America’s next great wealth-building policy is more important than ever
American economic policy revolves around income, the flow of resources we need to afford our lives. Access to social services is predicated on it. Demands for economic justice often focus on a living hourly wage. And government data collection looks at hourly or yearly earnings.
But real economic independence and freedom flow from wealth — the stock of capital buttressing an individual or a family. True over the centuries, this fact has become even more salient in today’s United States, where the 400 richest people hold more wealth than the poorest 170 million, and where policy changes over the past decade have made it much easier for those who have wealth to expand it.
Wealth — rarely discussed in public and even more rarely measured — offers security, resources, and choices. “If we were to identify a single economic indicator of agency, of power, of capacity, of security,” says The Institute on Race, Power and Political Economy Founding Director Darrick Hamilton, “it would be wealth.”
Baby Bonds are one way to chip away at the chasm between the wealthiest and poorest Americans. This seed capital is granted upon birth, appreciates over time, and offers a substantial endowment once a child reaches adulthood. It’s a policy whose goal is narrowing the vast inequalities that exist from birth, particularly those related to the wide and persistent racial wealth gap.
To help understand the potential of Baby Bonds to address the root cause of economic insecurity, we need to first examine the historical and structural ways wealth accumulation in the United States has been encouraged and concentrated.
Early government efforts to encourage wealth-building
POST-REVOLUTIONARY WAR: “A PUBLIC SYSTEM OF ECONOMIC SECURITY”
The idea of a publicly funded program to provide capital to young Americans is as old as the nation itself. In 1797, philosopher Thomas Paine proposed a “public system of economic security” in the pamphlet Agrarian Justice. It would provide seed capital for a young person on their 21st birthday and another lump-sum payment on their 50th.
Paine suggested funding the program by taxing land at the point of inheritance, arguing that it would rectify the injustice of unequal land ownership. “It is a right, and not a charity, that I am pleading for,” he wrote. But this radical proposal found no political footing among the agrarian elites, foreshadowing a deep-seated strain in American political culture that resists the idea of universal economic rights, and constantly debates who is “deserving” of collective investment.
CIVIL WAR PENSIONS
Following the outbreak of the Civil War, Congress authorized pensions for Union soldiers and their families. What began as a targeted program in 1862 soon expanded to a broad social security system. By 1900, more than one in five older White males was receiving a pension, and the average payout replaced 30 percent of a laborer’s wages, on par with Social Security today. Black Union veterans were also eligible for pensions, although they faced more barriers than White veterans when applying. Women could only apply as widows or veterans — nurses, primarily. Former Confederate states also set up their own pensions systems, which were typically smaller and less reliable.
THE 1862 HOMESTEAD ACT
In 1862, Congress proposed a vast program of land redistribution. Under the Homestead Act, any citizen or intended citizen could claim a parcel of land west of the Mississippi for a nominal fee, as long as they lived on it and farmed it for a period of time. “The wild lands of the country should be distributed so that every man should have the means and opportunity of benefiting his condition,” President Abraham Lincoln wrote.
The Homestead Act remains one of the most significant redistribution programs ever undertaken in the United States: One-tenth of all U.S. land, or about 270 million acres, was distributed. Researchers estimate that 20 percent of White Americans today can trace their family wealth to this act.
Much of the land thus appropriated had belonged to Native Americans, who just decades before had been forcibly resettled outside their historic territories. Native Americans, whom U.S. law did not consider people at this time, were also ineligible to make a Homestead Act claim unless they renounced their tribal affiliation.
Most Black people in America were enslaved when the act was passed, and therefore could not make claims in the Act’s early years. While some Black homesteaders did build successful communities out West, many Black people could not take advantage of homesteading, an unreliable and risky way to get rich. The intentional and systematic exclusion meant that while the Act did provide a strong vehicle for generational wealth for White families, it simultaneously cemented a structural disadvantage for Black and Native Americans — becoming another foundational driver of America’s current racial wealth gap.
Black families dispossessed
THE 19TH CENTURY: “40 ACRES AND A MULE”
The end of the Civil War spurred an idea across large swaths of the abolitionist movement: redistributing plantation land to formerly enslaved people, giving them a chance to achieve self-sufficiency.
On January 16, 1865, Union General William Tecumseh Sherman issued Special Field Order No. 15, which set aside 400,000 acres of coastal land stretching from Charleston, South Carolina, to northern Florida. The land was to be split into 40-acre parcels, “left to the freed people themselves, subject only to the United States military authority and the acts of Congress.”
