Child Allowances and Family-Scale Capitalism
Three different ideas, three very different groups of supporters. One appeared in the neo-Hamiltonian journal American Affairs (which I recommend subscribing to), descended from the pro-Trump Journal of American Greatness. One was touted by New Jersey Senator Cory Booker on the Presidential campaign trail. One is proposed by 2012 Republican Presidential Nominee and Utah Senator Mitt Romney and Colorado Senator Michael Bennet. What on earth could unite these three ideas? Each of them represents a sort of a child allowance that holds promise for combatting racial inequalities, fighting poverty, supporting stable household formation, and helping create new political coalitions. Increasingly, folks on the left and right alike recognize that economics and family are intertwined. The economy must serve a goal greater than GDP. Sociologist Daniel Bell correctly wrote that “no moral philosopher, from Aristotle to Aquinas, to John Locke and Adam Smith, divorced economics from a set of moral ends or held the production of wealth to be an end in itself; rather it was seen as a means to the realization of virtue, a means of leading a civilized life.” Policies like those I describe connect the left’s long-standing pursuit of social justice with the traditional institutions that underpin communities. Let’s get into how these policies operate.
Baby Bonds — Building Wealth
First, Baby Bonds sketch a powerful framework for combatting racial inequality. Senator Cory Booker of New Jersey ran an electric-if-ill-fated bid for the White House focused on expanding opportunity for all Americans. Unlike many in the 2020 Presidential campaign, and certainly the incumbent President, Booker knows the struggles impoverished Americans face. As Mayor, he lived in a housing project in the middle of Newark. Interacting with his neighbors combined with (as Ezra Klein puts it)Booker’s “far more radical ethical vision than he gets credit for” to fuel “ a more ambitious policy vision than is often discussed”. Central to that vision was his Baby Bond proposal. Baby Bonds entail giving each American newborn baby an account with $1,000 in it, followed by up to $2,000 a year through age 18 depending on family income. At age 18, after the funds mature in a Treasury account with a 3% interest rate, the minor-come-adult can withdraw funds to pay for homeownership, educational expenses, or retirement. Booker proposes paying for the $60 billion program with estate tax changes for people making over $10 million a year. The 10-year net deficit effect, calculated by the Committee for a Responsible Federal Budget, would be $50 billion. There is room to tweak Booker’s amounts, and this is just one estimate.
Baby bonds would have a massive effect. Those born into families below the poverty line would net $46,215, while even a family making $81,575 annually would end up with $7,248. Researchers from the Center on Poverty and Social Policy at Columbia University found that this would help close America’s staggering racial wealth gap. The median wealth of Black Americans would rise to $57,845 from $2,900 while the median wealth of White Americans would also rise, from $46,000 to $79,159. Consequently, the ratio of wealth held by White Americans to Black Americans would decrease from 15 to 1.6, while Americans of all income levels and races would gain wealth!
Neighborhood segregation, lack of access to homeownership, and lower intergenerational transfers help drive current gaps. Baby bonds would tackle each of these issues because wealth matters. It allows people to move to better neighborhoods, invest in human capital, start a business, and take many more choices. Proposals that bolster wealth open doors to the American Dream. Early results from studies of a similar private plan in Oklahoma suggest that involved parents express greater optimism for their children’s’ futures. No matter our politics, we all want a better future for our children. That optimism is a powerful motivator.
Booker’s suggestion has attracted criticism though. Some describe the money as coming too late, while others question whether the government should be involved here in the first place. But the government on all levels actively supported policies that created the racial wealth gap. Residential discrimination, including redlining and racial covenants, received government approval for years. Federally funded highways were driven straight through often Black-and-Brown communities. Even today, African-Americans, especially men, are incarcerated at 5x the rate of Whites, due in part to government carceral policy. Even middle-class Black neighborhoods were gutted by subprime mortgages and abusive banking practices during the Great Recession, enabled by deregulation. Basic tenets of responsibility force the government to curb racial wealth discrepancies they had a hand in creating. So then, why not choose a solution more politically palatable than calls for uni-racial reparations? Baby bonds contain enough universality for buy-in to combat stigma, but their effect especially boosts the wealth of vulnerable populations. A win-win antiracist proposition indeed.
