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  December 14, 2017

Can Baby Bonds Help Close Baltimore's Wealth Gap?


Most social programs that address the poverty problem give out resources after someone has already experienced poverty, but "what we need is a structural apparatus in this society where people don't get exposed to poverty in the first place," says Dr. Sandy Darity
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DHARNA NOOR: The same day Maryland Governor Larry Hogan announced a plan to pour resources into law enforcement to address crime in Baltimore, another type of discussion was happening in the city.

SPEAKER: We really want to trust people. We need to provide them with the structure and resources so that they can achieve and attain, not just simply focus on subsistence policies to just provide them with simple enough to survive, or trying to be punitive and punish their seemingly bad behavior, which frankly manifests as a result from not bad behavior but simply not having resources in the first place.

DHARNA NOOR: The National Asset Scorecard for Communities of Color is a project that assesses the level of, and nuances of, wealth disparities in cities across the country. At the 21st Century Neighborhoods 2017 Symposium, the projects lead investigators, Dr. Darrick Hamilton and Dr. Sandy Darity discussed their current work on wealth disparities in Baltimore.

SPEAKER: With Baltimore, it was really relevant because of some of the media attention that was going on around criminalization and incarceration. So, we wanted to look at another dimension like what is the role of incarceration and the intersection with race as it relates to asset building?

DHARNA NOOR: The Baltimore study assesses the relationship between race, wealth and family histories of incarceration. About 1.5% of the white population in Baltimore has been incarcerated versus roughly 9% of Black Baltimoreans.

SPEAKER: If we look at wealth, the medium wealth position of Black families is virtually zero and negative if you've had exposure to incarceration.

DHARNA NOOR: The exact numbers aren't final yet but their research indicates that Black people, especially those with a family history of incarceration, not only have far less wealth than white people, but also are far less likely to have access to wealth building assets that appreciate in value, like stocks, a house or a bank account.

SPEAKER: So, if you don't access to formal banking, you tend to have to resort to check cashing institutions that have much high fees for banking.

DHARNA NOOR: Professors Darity and Hamilton also discussed potential redistributive measures. One was a federal job guarantee program. Another was what's known as baby bond system.

SPEAKER: But the idea is that every child would receive a trust fund. The amount of the trust fund would vary based upon the wealth position of the child's family. And so the wealthiest families, we'd give the newborn child a $50 trust fund but for families at the lowest end of the wealth distribution, we'd give the kid $50,000 to $60,000.

DHARNA NOOR: The money in the trust would accrue interest and eventually could be used to put a down payment on a house or a business.

SPEAKER: So, it's intended to give everybody capital at a key juncture so that they have an opportunity to build wealth. It doesn't guarantee an outcome but we know that if you don't have a chip in the game, you can't even play the game.

DHARNA NOOR: And the professors have some ideas for how to fund such a program.

SPEAKER: The estate tax is a potential option but we can also think about the ways in which capital gains is taxed at the local level, the ways in which mortgage interest is taxed at the local level and how those benefits and taxes are distributed. People at the low end of the wealth distribution often times don't benefit one iota from these types of taxes, so we can think about caps for instance on some of those things. Should you be able to deduct a second home that cost $2 million and get state subsidy to do so? Maybe not.

DHARNA NOOR: But for right now, Dr. Darity thinks a more likely way to fund baby bonds would be to call on philanthropists.

SPEAKER: The community would seize the opportunity to try to show how this type of project could be done, so we could learn about what needs to be altered or what needs to be changed before we tried to scale it up at the federal level when we have a more politically receptive congress.

DHARNA NOOR: These programs, Darity and Hamilton argue, would represent a shift in how we think of public services.

SPEAKER: We invest too much in trying to manage poverty. Stop trying to manage poverty and really think about ways to empower people.

SPEAKER: But I think that most of our social programs to address the poverty problem are mechanisms that give you resources after you have already experienced poverty, and I think what we need is a structural apparatus in this society, where people don't get exposed to poverty in the first place.

DHARNA NOOR: For The Real News, Dharna Noor, Baltimore.



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