Web Only / Views » May 12, 2020
Give Every Child a $1,000 Trust Account and the Next Crisis Won’t Be So Bad
To weather the economic wreckage of the Covid-19 crisis—and prepare for future disasters—we should enact a Just Futures Fund.
We have an opportunity to use the lever of public policy in favor of racial and economic justice.
While it’s true that everyone has been impacted by the Covid-19 pandemic, the federal government’s response to the crisis is failing two groups in particular: Black and Latinx Americans.
Reports out of Louisiana have found that while African Americans make up a third of the state’s population, they account for 70% of the deaths. We have seen similar disproportionate ratios in cities such as Detroit and Chicago. Black and Latinx workers are far less likely to be given the option to work from home compared to white workers, increasing their risk of exposure to the virus. Many service workers, low paid and often with insufficient benefits like healthcare and retirement, are now deemed “essential” to public health and the economy. These health risks will go hand-in-hand with economic hardship, as the impact of medical costs and job losses combined with the lack of financial assets in these communities will lead many to financial ruin.
Shamefully, outcomes like these are nothing new. America has a long history of major disasters and federal responses that neglect communities of color, with Black and Latinx Americans less likely to receive aid and the racial wealth gap widening in the aftermath.
But it doesn’t have to be this way. We have an opportunity to use the lever of public policy in favor of racial and economic justice. We can make sure all people are supported in the current crisis and also ensure they have the financial resilience to weather disasters in the future.
A Just Futures Fund could accomplish this goal by bringing together two big ideas: universal basic income, where every adult and child would receive a monthly cash transfer to cover their basic needs, and Kids’ Futures Accounts, which are trust accounts that build wealth for children in asset-poor families.
Under a universal basic income system, every adult 18 and older would receive $1,000 in cash every month, regardless of their employment status or other income. Parents would also receive $250 per month for each child. Kids’ Futures Accounts would provide every child with an interest-accruing trust account in their name, containing $1,000 at birth. Every year, more money would be deposited into the child’s account based on the wealth of their family, with the amount ranging from $2,000 for very low-wealth families to $0 for very high-wealth ones. The child would receive access to those funds when they turn 18, at which point the size of the account could be around $37,000 for children from low-wealth backgrounds.
Working together, these policies could have a profound impact on people’s resilience to get through disasters, by both lifting people out of poverty and building wealth for Black and Latinx communities that they can rely on in times of need. A recent analysis from Brandeis University and the Universal Income Project (where I serve as co-director) found that a Just Futures Fund would cut the poverty rate amongst Black parents by a factor of six—from 30% to just 5%—and amongst Latinx parents by a factor of four—from 22% to 5%. It would eliminate poverty entirely among Black and Latinx elders. And it would radically reduce the number of people of color living in asset poverty, from 54% to 6% for Black families and 49% to 1% for Latinx families.
In terms of paying for such redistributive programs, the Brandeis / UIP report lays out a number of progressive mechanisms that could be enacted. “The public investment necessary to finance a bold and robust Just Futures Fund, simply, is affordable now by re-balancing budget priorities and a portfolio shift in public investments. The majority of the policy cost could be financed for by introducing a Transfer Repayment Tax, which would tax every dollar earned by adults receiving Basic Income, up until they’ve paid back most of the cash transfer in taxes…More innovative, equitable, and sustainable financing mechanisms also should be explored, like a sovereign wealth fund created from fossil fuel revenues, carbon air rights; restoring public ownership of common resources; a wealth tax; a financial transaction fee; a reformed Estate Tax; a reformed Capital Gains tax; a Social Wealth Fund financed by a share of corporate equity; more progressive individual income tax; and closing corporate tax loopholes.”
To be clear, this is not a wholesale solution to the racial injustice we so often see in response to major disasters. But by providing Black and Latinx communities with far greater financial resilience, a Just Futures Fund can equip them to overcome the greater obstacles they face during these disasters, while at the same time we push for a more equitable public response.
The Covid-19 pandemic has laid bare how the social contract we have today is failing so many members of our society, especially communities of color. This is the moment to build a safety net that paves the way to a just future for all Americans.
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Jim Pugh is the co-director of the Universal Income Project.