The initiative was short-lived. While some Black families were able to buy land seized during the war, Abraham Lincoln’s assassination put an end to reallocation. Lincoln’s successor, Andrew Johnson, was sympathetic to segregationists and returned the lands to Southern plantation owners later that year.
The phrase “40 acres and a mule” has come to symbolize the failed promises of Reconstruction.
THE 20TH CENTURY: CONFISCATION OF BLACK-OWNED LAND
Despite the lack of federal help, a significant number of Black families were able to buy land in the post-Civil War South. By 1890, one in five families owned land. By 1910, one in four did, creating a rural Black middle class that had real economic power and held a total acreage about the size of South Carolina.
But early in the 20th century, Southern segregationist Congress members helped create the modern agricultural system. New United States Department of Agriculture (USDA) policies encouraged mechanization and subsidized large landowners while eliminating many small programs that had assisted Black Americans. Coupled with outright fraud by unscrupulous government agents, the move pushed millions of Black families off their land.
The land that Black farmers lost between 1920 and 1997, and the income it could generate, would be worth around $326 billion in today’s dollars, according to research coauthored by Dr. Hamilton. If this amount were distributed across all Black families, it would nearly double their median household wealth.
Much of today’s Black-White wealth gap can be traced back to this loss.
The New Deal era builds a middle class for some but also entrenches inequality
THE SOCIAL SECURITY ACT
Starting in the 1930s, President Franklin D. Roosevelt’s New Deal marked a major expansion of the American social safety net. The 1935 Social Security Act created a public pension program in which workers pay taxes while employed to fund their living costs after they stop working. The Act also established an unemployment insurance program to be run by states, and provided aid for single-mother households. The initial act left out jobs most commonly held by Black workers, namely domestic and agricultural workers. This omission was a deliberate bargain that Roosevelt made with powerful Southern segregationist legislators to ensure the passage of the overall New Deal legislation.
Even as these jobs were added during Act expansions in the 1950s, Social Security created a pay-as-you-go system in which workers who paid more into it received larger benefits. Thus, it did not engineer the broad leveling of wealth some of its backers hoped for. It did, however, protect many Americans from destitution. Today, Social Security remains the largest source of income for the elderly.
EASIER HOMEOWNERSHIP — FOR SOME
In the 1930s, the federal government radically expanded opportunities for White Americans to own homes while further entrenching residential segregation.
The Federal Housing Administration, established in 1934, was tasked with insuring mortgages — a relatively new financial tool that allowed wage workers to spread out the cost of a home over decades. But the FHA declined to insure mortgages in Black neighborhoods or any neighborhoods where Black residents could move, since their presence could reduce the homes’ values, a practice called redlining. Until the 1960s, the federal government, municipalities, and private developers encouraged segregation via restrictive covenants, which forbade individual houses from being occupied by anyone of a different race than the original occupants. At the same time, the FHA provided robust support for all-White developments in newly burgeoning suburbs.
THE GI BILL
The 1944 Servicemen’s Readjustment Act gave veterans money to pay for a college education, a home, or a business. While the GI Bill was race-neutral on paper, widespread discrimination against 1.2 million Black World War II veterans and persistent redlining meant many Black GIs could not access new, desirable homes in all-White neighborhoods, or send their children to well-funded suburban schools. Black veterans were more often steered by discriminatory Veterans Affairs counselors and segregated institutions to vocational schools rather than college, effectively lessening the value of educational benefits they received.
Today’s wealth-building policies
THE UNITED KINGDOM: A ‘CHILDREN’S TRUST’
Starting in the 1970s, public discussion of equality took on a neoliberal bent, characterizing the government as less and less responsible to provide for its subjects. Instead, individuals were expected to provide for themselves. In this context, Baby Bonds made their first modern appearance in 1989, when economist Julian Le Grand of the London School of Economics proposed universal trust funds, or a “universal grant of basic capital.” The initial suggestion was a £10,000 grant to every citizen who reaches the legal age of adulthood, funded by inheritance taxes. Le Grand would go on to be chief architect of the short-lived Children’s Trust Fund, a decade-long program in which the U.K. government funded universal savings accounts, with higher funds for the poor. Le Grand called this universal endowment “a badge of citizenship.”