American Affairs — Paying Families for Kids
A second idea is even more straightforward, proposed by University of Dallas Professor Gladden Pappin in the pages of American Affairs. Pappin combines three different initiatives into an encompassing proposal. FamilyPay would consist of a direct cash payment to families having children while CarePoints would be bookmarked vouchers for child-related expenses, which often add up quickly. For one child, a family would receive a $6,500 stipend, while 2 would garner a $11,500 stipend. CareBonds would fulfill a function slightly similar to Baby Bonds, albeit at a smaller scale. CarePoints can be invested in this vehicle for later expenses like college tuition, providing a forward-looking element. Median household after-tax income would rise by around 30%, but the program would cost $1.8 trillion per year, a hefty sum Pappin proposes paying for with excise taxes, a financial transaction tax, and cuts to current tax credits. FamilyPay might prove a tough sell at the proposed amount, but the basic idea is powerful. Give families money for having children. The benefits are universal, but economic inequality means that benefits would be relatively higher for poorer Americans. Unlike Booker’s Baby Bonds, the benefits would accrue directly and immediately, and they’re more focused on parents.
Centrally, Pappin’s proposal reveals the potential for coalition-building around this issue:
Since the matter of abortion shows no signs of undergoing fundamental change, Republicans in particular should consider firmer state support for families. While Republicans profess to be in favor of traditional rather than progressive family structures, it is Democrats who have proposed the most robust recent forms of state support for family formation. Yet Democratic rhetoric that denigrates traditional family structures undermines their credibility on this point with Republican voters. The result is a situation of considerable political flux, in which policy entrepreneurs, particularly on the right, could make considerable strides.
In light of the flux Pappin recognizes, his idea or similar ones could usher in the pro-family, pro-labor left-right coalition Saagar Enjeti and Matt Stoller discuss in an amazing Federalist interview. The need to challenge a broken elite consensus remains strong. President Trump has divided more than united the working class, stirring up racial resentment instead of emphasizing the common roots of economic decline among his White working-class fanbase and POC groups. During this pandemic, large corporations got huge checks while average Americans suffered. Politics as usual has been blown apart. Modern conservatism might be broken, but as Enjeti notes, a good amount of the right has historically been skeptical of unbridled free-market ideology. The threads of right-wing market-wariness are diverse. Some rightfully see how a libertarian right-wing individualism undermines the household and community. Others pragmatically acknowledge that the United States has a safety net that isn’t going away. Pappin himself speaks of too many conservatives seeking to conserve what’s good without a proper understanding of power and statecraft. After all, Republican President Richard Nixon proposed a guaranteed minimum income of $500 for adults and $300 for children in his Family Assistance Plan. The policy emerged partly in response to “the riots in the street and the quiet hunger in the countryside”. Just weeks after cities were wreaked by calamitous riots followed by massive peaceful (and inspiring) protests across localities of all sizes, the US today faces a similar political call. Recently, public opinion majorly shifted to acknowledge continued racial injustice. The political realm is also more attuned to change. The COVID-19 crisis necessitated rapid, large-scale government action that broke through ideological barriers. Congress has spent the last few years drowning in partisan squabbling, but the current moment creates space for new approaches to break the deadlock. Additionally, intraparty divisions could use a major change in focus. The emergence of new political cleavages that elevate cultural issues damaged the left by pitting an elite managerial class against the multiracial working classes that the left traditionally derived strength from. In a wonderful 2019 article, Yascha Mounk notes that the left:
must loudly oppose the far-right’s attacks on the rule of law and proudly reject policies that discriminate against minorities. But they would also need to take the instinctive cultural conservatism of many working-class people … more seriously than they currently do.
A child allowance like the one Gladden Pappin proposes simultaneously achieves both. Making it easier to raise children has an outsized positive impact on African-American and Hispanic families, which tend to be larger than White ones. Paired with investments in eliminating racial gaps in infant mortality and boosting education, this challenges the vestiges of racism that haunt our society. But by elevating traditional structures, it also dignifies “a haven in a heartless world”, as Christopher Lasch eloquently calls the family.
