Baby Bonds History

An old idea made new

It was Professor Darrick Hamilton’s advocacy of baby bonds that brought his academic work off progressive wish lists and into the real world. Hamilton developed the idea more than 20 years ago, proposing to give each baby born in the U.S. a trust fund established and guaranteed by the federal government. The goal is to narrow the vast inequalities that exist at the moment of birth, particularly those related to the wide and persistent racial wealth gap. The bonds could give any disadvantaged 18-year-old resources to catch up to wealthier peers. “The fundamental point 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,” Hamilton says. And, because race correlates so closely with wealth in the U.S., the policy can be officially race-neutral while still giving a substantial boost to Black Americans who for centuries have been denied opportunities to build intergenerational wealth.

In the early 2000s Darrick was asked at a forum convened by the Ford Foundation to come up with a more politically feasible way of building up Black wealth. “Give us something that can actually happen,” he recalls being told. The answer would be baby bonds, formerly described in a 2010 academic paper by Hamilton and his graduate adviser and then-frequent co-author William Darity Jr.” (Bloomberg, 2022)

History of bold wealth building policies

While the notion of creating a publicly-funded program to provide capital to young people may seem new or radical, the idea—and the concept of economic rights in general—is deeply rooted in American history.  In his 1797 pamphlet, Agrarian Justice, philosopher and political activist Thomas Paine proposed a “public system of economic security” funded through a tax on inherited property that would provide seed capital to young adults when they turned 21, as well as an “age old pension” in the form of annual income support to adults over the age of 50. He argued that all people reaching adulthood should receive a capital grant to help them “begin the world.” In Paine’s proposal we find the seeds for foundational public programs for a lifetime of economic security, including our now firmly established Social Security program and the emergent Baby Bonds.

A History of Wealth-Building Policy in the U.S.— for some

In the 200 years since Paine’s proposal, there have been other key policy moments that set the stage for today’s Baby Bonds.

In 1862, an early federal social security-type pension system to provide steady income was set up for Civil War Union soldiers. Later, former Confederate states had to create and fund their own pension system. Black Union veterans were eligible for pensions, as were women—either as widows or veterans (primarily nurses). 

That same year, Congress passed an asset-building program known as the Homestead Act, which opened land ownership to male citizens, widows, single women, and immigrants pledging to become citizens. At the time, this opportunity was not open to most Black people, who were still enslaved. Unfortunately, much of the land made available through the Homestead Act was historically inhabited by Native Americans, who were further displaced by this new act. Researchers estimate that 20 percent of the U.S. population (mostly White people) can trace their family history of building wealth to land acquired through this one piece of legislation. 

On January 16, 1865, near the end of the American Civil War, General William Tecumseh Sherman issued Special Field Orders, No. 15. This order provided for the confiscation of 400,000 acres of land along the Atlantic coast of South Carolina, Georgia, and Florida and its division into 40 acre parcels for the benefit of approximately 18,000 formerly enslaved families and other Black people then living in the area. Four months later, after the assassination of President Lincoln, the orders had little concrete effect because new President Andrew Johnson issued a proclamation that returned the lands to southern owners who took a loyalty oath. Although mules are not mentioned in the orders, this order and eventual rescission were a main source for the expression "forty acres and a mule."

Over the following decades, Black families overcame significant challenges to acquire property in the post-Civil War South–yet another wave of discriminatory federal policy would rob them of their land and its generational wealth-building capacity:

In 1935, Congress established Social Security as part of President Franklin D. Roosevelt’s New Deal program. This social insurance program addresses the problem of economic security for the elderly by creating a work-related, contributory system in which workers provide for their own future economic security through taxes paid while employed. Note that the original Social Security program excluded domestic and agricultural workers, about half of whom were Black men and 90 percent women.

In 1944, President Roosevelt introduced the idea of an economic bill of rights, in which he called for physical security, economic security, social security, and moral security. That same year, the G.I. Bill helped millions of Americans get a college education or buy a first home. While the G.I. Bill's language did not specifically exclude African-American veterans, it was structured in a way that ultimately shut doors for the 1.2 million Black veterans who had served their country during World War II. 

