Tanzina Vega: Hi, everybody. I'm Tanzina Vega and this is The Takeaway. Last week New Jersey Governor Phil Murphy announced a proposal that takes aim at the racial wealth gap.
Governor Phil Murphy: Inspired by the trailblazing work of Senator Cory Booker at the federal level, I propose today that New Jersey provide a baby bond, a $1,000 deposit into an account for every child born in the year 2021 to a family making up to $131,000 per year.
Tanzina: Governor Murphy's plan which he's hoping New Jersey legislators will approve in the state's 2021 budget would allow children to access the bonds once they turn 18. At that point, the value of the bond would roughly be $1300. That's according to data from the New York Times. On average, white families in the United States have roughly 10 times the wealth of Black families and eight times the wealth of Latino families.
Governor Murphy's plan is likely just a small step towards narrowing that gap. Joining me now is Darrick Hamilton, the Henry Cohen, Professor of Economics and Urban Policy at The New School in New York City. Darrick, welcome to The Takeaway.
Darrick Hamilton: Thank you, so happy to be on your show.
Tanzina: Thank you, Darrick. You're one of the folks who-- We've spoken over the years and you've been-- I guess some people would describe you as somewhat of an architect of this idea of baby bonds. What was your initial reaction to Governor Murphy's proposal?
Darrick: I'm very pleased. There was some more phrasing that he used as well. The word downpayment, I think is critical. Then also in that New York Times article, he said, "We reserve the right to come back to these accounts and augment them with additional resources," which of course $1300 is not going to be enough to really address the racial wealth gap but because of the way state finances are structured, oftentimes, appropriations are made on an annual basis. I think the governor is clear and recognizes that the accounts will need to be augmented over time.
Tanzina: You said really what I was thinking, Darrick, which is initially it sounds like a great idea, some money, rather than no money is always helpful, but really, $1300 dollars when you're 18, especially appreciating from 2021 on just doesn't seem like a lot. What do you see as the most effective way of implementing a baby bond program with just that amount of money? Shouldn't it be increased?
Darrick: Well, again, I think the governor recognizes that, in his claims, he would like to, but because they're not the federal government, they are a state locality, and they make appropriations on annual basis often. I suspect that this was intended to seed the idea to get it started in the face of a pandemic, not just be defensive, but get on the offense and address economic security.
Tanzina: Do you expect that the New Jersey State Legislature will approve a plan like this?
Darrick: I think they will. I'm optimistic. I think the governor has a great deal of power seat of the government in New Jersey at the top. Again, hopefully, a progressive state like New Jersey really does take to heart that we have to be proactive if we really want to address economic security.
Tanzina: Darrick, we've talked along for many years about the racial wealth gap in which we're not talking about income, we're talking about overall wealth, which is assets that families tend to have. White Americans on average tend to have 10 to 13 times the wealth that Black families do and eight times the wealth that Latino families do. Should these bonds be solely set aside for communities of color to try and close that gap?
Darrick: That is the most direct and parsimonious approach that if you wanted to address racial disparity to use race as the means test. I suspect that the way the current Supreme Court and various other courts are constructed at this very moment that becomes a high hurdle. It doesn't mean we should abandon those. Indeed, I support reparations, but reparations would have to take place at the federal level ultimately.
Tanzina: Darrick, you and a colleague at Duke University Professor Sandy Darity, who I've also spoken to over the years disagree somewhat on how far baby bonds would actually go in closing the racial wealth gap. He says it's not going to do enough. You say it will do enough, particularly, when we're talking about the median wealth. What is the distinction that the two of you are at odds about here?
Darrick: Well, you just hit the nail on the head when you said median versus domain. If you're talking about closing the racial wealth gap at the mean, baby bonds is not going to address that problem. If you're talking about closing the racial wealth gap at the median, there is Naomi Zewde who has done projection studies and when she looks at cohorts of children born at the same time, she finds a dramatic closure, even within one generation when the accounts are fully funded.
The question of whether the median or mean should be the metric, it depends on what the outcome is. True racial equity is when Blacks and whites are similarly positioned throughout the distribution of wealth at the 75th percentile, at the 25th percentile, at the 50th percentile, et cetera. If we're talking about the typical experiences between a Black and white household, then the medium becomes the metric. Why? Because of the skew associated with wealth distributions, regardless of race.
America's wealth distribution is highly skewed at the top where you have basically a white billionaire class that owns virtually everything in America. Given that, a goal might not bid for Black people to replicate a dysfunctional distorted picture of concentrated wealth at the top, the white tab, but rather to do several things. One, have a more egalitarian distribution of wealth regardless of race, but then also ensure that one's racial identity is not determining on one's economic security associated with wealth so that Blacks and whites would be similarly situated throughout the distribution. In a nutshell, sorry.
Tanzina: I'm sorry, I just wanted to interject there because I agree that it shouldn't be, but sadly, it is because, Darrick, you and I know intimately that this is something that the racial wealth gap and we could spend a whole show talking about how it got there, but it essentially, goes beyond the millionaire and the billionaire class who average white Americans, who, again, not all, but the average do tend to have more wealth in terms of homeownership and other things because of past policies. Some estimates have said that it will take more than 200 years for Blacks and whites in this country to achieve some economic parody. How do we achieve that? Our baby bonds, just the first drop in the bucket here.
Darrick: Well, you, you asked several things in that question. One, there is no silver bullet policy about economic disparity across rates. There will have to be a package of policies. Then the second thing, here's to highlight the point about median versus mean. The mean wealth for white families is close to a million dollars at $933,000. The median wealth for white families is $131,000.
Clearly, the typical white family is not a millionaire. That is the point between mean versus median. Now, even when looking at the media as you pointed out earlier, the disparities are dramatic. The typical Black family is basically penniless. There is no wealth class for Blacks, largely speaking when we think about wealth. No middle-class when we think about wealth. The typical Black family, inclusive of homeownership only has about $17,000. These are all issues, but they're slightly nuanced in that, you want to do several things. One, you have to address the concentration of wealth in America, period.
If we were, for example, to make a Black billionaire class, that might be racial justice, but that's not economic justice. I'm for both racial justice and economic justice. We want Black positions similarly to whites throughout the distribution, but we don't want a concentration of wealth amongst Blacks simply to replicate that of whites.
Tanzina: Darrick Hamilton is a Professor of Economics and Urban Policy at the New School in New York City. Darrick, thanks so much.
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