May 17, 2023
Connecticut is in the forefront of the latest avant-garde plan to reduce wealth inequality, Baby Bonds. These are bonds issued to impoverished newborns who are defined by being eligible for health insurance for the poor, the Husky plan.
Infants who meet this criterion will be given $3,200 by the state. This money will be placed in a trust where it will grow in value to an estimated $10,600 by the time this person is eighteen. A recipient may wait until age thirty, at which point, the value of the bond may be $24,000.
While the legislature has been wrangling over this issue for several years, it now appears that $600,000,000 will be issued over twelve years allowing 12,000 poor newborns to receive this money annually at birth.
Once of age, according to the legislation (SB6659), this money can be used for a “eligible expenditures” These being:
(A) Education of a designated beneficiary; (B) ownership of a home by a designated beneficiary; (C) ownership of a business by a designated beneficiary; or (D) any investment in financial assets or personal capital that provides long-term gains to wages or wealth, as prescribed by the Treasurer;
There are several problems here. It assumes the Connecticut politicians will not blow this money as soon as there is a deficit, or at least use it as collateral for more borrowing. Connecticut is not known for prudent stewardship of sequestered funds as manifested by having one of the lowest returns and most underfunded state pension system in the country. Former Treasurer Denise Nappier lost $45 million in pension funds on a Magic Johnson real estate venture.
But the real problem is there will be political pressure from the parents of these recipients to dip into this money sooner. Even the statute as presently written is somewhat vague.
How is a business defined? Could a recipient set up an LLC to invest in cars and then buy himself a new car? What is an investment that “provides long-term gains in wages or wealth?” Are these recipients going to become expert stock pickers or lose their shirts on Robinhood?
And what does “prescribed by the Treasurer” mean? Can the Treasurer approve expenditures for heating bills, home repairs or health care bills in hardship cases? Or even worse, will the Treasurer or future legislation allow a recipient to borrow from this trust and then give the bill to the taxpayer when the recipient does not pay it back? This is what is happening with student loans. Cottage industries will be created to get at this pile of money.
And nothing spreads faster among citizens than the news of free money. Many women may decide to stop working when pregnant so that they become eligible for HUSKY health insurance. Clever middle class suburbanites may even pull this off. The number of recipients could skyrocket.
The best way to help the poor, especially he urban poor, is to improve the family structure, allow school vouchers and make their streets safe.
Yet our culture idolizes sexual gratification and promiscuity leading men to dump the women they have impregnated. In fact the very liberals who are promoting Baby Bonds are the architects of this cultural phenomenon.
Furthermore, the housing game is rigged against the urban poor. Property values are determined by the perception of the public school system. Teachers’ unions are so powerful in Connecticut that they shut down the school system during COVID while still managing to receive their salaries leaving minority children in the dust. School vouchers are politically verboten. Thus building housing equity – the best best savings vehicle in the country – is disproportionately negative in areas with inferior school systems.
Liberal white suburbanites give diversity lip service by calling for the the need for more affordable housing. But any attempt to allow minorities to build and buy affordable small condominiums in suburban areas is met with fierce opposition. Again, the poor are denied the opportunity to build housing equity unlike the suburbanites.
Thus, the urban poor are mollified with Baby Bonds and irrelevant education curriculums such as Critical Race Theory enabling the feckless political class to avoid the real problems – destruction of the family, poor schools and housing discrimination.
For Joe Bentivegna on Twitter @joebentivegnamd
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