In 1948, the United Nations ratified the Universal Declaration of Human Rights (UDHR) in the aftermath of World War II, with input from figures like Eleanor Roosevelt and René Cassin. It aimed to promote universal human dignity and prevent future atrocities. Early drafts included both civil-political rights (like free speech and voting) and economic-social rights (like the right to work, education, housing, and social security), recognizing that economic stability was fundamental to human freedom. However, Cold War politics led to the sidelining of economic rights, as Western powers, particularly the U.S., opposed their inclusion. As a result, while economic rights were acknowledged in the declaration, they were not given the same enforceable status as civil and political rights, reflecting the ideological tensions of the time. (Glendon, 2001; Moyn, 2010)   

While the G.I. Bill and other  government programs provided income and some wealth benefits to new generations of middle class Americans, they have done little to improve the wealth positions for many poor Americans, particularly young people, women, and Black and Indigenous people. The benefits of these programs were inhibited through policies like redlining, highway construction, and exclusionary zoning that have all worked in tandem with restrictive covenants and regulatory controls to marginalize Black Americans and constrain their economic participation and political power.

Origins of Modern Baby Bonds — United Kingdom 

Starting in the early 1970s, political sentiment regarding social mobility shifted radically from government mandates to promote economic security toward a “neoliberal” approach in which the market is presumed to be the solution for all our problems, economic or otherwise. As a result, the onus of social mobility has shifted further onto the individual, while the market has become more inadequate at addressing rising inequality. 

In 1989, economist Julian Le Grand of the London School of Economics may have been the first in modern policy discourse to propose “baby bonds,”  or in his words, a “universal grant of basic capital (UBC).” Le Grand proposed that a grant of £10,000 should be awarded to every citizen on his or her attaining the age of majority, funded by inheritance taxation. (Le Grande and Estrin, 1989).  

In 2000, Gavin Kelly of the Institute of Public Policy Research (IPPR), a policy think tank in England, put forth another version of the UK’s UBC. He advocated for the creation of publicly funded savings accounts for all children at birth, with additional contributions for children from lower-income families. These accounts would become accessible when the child reached adulthood and could be used for wealth-building purposes such as education, homeownership, or starting a business. This concept closely mirrors what later became known as "baby bonds.” This version of the UBC idea formed the basis of the Child Trust Fund, a policy introduced in the United Kingdom in 2003 but abolished in 2011. (Le Grand, 2000; Kelly and Lissauer, 2000)

Origin of “Baby Bonds” in the United States

The idea of providing financial resources to children as a means of reducing economic inequality gained steam in a 1991 book by Michael Sherraden called Assets and the Poor and, later, in a 2004 book by  Tom Shapiro, The Hidden Cost of Being African American . Both authors proposed “asset-based policies” for wealth-building. Additional thinkers opened the conversation of economic well-being and poverty beyond income and subsistence, and understood the role of assets in forging justice, mobility and economic inclusion. The Urban Institute recounts the policy proposals inspired by this early work:

• Introduced in the 1990s, matched savings accounts—called individual development accounts, or IDAs—provide an accessible asset-building pathway for low-income families… Though IDAs promote economic well-being among people with low incomes, evidence has not yet shown a significant increase in net worth among participants (Grinstein-Weiss et al. 2012). Further, no evidence to our knowledge shows that they reduce racial wealth inequities.

• In tax policy, 529 college savings plans, which provide tax credits to families who save for their children’s education, became popular for higher education in the late 1990s and early 2000s. Such plans are currently offered in every state in the US, but they require personal savings and individuals must enroll in most cases, so in practice they mostly serve families with higher incomes and have not contributed to large shifts in racial wealth inequities… 
• Child development accounts build on college savings accounts—and in some cases use the 529 vehicle—but automatically enroll families. Seven states have passed legislation to enroll all newborns in a state account with an opening deposit (Huang et al. 2021). Longitudinal experimental research on child development accounts demonstrates that an investment of $1,000 at birth has both financial and nonfinancial impacts (Huang et al. 2021). The nonfinancial benefits include sustaining high parental expectations about children’s education, reducing the intensity of maternal depression, reducing punitive parenting practices, and improving children’s early social and emotional development. Other qualitative and quasi-experimental research also points to the development of a college-going identity, more concrete communication about postsecondary plans between caregiver and child, and greater hope for the future (Blumenthal and Shanks 2019). But child development account programs still limit uses to higher education, preventing participants from investing in other evidence-based asset-building activities like retirement accounts, small-business investment, or Homeownership. 