Accordingly, Gladden Pappin’s idea exemplifies the space for new alliances. Not only can the left better maintain its balancing act, but it can also partner with a realigning right to seek common ground on economics.
Romney/Bennet — Compromise in Action?
Finally, a bipartisan Senate bill would provide tax credit allowances for children, displaying how compromise might work on a child allowance. Less idealistic than the aforementioned ideas, the Romney/Bennet proposal is promising and displays an application of my argument. Romney/Bennet would devise a $2,500 New Young Child Tax Credit for children up to the age of 6, with the first $1,500 being fully refundable and the next $1,000 phasing in at a 15% rate and declining more as income rises. Additionally, refundability for the current Child Tax Credit through age 17 would be expanded. Notably, this plan is funded by various bipartisan tax tweaks that raise rates for wealthy Americans. While the program is more limited than the first two examples and smaller than Bennet’s own American Family Act, which would reduce child poverty by 40%, it would still aid millions. Consider that 3/4 low-income families with children under 6 report hardship in meeting the costs of housing, healthcare, utilities, and food. The Niskanen Center estimated that the Romney-Bennet package would lift 1.6 million children and 1.1 million adults above the poverty line. Higher income begets greater earnings for children down the line; with each $3,000 in additional income for a poor family with a small child, the child’s adulthood income is 17% higher according to the Center for American Progress. Even the Tax Foundation notes that “assisting families with their dependents through a child tax benefit increases the likelihood that parents will enter and continue in the labor force, thus retaining the means to consume and save, both of which aid the economy in both the short and long term.” Therefore, Bennet/Romney doesn’t disincentivize work, avoiding a common right-wing attack on welfare programs.
Non-elite families would receive most of this allowance, but most American families would get something, bridging the universal/means-tested divide. Some studies show a stigma associated with means-tested programs that facilitates the otherization of recipients. However, a universal buy-in makes it more difficult to flat-out oppose the program or disparage beneficiaries. Moreover, there’s no need to set up accounts for Americans at the Treasury as with Baby Bonds; the infrastructure for a child tax credit is already in place.
Most importantly, Bennet/Romney demonstrates how pro-family, anti-racist economic changes don’t have to come in a radical package. We don’t need to talk about socialism or revolution, notions offputting to many Americans. Bipartisan, costed reform can benefit millions as it, and more costly proposals might usher in greater benefits. Starting somewhere is important. Even left-wing publications like The Nation praised the proposal for showing that a child allowance can be achieved in America, while also wishing for something greater. The ideas proposed by Booker and Pappin integrate key points from both the left and the right. Bennet/Romney shows us what those coalitions might look like on the ground in Washington.
Why Does This Matter?
The impacts of these policies are crucial. Marriage is partially a function of economic stability. Conservatives bemoan the cultural factors involved in this institution’s decline, but even the Institute for Family Studies admits that “Neither economic changes nor public policy can wholly explain the retreat from marriage” and that economic shifts influence the cultural conditions that make marriage conducive. Interestingly, the very groups displaying “the greatest change toward nonmarital, unstable living arrangements for having and rearing children” suffer from “the greatest erosion of labor market opportunities” at around the same time. Among White Americans, poorer and working-class families undergo an increasing amount of divorces as better-off and more educated couples stay together. Among younger Americans, the effect is pronounced. A full 29% of unmarried millennials feel financially unprepared to marry. It’s little wonder why — between the Great Recession and the COVID-induced recession, my generation was impeded by college debt, expensive healthcare, declining blue-collar jobs, and a vanishing sense of community.
