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Let’s Give $500 to Every Baby (and $500 more to poor babies)
By JLP | May 5, 2008
Last November I highligted a Money Magazine article about Michael Sherraden’s plan to use taxpayer dollars to give every newborn baby $500 (babies born to poor families would get an extra $500). Now the June 2008 issue of Kiplinger’s Personal Finance has an interview with Mr. Sherraden. From the Kiplinger interview:
How would your savings plan work?
I think there should be a lifelong system of accounts for everybody to save for important life goals — post-secondary education, homeownership, additional job training. Eventually, money in the accounts would provide retirement security.
There’s a strong rationale for making the accounts progressive, with low-income kids getting a slightly larger initial deposit because most of the tax benefits of college and retirement-savings plans now go to upper- and middle-income families. One bill in Congress calls for $500 for all children and an additional $500 for the poorest.
Quick question:
Who’s considered “the poorest?”
In my post from last November about this plan, I laid out some math. I cam to the conclusion that I just didn’t see that this plan would make tha much of a difference. Five hundred dollars just isn’t enough to do anything. My fear is that they would start with $500 and then once they got the plan up and running, they would start sneaking in increases. In other words, it would become another wealth redistribution tool.
Oh, and I “love” (I’m being sarcastic) his thoughts on where the money to pay for this program would come from:
There are four million babies born every year. In an annual federal budget of $3 trillion, even at a cost of $4 billion, I wouldn’t call it a large sum.
He didn’t answer the question! Where will the money come from? Answer: “Ah, it’s a small amount so it won’t matter.”
Topics: Miscellaneous | 14 Comments »
May 6th, 2008 at 12:55 am
That’s the first I’ve heard of that and in my opinion it’s an interesting but utterly off-the-charts horrendous idea. Look how bad Americans are at using the money they already have! The $500 would be better spent funding efforts to educate kids about personal finance.
Also, who is going to have stewardship of the extra $500 that goes to the poor babies? This idea has great intentions, but simply giving money somebody who doesn’t have it (most likely because they don’t know how to keep it) does not fix any social problem.
I don’t want to sound like some kind of ultra-conservative freak – in fact, I don’t view myself as conservative at all. I simply know a bad idea when I see it. And this one stinks!
May 6th, 2008 at 12:56 am
There needs to be a reason to do this, other than “yay babies”. Either the government wants to incentivize having babies even more than it already does, or there is some reason that babies should get money redistributed to them from taxpayers in general.
I don’t see either of those at all as being the case.
May 6th, 2008 at 1:03 am
Let’s see, tax me, take my money, for what? Because someone chooses to be a breeder!!! If they choose to have a baby then they have the responsibility to pay for the baby.
Don’t increase my taxes, or add to the national debt, for another wasted government program of redistribution of wealth. Doesn’t the “earned” income tax credit already do this?
May 6th, 2008 at 3:31 am
I agree with all of the above. $500 won’t help anything – I’d rather see a program to educate people about personal finance.
May 6th, 2008 at 4:39 am
//sarcasm on//
How about we give the troops 2 weeks off each year in fighting the Iraq War? That oughta cover it.
//sarcasm off//
I’m neutral and open minded on this until I actually see the plan. The comments above seem to assume the parents are being cut a check; that, of course would be bad.
But what if it were put in custodial account (kind of like what the selfish neocons want to do with social security) that couldn’t be touched until the person is, say, 26. If the person doesn’t live until 26, it all (plus interest generated) goes right back to the govt. At, say 8% after 26 years it turns into ~$4,000
This has the potential to show, by example, the power of compounding for a fairly small cost. Turning the $ over at 26 (or what ever age) would be accompanied with educational materials on the power of compounding and saving. The person could then do whatever he/she wanted to do with it – spend it on education, roll it over into a new account, put it towards starting a business, or even spend it frivolously. Whatever. This would be one of the cheapest ways to teach this lesson.