In the United States in 1999, Bruce Ackerman and Anne Alstott proposed a “stakeholder grant” of $80,000 for everyone at the age of 21 with a high school diploma and no criminal record, financed by a wealth tax. This landmark proposal envisioned the provision of substantial resources, although not with progressive funding, so it would privilege those who already have wealth.

The current Baby Bond movement in the United States traces its origin to Dr. Darrick Hamilton. As he told Vox in May 2024:

“Around 2000, I was doing a post-doc at the University of Michigan with a colleague Ngina Chiteji (now an economist with New York University). We did work on the racial wealth gap, looking at the role of families, the role of having poverty in your wider family vs. having more affluence. We talked about some of the peers we grew up with and some of the advantages they may have had versus us. That helped me understand the power of inheritance, of endowment, of intergenerational transfers of resources. A middle class didn’t simply emerge. It came about because of public policy. It’s through providing access to capital at a key point in somebody’s life that they’re able to generate wealth. 

“About the same time,  the Ford Foundation – led by Kilolo Kijakazi , a program officer there, and Melvin Oliver, a VP at the time, would convene academics, advocates, policy makers, and media to come together and tackle this problem of the racial wealth gap. I’d sometimes say reparations is a way to close the racial wealth gap. While that’s more of a political possibility today than when these meetings were taking place, in the context of these meetings, it was said, ‘Ok, give us something we can use politically.’  Then Baby Bonds came about (the phrase was coined by Manny Maribel, a professor of public affairs at Columbia University). I thought about what it would mean if we had a policy, similar to the GI bill, that provided people with downpayments so that everyone in an inclusive way could have the benefits of capital.   

“These Ford convenings provided space, motivation, and collaboration where the idea developed more fully. People’s lived experiences give insight into policy. Baby bonds is a story building on scholarly contributions who’ve shifted the conversation in dynamic ways.”  

The program is affectionately known as “Baby Bonds” but is more accurately labeled a “Baby Trust,” since it is actually a trust account program, not a bond account program.

Building on these convenings and the observation that Children Savings Accounts (CSA) tended not to build wealth nor solve the unequal participation in CSA programs by certain groups, particularly communities of color, in 2010, Dr. Hamilton introduced Baby Bonds in a peer-reviewed article, "Can 'Baby Bonds' Eliminate the Racial Wealth Gap in Putative Post-Racial America?" This seminal work energized the consideration of Baby Bonds, a policy that would provide every newborn child with a government-funded trust account. These accounts would help create a more equal starting point for children born into poverty and would focus on wealth, rather than income.  

Baby Bonds are different from CSAs and recognize that savings alone are not enough. While CSAs aim to reduce student loan debt—which is an albatross on wealth creation, particularly for Black and brown households—the concept of Baby Bonds is keenly focused on the initial endowment itself as a necessary ingredient to put families on a pathway to additional wealth accumulation. In doing so, these substantially endowed accounts will lead to significant wealth-building, not just the modest savings that are more typical of CSAs. To that end, Baby Bonds accounts will provide all children—but especially those from lower-wealth families—with the necessary capital to have financial agency and economic security to take risks and shield against losses. 

Baby Bond Policy Momentum

In the past ten years, the idea of Baby Bonds has gained traction in academic circles, think tanks, and policy discussions. Various economists and researchers published papers and reports discussing the potential benefits of such a policy, including reducing wealth inequality and improving economic mobility. Baby Bonds came to wider public attention in the U.S. in 2019, when New Jersey Senator Cory Booker (D-NJ) ran for president on a platform that featured a federal Baby Bonds program (developed by Booker aide Chad Maisel). Dr. Hamilton helped craft the proposal; his tireless advocacy for the idea prompted Senator Booker to dub him “the intellectual father of baby bonds.” The first substantive attempt to introduce legislation in support of Baby Bonds was made by Sen. Booker in 2019 with the introduction of the American Opportunity Accounts Act (AOAA). Since then, Sen. Booker has worked with Rep. Ayanna Pressley (D-MA-7) to develop and promote the legislation. Sen. Booker and Rep. Pressley reintroduced the bill in the 118th Congress in February 2023.  

