Baby Steps: Inside the Future of Baby Bonds in Rhode Island

Photo illustration: Alan DiPetrillo/Getty Images

According to a tribute upon his death in 1920, Merritt W. Pinckney grew up in Mount Morris, Illinois, reading Latin at his father’s knee by an open fireplace “and poetry with his mother and learn[ing] garden lore from his grandparents and farming in the holidays away from school.” 

Perhaps that secure childhood accounted for the way he approached child poverty: One of the first juvenile court judges in Illinois, he was known as a kindly man who would descend from the bench to speak to a child eye-to-eye. He saw how the sharp slap of adversity could knock a family apart. Mothers with no means of support, through illness, job loss or the death of a husband, would be forced to send their children to orphanages, where the state would pay to keep them and teach them a trade.

Wouldn’t it be better just to pay the mothers directly and allow children to grow up in the wholesome bosom of their own families, Pinckney thought. The idea was articulated at the 1909 White House Conference on the Care of Dependent Children convened by President Theodore Roosevelt. The conference declared: “Children of parents of worthy character, suffering from temporary misfortune, and children of reasonably efficient and deserving mothers who are without the support of the normal breadwinner, should, as a rule, be kept with their parents, such aid being given as may be necessary to maintain suitable homes for the rearing of the children.” 

But, it concluded, this mission was best carried out by private charity.

Pinckney believed that it was best enshrined in the law. In 1911,  he advocated for the passage of, and later administered, the first state mother’s aid law, which provided direct income support to poor families in Illinois. But Pinckney was hardly the only supporter and Illinois was hardly the last. The change from an agrarian to an industrial economy was forcing a major shift in the way society
addressed poverty. Thanks in part to the support of reformers,
jurists and feminist groups, thirty-nine states adopted mother’s pension laws by 1919, forming the foundation of the American welfare system. Over the next century, welfare would become largely a federal responsibility and expand to include food and health care. But it never strayed from the idea of providing temporary support for basic needs. 

In recent years, a different idea has taken root: making a direct investment with a government-funded savings account that could grow up with each impoverished child from birth, sending them into adulthood with real assets. In January, Rhode Island General Treasurer James Diossa made a pitch to do that here. Nineteen states are now mulling some version of legislation — called baby bonds — which would put public dollars in service to the most vulnerable children to break the bonds of intergenerational poverty.    

The proposal calls for creating a trust seeded with $3,000 for each child born into a family receiving public health insurance, to be invested and managed by the treasurer’s office until the child turns eighteen. The money could then be used to buy a car or home, pursue education or training, or start a business in Rhode Island. 

Diossa estimates the trusts would accumulate $12,000 to $15,000 over the course of eighteen years. The bills, sponsored by Senator Melissa Murray (D-Woonsocket, North Smithfield) and Representative Joshua Giraldo (D-Central Falls), earmark the annual unclaimed property funds typically returned to the general budget as the source to fund the accounts for about 4,600 children annually.    

“We predict an economic output of $50 million that’s going to go back into the state coffers through taxes, retirement fees [and] car registration,” Diossa says. “I think it’s important to realize that the state is going to get back more in the long run.”

The house bill was held for further study in April, signaling that the proposal will not advance this year, but Diossa plans to continue lobbying for baby bonds and resubmit legislation next session.

The idea of baby bonds has been gestating for more than three decades.

In the 1970s, the federal government began to seed asset-building perks into the tax rules for those with sufficient incomes, such as deductions for mortgage interest and state and local taxes on owner-occupied homes, as well as tax-deferred savings plans for retirement and college education. But poor people were effectively barred.  

“All programs that were providing income also had asset restrictions. The logic was, if they had money, the government shouldn’t give them money. Poor people were, in public policy, discouraged from asset accumulation,” says Michael Sherraden, a former social worker and founding director of the Center for Social Development at the Brown School at Washington University in St. Louis.

In 1991, Sherraden called for another shift in the way society addressed poverty. His book Assets for the Poor suggested the government should help low-income people build their financial futures, not just provide income support. 

“It introduced the idea that even poor people need to think about their balance sheet, their assets and their liabilities, not just their monthly income flow, because very poor people also have to make investments in their future and have to have some stability and security,” he says.

The book made a splash and spawned several pilot and permanent programs in the United States and abroad. In the last twenty-four years, three countries — Korea, the United Kingdom and Kazakhstan — have created universal at-birth trust accounts. Beginning in 2002, the UK’s Child Trust Fund program endowed every newborn with £250 ($311 in U.S. dollars), and children from low-income families with £500 ($622), but a Conservative government killed the program in 2010. 

