

3:00

start off with money in their

3:02

account before they're born?

3:05

And the notion is to give

3:08

them an opportunity to build wealth before

3:10

they even start. Exactly. Is

3:13

it like a 401k for babies? It's

3:16

like a 401k for babies. In

3:18

essence, the idea was for the

3:20

government to create

3:22

these trust fund accounts and

3:25

seed them and continue to fund them

3:27

throughout the child's life.

3:29

Here's Derek Hamilton, one of those economists,

3:32

talking about baby bonds at a TED Talk

3:35

in 2018.

3:37

Wealth

3:37

is the paramount indicator of economic

3:40

security and well-being.

3:43

It provides financial agency, economic

3:45

security to take risk and shield

3:47

against loss. Hamilton

3:51

says that since wealth gets passed

3:53

down through generations, it stays

3:55

in the hands of the few.

3:56

Without wealth to pass down, poverty.

4:00

also becomes entrenched over generations.

4:03

Without capital, inequality is locked

4:06

in. We use words like

4:08

choice, freedom

4:10

to describe the benefits of the market, but

4:13

it is literally wealth that gives us

4:15

choice, freedom, and optionality.

4:17

According to the Pew Foundation,

4:20

only 4% of poor Americans actually

4:23

worked their way to wealth. Most

4:25

people who are born into the lowest income levels

4:28

remain there for life.

4:31

Programs, like the one Hamilton envisions,

4:34

already exist in other places in the world.

4:37

For example, Canadian children, actually, from

4:39

low-income families are eligible

4:41

for an Education Investment Fund.

4:44

Israeli children receive savings

4:46

accounts regardless of income that

4:48

goes towards education, home

4:50

ownership, or a business.

4:53

And the United Kingdom also allocated

4:56

child trust accounts from 2002 to 2011, but

5:00

then they switched to

5:01

tax-free savings accounts.

5:04

In the U.S., the idea got some

5:06

support in 2008 from Hillary Clinton's

5:08

presidential campaign, but

5:10

Brenda says it came back after

5:12

George Floyd's murder in 2020. So

5:15

after the summer of George Floyd, we see

5:18

a lot of Democratic lawmakers proposing

5:20

programs that would address racial

5:22

inequality and racial

5:25

problems across their states. And

5:27

that brought into essence a

5:29

wider conversation of who has

5:32

access to resources and who doesn't.

5:35

And one of the places that started looking into

5:37

baby bonds was Connecticut.

5:40

How would you describe the state of Connecticut?

5:43

Ah, Connecticut is a funny state.

5:46

I think that it's a state

5:48

where there is an

5:51

abundance of wealth concentrated

5:54

in some counties and

5:57

there is also pockets of...

5:59

state that experience extreme

6:02

poverty as well. In 2021,

6:05

Connecticut state treasurer Shawn Woodin

6:08

proposed a baby bonds program. He

6:10

saw it as a way to fight the state's extreme

6:13

poverty and racial wealth gap.

6:14

It is so clear to

6:17

everyone that we

6:20

as policy leaders, we need to do more.

6:22

We need to meet the moment.

6:24

Woodin saw baby bonds as

6:26

a way to level the playing field. You're

6:29

more focused on possibly

6:32

going to college if

6:34

you see a pathway, if there's a fund.

6:37

You're more focused on one day owning a home,

6:39

which some people in poverty never aspire

6:42

to because they don't think it's ever achievable.

6:45

What were some of the specifics of his proposal?

6:48

So his proposal was to create

6:51

an investment account per child.

6:54

And at age 18, children

6:56

who completed a financial literacy course would

6:59

be able to use the money to start or invest

7:01

in a Connecticut business, buy a

7:03

home in the state or pay for higher education,

7:07

maybe even save for retirement.

7:09

Families would be eligible for the program

7:12

if they were on the state's public health insurance

7:14

with a household income of around $65,000 or less. The

7:19

total program was estimated to cost $600

7:22

million and Woodin

7:25

had a proposal for how to pay for it.

7:27

Here he is in an interview on Yahoo Finance.

7:31

How much are you expecting if it does pass?

7:33

How much are you expecting this baby bond program

7:35

to cost and where would the money

7:38

come from to fund it?

7:39

Sure. So the cost

7:42

would be approximately $75 million a year.

7:47

And the funding would come

7:49

from a combination of we have a budget

7:51

surplus this year in

7:53

terms of seeding the program and

7:56

also long term debt

7:58

financing.

7:59

The president's proposal got traction, and in the

8:02

summer of 2021, Connecticut's state legislature

8:05

passed the first baby bonds program

8:07

in the country.

8:09

And Governor Ned Lamont signed it

8:11

into law.

8:14

And this program gave hope to people

8:16

like Shondell Vann. Shondell

8:18

lives in Bridgeport, Connecticut, and has a

8:20

two-year-old daughter, Maria.

8:23

The moment I currently don't

8:26

have much income, I do have, you

8:28

know, my own business where I

8:31

see things and make things, and that's how,

8:33

you know, I keep my income in it.

8:36

Shondell has a business selling customized

8:38

prints on t-shirts, backpacks, and tumblers.

8:41

And she's also enrolled in an online business

8:44

program at Norwalk Community College.

8:47

Shondell spoke to Brenda in March. And

8:49

so you go to school and you take care of your baby.

8:52

And you sort of like run your own business.

8:55

Yes. You must be exhausted all the time. Yes,

9:00

it is exhausting. It

9:01

really is. How

9:05

would you describe, you know, your day-to-day and

9:07

like your financial stability

9:10

looking forward? My

9:13

day-to-day, it's not

9:15

perfect. I

9:17

get by. Like, you know, it's a little

9:20

bit harder. I do think about my future.

9:23

I do think about what I

9:25

want to do and the stuff that I need to make to

9:28

make myself

9:29

better, in that instance, to be able

9:31

to be more financially stable and

9:33

things like that. But as far as

9:36

life goes, I do feel like I am

9:38

stable, but like you're living in the moment.

9:41

Like, you're not really thinking about the future because

9:43

you're trying to survive the now. How

9:45

would a program like this help your daughter in the future?

9:48

Or like, what is your take on like

9:51

this whole idea of addressing

9:53

generational wealth? I feel

9:55

like the program would give her

9:57

a little bit more of a leg up. As

10:00

her mother, I plan on

10:04

making plans for her so that way she does not

10:06

have to struggle in this

10:08

life and things like that. But obviously

10:11

something like that was just

10:13

a little bit more of a leg up so

10:16

that way she would be able to say she

10:18

wanted to have a business just like me.

10:21

She would be able to fund that with no problem.

10:24

Just anything that she wanted to do

10:27

with that money to be able to just

10:29

be a little bit more successful than

10:31

she was or just be a little bit better

10:33

off than she was just

10:35

better than nothing.

10:38

But Connecticut's Baby Bond program

10:41

stalled.

10:43

What happened is next.