THE UNITED STATES: A PUSH TOWARDS ASSETS
Similar thinking began to take root in the United States with the publication of Assets and the Poor by Michael Sherraden in 1991 and The Hidden Cost of Being African American: How Wealth Perpetuates Inequality by Thomas Shapiro in 2004. Both authors proposed “asset-based policies” for wealth-building. “While incomes feed people’s stomachs, assets change their minds,” Sherraden wrote. Limited programs of this type included Individual Development Accounts (IDAs), savings accounts that match funding account holders put in, and tax-advantaged 529 educational savings plans. Studies have shown, however, that neither account has improved wealth among the poorest nor shifted the racial wealth gap. Their impacts are limited because they rely on people with fewer resources to set aside assets, when they have few to no assets to begin with.
THE UNITED STATES: DR. DARRICK HAMILTON’S RESEARCH AND THE BABY BONDS MOVEMENT
Dr. Hamilton is credited as the intellectual father of the Baby Bonds movement in America. A distinguished economist with a long career studying racial injustice and wealth-building, he hit upon the idea in the early 2000s. The concept came about when the Ford Foundation asked him for a proposal to close the racial wealth gap that was politically feasible. His response was Baby Bonds, which he and William Darity, Jr., formally described in their 2010 paper, Can ‘Baby Bonds’ Eliminate the Racial Wealth Gap in Putative Post-Racial America? in the Review of Black Political Economy.
The idea has gained traction over the last decade in academic circles, think tanks, and state legislatures. The study Universal Baby Bonds Reduce Black-White Wealth Inequality, Progressively Raise Net Worth of All Young Adults by Naomi Zewde in 2019 found that a Baby Bonds program implemented in the 1990s (25 years prior) would have reduced the White-Black wealth gap by a factor of ten. Other studies found similar but lesser equalizing effects, along with improved economic mobility.
AMERICAN OPPORTUNITY ACCOUNTS ACT
Inspired by Dr. Hamilton’s research, New Jersey Senator Cory Booker made Baby Bonds part of his 2019 presidential campaign and introduced the first federal legislation on Baby Bonds that year. Under the American Opportunity Accounts Act, every eligible child would receive $1,000 in a Treasury-managed account the year they were born, with $1,000 to $2,000 added every subsequent year, depending on income. On their 18th birthday, the recipient could access up to $45,000, which could be used for a wealth-building activity — such as buying a home, starting a business, or paying for education. Sen. Booker, along with Rep. Ayanna Pressley, reintroduced the legislation in 2023.
CALIFORNIA, CONNECTICUT, RHODE ISLAND, AND VERMONT LAUNCH BABY BONDS
In 2021, Connecticut became the first state to pass a Baby Bonds program (commonly referred to as CT Baby Bonds). It invests $3,200 on behalf of every child whose birth is covered by state Medicaid (nearly 50% of all births in the state). After a change of heart from the governor nearly derailed the program, it was funded in 2023. The first eligible baby was born on July 1 that year. About 33,000 children have joined so far.
In July 2025, Governor Daniel McKee officially signed Rhode Island’s new Baby Bonds bill. Once funded, these Baby Bonds will provide a $3,000 trust for every baby born to families in the Rhode Island Works Program. These funds can be used to pursue higher education, buy a home, start a business, or make other wealth-building investments.
Vermont has also passed legislation to establish a Baby Bonds pilot program, though, like Rhode Island, it is currently dependent on securing the necessary funding.
California established the HOPE Accounts program, a Baby Bond-like initiative that targets vulnerable youth, including those in long-term foster care or those who lost a primary caregiver to COVID-19. It received $100 million in one-time startup funding in 2022 to provide initial accounts of at least $4,500 to an estimated 58,000 eligible children.
STATES CONTINUE TO EXPERIMENT
Over the past three years, interest in Baby Bonds has ignited in state legislatures. Nearly two dozen states have proposed or are considering legislation to create or study Baby Bonds programs. And leaders from seven states are working to develop and test Baby Bonds pilot programs, generating crucial data to drive the scaling and replication of state and federal policy.
Washington, D.C., passed a Baby Bonds program in 2021, but it remains unfunded. Massachusetts, Nevada, New Mexico, North Carolina, Washington, and Wisconsin have all introduced Baby Bonds legislation, with strategic support from Dr. Hamilton and his team at the Institute. Baby Bonds have been featured in media and events hosted by the Asset Funders Network, the National Association of State Treasurers, the Federal Reserve banks of Atlanta, Boston, and New York, and the United Nations.
“The fundamental point,” says Dr. Hamilton, “is providing people with capital at a key point in their life, so they can get into an asset that will passively appreciate over their lifetime.” The history of this policy solution continues to be written.
To learn more about Baby Bonds or how to bring Baby Bonds to your state, city, or region, sign up for the Baby Bonds newsletter.
SHARE