MB: Where did the idea for the baby bonds proposal come from?
DH: I focused exclusively on middle-income blacks and found that poverty in the family was a drain on their ability to acquire wealth relative to white families. We both went to elite environments but were in networks of poverty. Our peers were receiving support from their families, whereas we’d have conversations around all of the checks we’d have to write, the issues in our families. The resources were going the other way. So rather than receiving support, we were offering support. It led to the work that Sandy and I have been doing around the role of one’s birth position in the ability to generate assets, which is a big source of economic security. If we really want to address racial wealth gaps, it really is tied to the family position into which an individual is born.
SD: Racial wealth inequality is actually far more pronounced than general inequality, but general inequality in wealth is atrocious as well in the U.S. What’s the figure? A tenth of a percent of the persons in the overall wealth distribution own 40 percent of the nation’s wealth? I think that’s absolutely outrageous. So in a way you could argue that the baby bonds proposal is a dramatic change from the status quo, but it’s not going to dramatically overturn the wealth distribution. What it will do is create a different floor for the resources every young person has.
MB: How would it be paid for?
SD: I am somewhat of an enthusiast for the MMT [Modern Monetary Theory] perspective. From that standpoint, the real barrier to expanded government spending isn’t tax revenue [because the U.S. government can print more money]. It’s the inflation risk. A carefully designed program would take into account the potential dimensions of inflation risk, and I think that risk is lower to the degree that the focus is on asset-building as opposed to designing the funds so they’re utilized for immediate expenditure.
As the MMTers see it, the companion argument is that the expenditures could ultimately generate the taxes to support the activity. So they do the flip: Instead of pay-as-you-go, you go, and you pay.
MB: How has the African American community been affected by economic policy relative to the white community in America over the last 50 years?
SD: On virtually any indicator of relative position, there really has not been any significant change, particularly if it’s an economic indicator. And over that 50-year period, I think our best estimates of the wealth gap indicate that it actually has worsened.
MB: Baby bonds are a debt instrument. Do you connect the idea of baby bonds to the idea that it’s literally and figuratively an obligation of society to a specific group of people based on what came before?
DH: Given that America is not ready for race-specific policies politically, what can we do about the racial wealth gap? Like Sandy, I’m an advocate of reparations, and I think that it will happen. But there’s actually stuff you can do that is race-neutral but will have disparate racial impact. And I would say that it is very much couched in a lot of the policies that came about from the New Deal, as well as post-World War II, including assistance in homeownership, etc. We need to be race-conscious in a way that’s the opposite of what those policies were. They were exclusionary toward blacks.