The U.S. has experimented with child development accounts at the state and federal level. In 1998, Congress authorized the Assets for Independence, a demonstration project that matched participants with personal savings to be used for assets such as a first home, business or higher education and training. The Administration for Children and Families ran the program until 2017. 

In 2007, the Center for Social Development launched a long-term study in Oklahoma that opened a 529 college savings account with a $1,000 deposit for a random 4,600 children, with an oversample of Black, Hispanic and Native American children. Maine was the first state to adopt a universal college savings plan in 2014, automatically enrolling all resident newborns with a $500 deposit. 

Over the same period, a parallel discussion emerged about the racial wealth gap. America has a long history of denying Black Americans opportunities to accumulate assets — from pushing Black farmers off their land during Reconstruction, to the decision to exclude domestic and agricultural workers — jobs largely held by Black Americans — from the Social Security program, to segregation in housing and lending, which effectively prevented Black World War II veterans from accessing the home ownership benefits of the GI Bill. 

According to the Federal Reserve’s 2022 Survey of Consumer Finances, between 2019 and 2022, overall median wealth rose by $51,800, but the racial wealth gap increased by $49,950, creating a $240,120 difference in wealth between median white and Black households.

In the mid-2000s, Darrick Hamilton, an economics professor at the New School in New York, began pitching the idea of baby bonds at a Congressional Black Caucus hearing, following up with a 2010 paper suggesting that endowments were a way to bridge the persistent gulf in the fortunes of white and Black families. Politicians promoted the idea, including Hillary Clinton, who proposed a $5,000 at-birth baby bond in 2007 as part of her 2008 presidential bid. In 2020, U.S. Senator Cory Booker (D-New Jersey) and U.S. Representative Ayanna Pressley (D-Massachusetts) submitted a federal baby bonds bill. Former Connecticut State Treasurer Shawn Wooden was the first to shepherd a state baby bonds bill to passage in 2021.   

Hamilton has watched the idea go from a “fringe conversation,” to a national debate, to a federal bill that legitimized it. At the same time, Americans, shaken by the economic catastrophes of the 2008 recession and the COVID-19 pandemic, became more receptive.

“There are lessons learned from the past that we need to do things differently,” he says. “And I think you get a political movement, social interest and economic conditions that call for fresh ideas. Then you have this idea that’s been incubating for a decade, and now it’s starting to get a little more traction.” 

A disagreement over funding Connecticut’s baby bond program stalled implementation for two years. Governor Ned Lamont balked at its reliance on borrowing $600 million dollars to fund the program’s first twelve years. Wooden’s successor, Erick Russell, pushed the program forward by abandoning bonding and tapping $400 million from a reserve fund created by the
restructuring of teacher pension debt, saving $350 million in financing and interest. He put an equal amount of work into building support among legislators on both sides of the aisle as well as mayors, educators and the business community. 

“A lot of the conversation with these different constituencies was about folks understanding that this is a program designed to address poverty, and poverty does not look like people think it does,” Russell says. “Connecticut is one of the wealthiest states in the country, but we have one of the largest wealth gaps that has continued to widen over time — and not just in urban communities. The majority of people who are going to benefit from this program are not people of color. It’s about addressing the underlying issue.”

Urban Institute Senior Policy Associate Madeline Brown says Connecticut’s progress has contributed to the spread of baby bond proposals elsewhere.

“The fact that the state treasurers have been partners has also led to some of the uptake, because they have a longer-term policymaking horizon,” she says. “Once Connecticut was able to write and introduce a bill that articulated how to pull this off, now you’ve got legislation another state can look at, tweak and think about how to serve your population.”

In rural Vermont, State Treasurer Mike Pieciak sees his proposal — which would invest $3,200 for every child born on Medicaid to be used for training and education, home ownership, business entrepreneurship or retirement — as serving “three primary policy objectives: [alleviating] intergenerational poverty, supporting rural economic development and supporting the retention of young people in Vermont.

“In the Northeast Kingdom, over 50 percent of children born are on Medicaid versus Chittenden County, where Burlington is, which only had about 28 percent,” he says. “So, we saw that as having a disproportionate beneficial impact on our more rural communities that have been underinvested in for decades.”

 In Rhode Island, Diossa’s interest is personal. The son of immigrant textile workers, Diossa grew up in Central Falls, where, according to the 2023 Rhode Island Kids Count Factbook, 35 percent of children lived in poverty from 2017 to 2021; and 77 percent were born into a family on public health insurance in 2023. Diossa’s Colombian parents earned enough to provide a stable life and become homeowners.

“But I saw my friends who didn’t have that, who were moving constantly from city to city because they wanted to find lower rent, or because of different job opportunities,” he says. “Always living in poverty.”

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Ellen Liberman is an award-winning journalist who has commented on politics and reported on government affairs for more than two decades.