New Plan Would Give Babies $1,000 a Birth, Up to $2,000 a Year: Here’s How it Would Work

Democratic lawmakers in Washington are continuing to push for a plan that would give every American child $1,000 at birth with up to $2,000 a year following until they reach 18.

The bill, the American Opportunity Accounts Act, was introduced recently by Sen. Cory Booker, D-NJ, and Rep. Ayana Pressley, D-Mass. The two recently urged Treasury Department officials to throw their support behind the payments, dubbed “Baby Bonds.”

“The impact (of baby bonds) would be transformative: at a cost of approximately $60 billion annually, less than 10 percent of what we currently spend to subsidize wealth-building through the tax code, we can give every American a stake in our economy and agency over their future,” wrote Senator Booker and Representative Pressley in a letter to Treasury Department Advisory Committee on Racial Equity Chair Michael Nutter and Vice-Chair Felicia Wong.

Here’s how the plan would work:

At birth, every American child would be given an “American Opportunity Account” with $1,000 in federal funds. Each year, children would receive up to an additional $2,000 deposited into their account based on family income.

The funds would sit in a federally insured account managed by the Treasury Department, achieving roughly 3% interest. The money would become accessible at age 18 for allowable expenses like home ownership or higher education.

The value of the account would vary based on family income. For a family of four with income of less than $25,100, the account could grow to $46,215 per child; for a family of four with an income of $125,751, the account would be worth $1,681, or the total growth of the initial $1,000 payments without $2,000 yearly allotments.

The bill has picked up a host of Democratic backers, including Sens. Dick Durbin, D-Ill., Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vermont.