Who Will Pay for Baby Bonds and How?
October 2, 2007
One of the best tips for building financial assets is to start early. Some people are fortunate enough to have family give us some seed money when we’re born. Others of us are lucky to have money savvy parents that start saving for us when we’re young and pass that money sense on.
Of course, there are many people that don’t get that head start. What can be done to help them? Hillary Clinton is proposing a “Baby Bond” program that would give every child born in the U.S. $5,000. The idea is that they could use it to pay for expenses later in life such as college, a first home, or a business venture.
I think it’s an interesting proposal, putting the power of compound growth to work from the moment a person is born. Letting people see the benefit of saving early and watching it grow. Of course there are many questions such as who would oversee and distribute the funds and what criteria would exist for cashing them in. But before we answer any of these questions, I think we should first ask how we’re going to pay for it. An ABC news article makes the following cost estimate:
“Presuming that approximately 4 million children are born in the United States each year, a $500 “baby bond” would only cost roughly $2 billion per year. A $5,000 “baby bond” would cost the government $20 billion per year.”
Thanks to a variety of reasons the Federal government is already in massive debt. Are we willing to commit to spending another twenty billion dollars a year when we don’t know how we’re going to pay for it? I think after hammering out all the details to account for fraud, oversight, etc. it could really help give people a leg up but where will the money come from? Is the government going to cut spending somewhere else, raise the money somehow, or just go deeper into debt?
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