Booker bill would create federally funded savings account for every child

Sen. Cory Booker (D-N.J.) is introducing a bill to give every U.S. child an interest-bearing savings account at birth in an attempt to reverse rising economic inequality.

The bill from Booker, who is seen as a likely 2020 presidential candidate, would create interest-bearing accounts funded by the federal government for each child born in the U.S, according to a summary released Monday.

The accounts would be administered by the Treasury Department and start with a $1,000 principal balance granted by the federal government. The government would then deposit up to $2,000 a year into each child’s account depending on total family income until the recipient turns 18.

The accounts would be federally insured, and the funds could only be used for homeownership and “human and financial capital investments that [change] life trajectories,” according to the summary.

“Everyone in America should have a real shot to succeed, but federal policy over decades and an upside down tax code that heaps benefits on the very rich and big corporations have grown the gap between those who have much and those who have little,” Booker said in a statement.

“Today, nearly one in three American families have zero to negative wealth, and it’s hard to get ahead if you begin life behind the starting line.”

The program would cost roughly $60 billion if implemented in 2019, a Booker aide told The Hill, and would be funded by increasing the capital gains tax rate by 4.2 points, increasing the estate tax to its 2009 level and raising taxes on multimillion-dollar inheritances. 

Economic inequality, typically measured by the wealth gap between the richest and poorest Americans, has steadily risen since the 2007-8 financial crisis. While those wealthy enough to invest amid the recession benefited from low interest rates and loose financial conditions established by the Federal Reserve, the resulting spike in equity and property values has left much of the working class behind.

There is also a staggering racial wealth gap resulting from decades of discriminatory laws and business practices that prevented minorities from accessing the same financial products and investments as whites. The median net worth of whites is roughly 10 times larger than of blacks, and nearly 1 in 5 black families have zero or negative net worth, according to Federal Reserve data from 2017.

Booker’s bill is the latest sweeping policy proposal from a 2020 hopeful meant to bolster the economic stability of working- and middle-class Americans. Several of Booker’s potential Democratic primary rivals, including Sens. Kirsten Gillibrand (N.Y.) and Kamala Harris (Calif.) have rolled out bills to bolster the supply of affordable housing and increase low-income household wealth.

A similar federally funded savings program was instituted in Israel last year. 

–Updated at 3:47 p.m.