Don't Throw Baby Bonds Out With Bath

For better or worse, America has a habit of conducting much of our policymaking through the presidential election process. This can be dangerous when meaningful reform efforts get trumped by volatile politics. Sure, we’d like campaign promises to mean something but it’s counter-productive if we let the consideration of good ideas get easily diverted into the gutter.

A case in point was the recent discussion of Hillary Clinton’s Baby Bond proposal, which was quickly hijacked by partisan politics. That’s a shame because the idea of creating a system of children’s savings accounts has good politics behind it and is potentially popular with voters.

Before Rudy Giuliani resorted to mocking Hillary as part of his campaign and debate performances, she was adding her voice to a number of policymakers and pundits who have expressed support for this idea. She was not poised to roll out any specific campaign proposal but she has in the past called for creating such accounts. In a July 2006 speech to the Democratic Leadership Counsel, she proposed giving every newborn child a $500 endowment, calling them Baby Bonds to distinguish them from other similar proposals already under consideration by Congress.

In recent years this idea has attracted attention across the political spectrum. In fact, before the current presidential campaign took over, it made news in 2004 and 2005 as a place where senators clashing over Social Security could find common ground. A piece of legislation called the ASPIRE Act was co-sponsored by the strange-bedfellow pairing of now-former senators, Jon Corzine (D.-N.J.) and Rick Santorum (R.-Penn.). This proposal would have seeded all newborns with a $500 savings account to get them build a basis for financial education and developing the savings habit.

In the current Congress, proposals and legislative bills to create accounts at birth have supporters among Republicans and Democrats alike. For instance, Rep. Patrick Kennedy (D.-R.I.) has reached across the aisle to work with Republican lawmakers who share his concern about the country’s growing wealth gap, low personal savings rate and poor financial literacy. He is leading a bipartisan coalition that recognizes that we need to find innovative ways to seed more savings and property ownership. These assets can in turn provide an essential element of economic security, letting people adjust to income fluctuations or make productive investments in their future. And there are a number of benefits to starting this savings process at birth. Not only do you get to maximize the advantage of compound interest, but these accounts can become a teaching tool to deliver the fundamentals of financial education — a primary skill for navigating our 21st Century economy.

The concept of children’s savings accounts, like the type proposed in the ASPIRE Act, is being carefully tested and subjected to research. A national demonstration project, called SEED, is being implemented by 12 community organizations across America. The experience is showing that families and youth can and will save if given the opportunity and support to do so.

To date, 1,400 children and youth across the United States and Puerto Rico have accumulated nearly $1.6 million in their accounts in just under three years. On average, each child has $1,332 in an account that is “seeded” as an investment for their future. Moreover, new polling data show that voters, especially parents, strongly support establishing children’s savings accounts for every child.

A national survey recently conducted by Peter D. Hart Research Associates shows that voters strongly support establishing children’s savings accounts. Sixty-nine percent of voters and 78 percent of parents favor children’s savings accounts upon exposure to the concept, and just 22 percent of voters and 15 percent of parents oppose the idea. This support was robust regardless of party affiliation, political ideology and region. Nearly three-quarters (74 percent) of self-described liberals favor children’s savings accounts, as do 72 percent of moderates and 62 percent of conservatives.

Shouldn’t we be looking for more ideas capable of garnering support from progressives and conservatives alike? The value of this idea is that it has a place in both an ownership agenda promoted by Republicans and one focused on opportunity, espoused by Democrats. Given the ideological diversity of its advocates, it is an idea that deserves a fair hearing, one that should be conducted above the partisan fray.

A version of this article also appeared in the Nov. 9, 2007, Detroit Free Press.