NJ Governor proposes $1,000 ‘baby bond’ for children to close wealth gap
New Jersey Gov. Phil Murphy (D) proposed on Tuesday a $1,000 “baby bond” nest egg for children from lower income families in an effort to close the wealth gap in the state.
The governor included the baby bond proposal in an amended state budget, as a scaled-down version of Sen. Cory Booker’s (D-N.J.) congressional legislation to address the gap in wealth. Murphy said the idea was “inspired by the trailblazing work” of Booker to address financial inequities specifically between white and Black families.
“This is a place where New Jersey will lead, with the first statewide program of its kind,” Murphy said Tuesday. “As this child grows, so, too, will the value of this bond — to help pay for college, to help make a down payment on a home, or to help start a small business.”
“At this time — when so many families are struggling with how they will pay their bills or seeing their hard-earned savings disappear — let’s make a better promise to the next generation of New Jerseyans,” he added.
The proposed baby bonds would provide $1,000 to each child born in 2021 into families earning less than about $131,000 per year or 500 percent of the federal poverty level, helping about three of every four children born in the state.
At this rate, the program would cost the state about $80 million per year and need legislative approval every year, according to The New York Times.
The average rate of growth equivalent to Monday’s 30-year bond rate of 1.35 percent means the baby bond could be worth about $1,270 in 18 years, according to the Times.
The child would not have access to the bond until they turn 18, and the money can only be used for certain expenses, like for college tuition, buying a home or starting a small business.
Booker and Rep. Ayanna Pressley (D-Mass.) have introduced similar legislation in Congress that would put additional money into the bond every year. The New Jersey senator also made the baby bond initiative a central part of his 2020 presidential campaign.
The wealth gap shows that white families on average make about seven times more than Black families and that gap has widened as money is passed down to the next generations, according to the Times.
Booker told the Times that Murphy’s proposal could be an “igniter of dreams.”
“It immediately gives kids a stake in expanding their imagination about what’s possible for them,” he said.
Critics of the proposal say the state will not be able to afford the baby bonds and that many lawmakers would not see results until after they are out of office.