May 6th, 2008 at 7:31 am
@Phil…yeah. Next to that cash outlay, this seems marginally sane.
But yes, adding MORE deficit spending just doesn’t seem like a good idea to me. And I don’t trust people being able to manage it right. It’d stimulate the fancy baby carriage industry. Unless the government managed it for all children until the age of 18. But I can’t see them handling it well either. Pretty soon it’d be pillaged for something new.
May 6th, 2008 at 8:01 am
If the gov’t wants to do something like this they certainly could find the money. If they can fund this war at the rate they are this money would be chump change.
I read this article too when it came out and thought “how stupid” – and my political leanings are usually to the left. Makes no sense to me. The question is why? Giving people money doesn’t make them fiscally responsible. Think about lottery winners – many of them end up blowing it all.
It would be virtually impossible to keep that money out of the hands of fiscally irresponsible parents. I’m not saying all poor people are fically irresponsible, but there is a direct co-relation between the two. This money might help children, but probably less than half would ever see the money.
May 6th, 2008 at 8:10 am
The national debt is over 9 trillion, which means each citizen’s share of this debt is $30,771.72.
What good would it do to give each baby $500 while increasing the national debt to pay for it? They would just own $500 more.
The country is broke. We are already swimming in debt. This idea is just another popular social idea. If this was a good idea, then why not just give everyone $5000 at birth?
May 6th, 2008 at 8:33 am
This is nothing more than the redistribution of wealth that champagne socialists like Sharridan advocate.
First, it will cost much more than the $4Billion because we need to pay for the account management as well.
What’s worse is this would have unintended consequences. If families can access this money in any way, then I envision people having children so they can get this extra $1,000 dollars.
I agree with Esmond. Teaching kids about financial management will have a bigger impact.
May 6th, 2008 at 8:42 am
Hillary actually floated this idea several months ago, but then she will say anything to get elected. Americans need to start thinking outside of the here and no and the one dimensional universe that we live in. Let’s start looking at the consequences of our actions. For instance, the ethanol mandate plus the falling dollar are set to create famine (ie millions dead) in North Korea, South America et al. all in the name of renewable energy. Let’s stop and think of the future ramifications for just a second. One, it sets people up to expect handouts from dear Uncle Sam and feed at the trough of government instead of teaching self dependence. Two, it expands the money supply by giving banks $4B in deposits that nobody can touch, with growth $4B a year for 18 years is a super fund of $150B, maybe a little inflation too. That’s off the top of my head but I’m sure you can think of more.
One more thing don’t you dare compare this to my privatized SS. I’m being taxed for my supposed benefit, I’d just as soon keep it in my own account thank you very much. I don’t want my SS retirement funding government healthcare just like you don’t want your’s funding the war. So let’s agree to keep government out of our lives.
May 6th, 2008 at 9:05 am
Redristribution of money never works. Isn’t that communism?
May 6th, 2008 at 10:20 am
I agree with the above statements asking who would be responsible for this money. I (sadly) know plenty of people who would gladly take that $500 and buy an iPhone rather than milk for the child – let alone SAVE it for their education. Kirk is absolutely right that having someone else manage the money would cost quite a bit more.
The problem is that people aren’t educated on how to save money and many don’t want to learn. Did anyone else see that 60 minutes special where they talked about the millionaire football players who are in debt b/c they don’t know how to follow a budget? The NFL setup a financial training seminar/class and ONE player showed up! (Granted, football players aren’t representative of the whole of society – but it still says something.)
May 6th, 2008 at 10:35 am
yeah, let’s incentivize having more kids to people who cannot afford to have the kids that they already have.
May 6th, 2008 at 11:30 am
OK, I could maybe understand poor babies – isn’t it what welfare is for?, but why every baby? Does it mean the taxpayers would have to give $500 to Melania Trump’s baby as well? Yes, I am sure they really need $500 when they are out of pocket change. I think many taxpayers need $500 a whole lot more than some of these babies.