September 2007
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Day September 28, 2007

Sen. Clinton’s “Baby Bonds” and a Stakeholder Society

While not yet a firm policy proposal, Sen. Hillary Clinton endorsed the notion of giving every child born in America a $5000 “baby bond” account which would accrue until they went to college, thus helping pay for the education necessary to raise a competitive, educated citizenry.

The bashing has already begun by the RNC, who called it an irresponsible idea, requiring “devastating tax hikes on hard-working families” and would “grow the size of government at a massive rate.”

Leaving aside comments about precisely which party has been “growing the size of government” and creating skyrocketing unfunded fiscal liabilities for our country (hint: read the GAO’s GAAP accounting estimates for the federal deficit, rather than the White House’s, if you want to know what the country’s finances under the Bush administration really look like), let’s talk about the merits of the proposal.

The idea is a variant on Anne Alstott and Bruce Ackerman’s proposal in The Stakeholder Society, which argued that our efforts at remedying the effects of income inequality should come on the front end, with children, rather than on the back end, with adults and assistance programs. There are many good reasons for “front-ending” such assistance, including arguments that conservatives and libertarians should be attracted to.

Arguably, adults should be responsible for their actions and life choices, and except for dire circumstances, government and tax dollars should not be spent to remedy poor personal choices. Even Hayek and Friedman argue for assistance in extremity, so I would expect conservatives and libertarians to follow this line of reasoning fairly closely.

Equally, we can all agree that children, prior to achieving independence and some age of majority, are not responsible for their own socio-economic status nor the life choices made by their parents and remoter ancestors. Hence, if we are to ensure that all citizens have equal opportunity (not equal outcomes!), equalizing the starting line status and success probabilities of children is the appropriate way to do it.

This is precisely what Alstott and Ackerman argue in the Stakeholder Society, and point out that $80,000 per child born in the United States would accomplish precisely this — allowing all children the ability to go to any school, commensurate with their intelligence, ambition, and abilities, or to pursue the opening of a small business or training in a trade or specialty.

The $80,000 figure has a fair amount of analysis behind it, and clearly it’s much higher than the $5000 described by Senator Clinton. Perhaps one is more than we can afford, but the smaller figure is also less help than we need to give: $5000 compounded for 18 years at today’s money market rates ain’t a college education by any standard, even in-state tuition at a state university.

But it’s an idea that’s on the right track. Both those who believe both in fighting the effects of income inequality on life chances, and those that believe we need to hold adults responsible for their choices but help children; in other words both principled liberals and principled libertarian conservatives, ought to come together and discuss Clinton’s proposal, and the Alstott-Ackerman research that underlies it, in good faith, and without the duplicitous rhetoric that the RNC pays its spokespeople to shovel out.