It’s not just marriage. On the whole, Americans continue to have fewer children, with the 2018 birthrate at a 32 year low. The causes for this are likely diverse, as other countries with better safety nets also experience declines. Lowering sperm counts, easy access to porn, more use of birth control, changes in courtship— these things (not all negative) play a part. But money matters. A New York Times survey of those who “had or expected to have fewer children than they considered ideal” reveals how economic policy might shape child-rearing in America. A full 64% say childcare is too expensive, 49% are worried about the economy, 44% can’t afford more children, and 43% waited due to financial instability. Relatedly, according to the pro-choice Guttmacher Institute, 73% of women who had an abortion cited not being able to afford the baby as a reason for the abortion. Economic insecurity makes it difficult to have a child, so if the government makes it easier to have and raise a kid, they can help revitalize life within the home.
The links make sense. Marriage and child-rearing are not cheap, and forging the connections for both requires a sense of stability. Parents struggling to raise children face additional stressors. Onto them may compound the anxiety of living in more dangerous neighborhoods, having a debt to pay off, or not being able to find a job. This stress can easily erode the foundations of a marriage, so addressing economic factors helps preserve familial bonds.
Building stronger families ushers in positive downstream impacts, creating a virtuous cycle of prosperity. Individuals not raised with both parents suffer a median wealth penalty of $61,600. For each year of marriage couples stay together, their wealth grows 14% on average. Net worth increases for married respondents are 77% higher than for single ones. The benefits disperse into the body politic. Economist Raj Chetty finds that regions with stable married households enjoy higher social mobility, with evidence showing that economic stability fuels marriage stability and vice versa.
It would be foolish to stop at an economistic analysis. Notwithstanding our comfort with statistical views of politics, Robert F. Kennedy and Andrew Yang both correctly emphasized that GDP doesn’t account for everything. Families are so much more than a set of numbers. By their nature, all are imperfect to varying degrees, but they represent an institution worth upholding. Having a family is being surrounded by love, support, and advice. It’s not just a hunch — to use just one example, studies show a role in aiding mental health recovery. Various family ties contribute to overall well-being. Even the seemingly mundane elements of life together count. Sir Thomas More was right when he stated, “The ordinary arts we practice every day at home are of more importance to the soul than their simplicity might suggest”. Something as simple as eating together with children can confer long term health benefits. The potential benefits of support really are endless.
While Democratic nominee Joe Biden’s platform strongly addresses inequality and injustice, Biden doesn’t propose a child allowance like the ones mentioned. Some of the bills discussed have many Democratic co-sponsors, but child allowances should really be at the forefront of the party’s agenda.
It’s not revolutionary as an idea. In 2008, Hillary Clinton proposed giving bonds of $5,000 to every newborn. This was a great idea, part of her populist 2008 bid that gained traction among White working-class voters and Latinos. But by 2016, her positioning had changed and this policy was nowhere to be found. Clinton ran that year as the candidate of the managerial class more than the upstate New York apple farmers she defended against foreign competition in the Senate or the rural gun-owners whose rights she articulated in 2008. Indeed, a child allowance could have undermined Trump’s anti-elite schtick and improved Clinton’s outreach efforts.
Today, a child allowance would allow Joe Biden to reach the left with an anti-poverty, anti-racist policy backed by a pro-family framing likely to play well among blue-collar voters. Joe Biden himself seeks to blend pragmatism and transformational change in his quest to “restore the soul of this nation”. Viewed as more religious than Donald Trump, Biden already cuts into Trump’s margins with White Catholics and Evangelicals. It’s not a leap for him to frame issues as influenced by his faith and personal background. Unlike many in politics, Biden’s commitment to family shines through. A dual sense of loss and love mark the biography of “Amtrak Joe”, who went home to Delaware every day to be with his wife and children. There are few Democrats better positioned to advocate for a child allowance than Biden.
For that matter, this approach integrates into a new cooperative spirit centered on orienting common-sense government intervention towards the common good. People like Mitt Romney and thinkers like those at American Affairs, Palladium, and National Affairs can be partners in helping struggling Americans and restoring healthy bipartisanship.
What Democrats package doesn’t have to be any specific one of these three programs. It could be a scaled-down version or even some curious blend of the three. But the left should support a child allowance of some sort and back it with rhetoric rooted in traditional institutions. This policy is just a start. Why not take a page from Andrew Yang and his idea of human-centered capitalism? Instead, call it family-scale capitalism.