In 2019, Dr. Naomi Zwede published research describing the potential impact of a national Baby Bonds proposal on the racial wealth gap. 

In 2023, Bloomberg News took note of the growing conversation around Baby Bonds: 

“The momentum for the idea really gathered after the murder of George Floyd by police in May 2020, sparking a reckoning that saw lawmakers scrambling for policies that might address the striking disparities between Black and White Americans.

“The first state to adopt a Hamilton-style baby bonds program was, by some measures, the country’s richest and least equal. Connecticut can boast one of the highest average incomes in the U.S., thanks to the hedge fund billionaires and other finance professionals who live in Greenwich and other suburbs of New York City. But its cities contain pockets of deep, persistent poverty. ‘Connecticut is ground zero for wealth disparity as well as income disparity,’ says Shawn Wooden, who grew up in the impoverished North End of Hartford, the capital, and was elected state treasurer in 2018.

“Wooden brought his baby bonds proposal [key contributors from Wooden’s staff include Dan Krupnik, Jen Putteti, and Greg Gerratana] to Connecticut’s legislature in early 2021, and by July it was law. The District of Columbia moved about as quickly, beginning debate in May and passing its law in December. Wooden says the combination of widespread pressure to tackle racial disparities and Hamilton’s ‘intellectual framework’ prompted advocacy groups and legislators in Connecticut to line up swiftly behind an idea that was new to most of them. To broaden the coalition, proponents argued that baby bonds wouldn’t just heal racial divisions but regional ones, helping poor, largely Black and Democratic urban neighborhoods and poor, largely White and Republican rural areas alike. Wooden tried to demonstrate to lawmakers that there were families in every one of the state’s 169 towns, including Greenwich, that could qualify for baby bonds. ‘Part of the messaging around this is it’s not race-based,’ he says. ‘This is a program that is antipoverty regardless of your race or ZIP code.’”  

Soon after CT Baby Bonds passed and was signed by the Connecticut Governor in 2022, the Governor had a change of heart and worked to derail the effort. In 2023, Treasurer Wooden’s successor, Treasurer Erick Russell, identified a new funding source for Baby Bonds that helped overcome the Governor’s opposition and allowed the program to go forward. The first eligible baby was born on July 1, 2023. CT Baby Bonds establishes an initial $3,200 for each baby born in Connecticut enrolled in the state medicaid program. Eligible young adults can access their share of the fund between the ages of 18 and 30 and use it for a qualified wealth-building purpose, such as college or a mortgage down payment. 

In October 2021, Washington, D.C. followed with a local Baby Bonds program. In 2022 and 2023, other states introduced Baby Bonds legislation, including California, Washington, Massachusetts, Nevada, Wisconsin, Vermont, New Mexico, and North Carolina. Today, Dr. Hamilton and his team at the Institute provide strategic support and design guidance to all of these efforts, as well as to several other states that are actively considering Baby Bonds legislation and demonstration projects.

The Institute’s Baby Bond website launched in October 2023 and has become the go-to destination for all things Baby Bonds, serving as a resource and repository for articles, research, legislation, and “Baby Blogs,” monthly columns written by a range of leaders from the community and public and private sector. Baby Bonds and Dr. Darrick Hamilton, the policy’s primary architect, has received significant press coverage, including features in TIME magazine, New York Times, National Public Radio, Boston Globe, Wall Street Journal, Washington Post, and Bloomberg News. Additionally, dozens of local papers around the country have written about Baby Bonds legislative efforts.  

The interest in this policy solution has spurred a desire to better understand and address the wealth gap and a more inclusive economy, which Darrick and the Institute team center as part of a “human rights economy.” Both this framework and Baby Bonds have been featured at events hosted by the Asset Funders Network, the National Association of State Treasurers, Federal Reserve district banks (New York, Atlanta, and Boston), the United Nations, and others. 

As the Baby Bonds movement continues to grow across the U.S. and beyond,  it is clear that the full history of this “old idea, made new”  is yet to be written. 

To learn more about the history of Baby Bonds or how to bring Baby Bonds to your state, city, or region, contact David Radcliffe at radcliffed@newschool.edu

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