Giving cash payments to the poor has become the latest hot policy idea bubbling up from both progressives and conservatives across the country. In New York City, Andrew Yang, the former tech entrepreneur, jumped into the mayor's race by pledging to give roughly $2,000 a year to half a million of the city's lowest-income residents, a scaled-back version of a Universal Basic Income plan he introduced during his presidential run.
But Yang is not the only mayoral candidate in favor of putting more money directly in the hands of people. Shaun Donovan, the former Obama administration housing secretary, is campaigning on an economic plan previously known as "Baby Bonds." Donovan's "Equity Bonds" would establish government savings accounts for all New York City children and make annual contributions to those in low-income families. He's betting that such a program can make the city a trailblazer in tackling racial income disparities.
"This is one example, I believe, of how New York could become a national leader, again, on all different areas of policy, and hopefully spur national change by demonstrating that this actually works," he told Gothamist.
What is Donovan's plan?
The Equity Bonds proposal seeks to establish savings accounts for nearly all children in New York City, with each child receiving $1,000 in "seed money." Going forward, the city would deposit up to $2,000 a year for children of low-income families.
Donovan estimates that the interest-earning savings accounts that receive annual contributions could accrue to as much as $50,000 by the time children enter adulthood. The money can be accessed once the recipients turn 18, but only under certain conditions, such as paying for school or starting a business.
The idea is not new. Equity Bonds is borrowed from a Baby Bonds concept that was first introduced by Darrick Hamilton, a professor of economics and urban policy at The New School. Donovan later consulted with Hamilton, who has endorsed his plan.
Who qualifies for the plan?
According to Donovan's estimates, annual enrollment in the Equity Bonds program would be about 1.4 million children, meaning that is the number of children who could receive the initial $1,000. This includes the roughly 1 million students enrolled in the city's public school system, 161,000 low-income children in private and parochial schools and around 235,000 kids between the ages of 0 and 2.
Only families making approximately less than $150,000 would qualify for the additional annual contributions. According to a 2017 census estimate, New York City had more than 2.6 million households in that income category.
What about undocumented families?
Donovan said he plans to include undocumented families, which would potentially set New York City's plan apart from a national one if it were ever implemented.
How much would it cost?
A lot. Donovan has calculated that the first year alone could cost about $3.2 billion.
How does he intend to pay for it?
Donovan said that he intends to draw from the city as well as private and philanthropic funds. (Notably, he is not in favor of increasing taxes on the rich.) He said he would aim to establish a dollar-to-dollar matching program in which every public dollar would be matched by at least one private dollar.
But a large part of his calculus rests on his belief that a version of the program will eventually be passed in Congress. The most well-known version of the Baby Bonds plan was introduced in 2018 by U.S. Senator Corey Booker. The New Jersey Democrat later made Baby Bonds the centerpiece of his economic platform when he ran for president. There have since been similar pieces of legislation in the works, including one by Republican Senator Mitt Romney which has been well-received among progressives.
Should one of those proposals be enacted into law, the federal government would then provide a significant portion of the funding for Donovan's plan.
And at the state level, Bronx Assembly Member Michael Benedetto has also introduced a similar bill.
But Donovan told Gothamist that he is committed to implementing his Equity Bonds program "regardless of what happens at the federal or state level." In this moment, he added, "the racial wealth gap is the single most important thing that we need to attack."
Have any other places tried anything similar?
In the United States, New Jersey came the closest to adopting such a plan. In August, New Jersey Governor Phil Murphy, a Democrat, proposed setting up $1,000 interest-earning savings accounts for children in low-income families. That plan, which did not include annual contributions, was estimated to cost $80 million a year. Despite making headlines, the proposal was scrapped during the state's budget process.
In 2005, the United Kingdom launched a Child Trust Fund program in which the government made initial deposits and incentivized future contributions from family members. Participants were also allowed to invest the funds in the stock market. But conservatives abolished the program in 2010. Last year, British teens who were enrolled in the plan and turned 18 were finally able to access the money. Depending on how the funds were managed, the balances ranged from about 1,000 pounds to 70,000 pounds each, or $1,330 to $93,100, according to Bloomberg.
What are the criticisms?
The hefty price tag comes at a moment where the city is arguably least able to afford such bold initiatives.
Sewin Chan, a professor of public policy at New York University, said the city's bleak financial outlook along with the long horizon of Donovan's proposal will naturally give rise to questions about whether the money might be better spent elsewhere, on programs like education or housing assistance. She pointed out that while Andrew Yang's annual cash payment plan is not nearly as far-reaching, it does seek to address the immediate needs of poor New Yorkers who are struggling amid the pandemic.
"It depends on what the competing needs are," she said. "It's not this versus nothing. It's this versus something else."
Still, Chan said that although a crisis might a bad time to kick off such big plan, it's never too early to start having these conversations about poverty and inequity.
"I think we should have these debates," she said. "And whoever wins, we should take the best of the ideas, even if it wasn't their own."
This story is the first installment of "The Big Idea," an explainer series on bold and interesting ideas pitched by candidates in the mayor's race. Listen to WNYC's All Things Considered next week for an interview with the reporter about the plan and more news from the campaign trail.
