Governor Schwarzenegger was cheered when he recently talked about post-partisanship in Washington, D.C. But the post-partisan waters don’t run deep back home in California. Two state senators who just crossed the aisle to forward a creative solution to a pressing problem are getting more grief than glory.
Senator Darrell Steinberg, D-Sacramento, and Robert Dutton, R-Rancho Cucamonga, held a press conference on February 28 to introduce their bill to create a California Kids Account for every newborn. The goal is to encourage parents to start saving early for their children’s future and, in the process, build the whole family’s financial know-how. This bill is essential to equip the next generation with the expertise and tools they’ll need to gain a middle class foothold in a society where employers and government play a smaller caretaking role.
But the vision and purpose of this bill was twisted almost exactly backward by the political bombardment that followed the press conference.
Here’s how the accounts would work: California would deposit an initial $500. The money couldn’t be touched until the child turns 18. Then it could only be used to pay for college, technical training, to buy a home or invested in a retirement account. Parents, relatives and the child could make regular contributions to grow the nest egg
The $500 deposit isn’t a giveaway. It’s an investment.
But the bloggers and talk-radio junkies went ballistic. Before the bill could get a fair hearing, they wrongly slapped three labels on it, calling it: 1) socialist 2) big government and 3) an illegal-immigrant magnet. It’s this last one that Dutton’s office got over 1,000 calls about. Their office was so overwhelmed that they dropped off the bill.
There’s a long list of democrats–including U.S. Senators Hillary Clinton and Chuck Schumer–with their own Kids Account proposals. But the Kids Account isn’t a Democrat or Republican idea. It’s an American one.
And big government? Kids Accounts grow out of the reality that the era of big government is over. Kids Accounts recognize the growing responsibility families have to manage their own health, education and retirement needs. That’s especially tough when you start with no assets to your name, the situation for a quarter of white kids and more than half of blacks and Latinos. Kids Accounts give all kids a head start. From the day they’re born, we’ll start to grow more savers, investors and owners, and fewer people who are dependent on the state.
The most ridiculous beef with the proposal is that Kids Accounts would encourage illegal immigration. The notion that prospective parents will enter California so that, 18 years later, the child will have limited access to $500, is absurd. Moreover, every child born in the United States is a U.S. citizen, not a second-class citizen.
Finally, what can California expect if this bill becomes law? We can look to Great Britain. Great Britain launched a version of KIDS Accounts, called the Child Trust Fund, for each of the 700, 000 children born in the U.K. every year, beginning in September 2002. As a result, the percentage of those who electronically deposit monthly savings in bank accounts for children has since doubled. And the amount being saved each month is up 60 percent. Preliminary analyses show the greatest savings increases amongst low-income families. Projections show most children will reach 18 with a financial springboard of more than $18,000.
Kids Accounts aren’t cheap. They’d run about $280 million a year. But let’s put that number in perspective. Last year’s infrastructure bonds had a $37 billion price tag. Those bonds are costing us about $1.8 billion a year in interest. If we can pay people $1.8 billion a year in interest, we can invest 15% of that amount in kids, our most precious infrastructure.
Kids Accounts ask us to look at our world in a new way, so the bill naturally demands a legitimate and vigorous debate. Unfortunately, political attacks can stifle a policy debate. But they can’t stop the future from coming.
Anne Stuhldreher is a fellow at the New America Foundation, a nonprofit, nonpartisan policy institute based in Sacramento and Washington, D.C.