Can Baby Bonds Bridge the Wealth Gap in Rhode Island?

Rhode Island General Treasurer James Diossa is proposing a plan to create more trust fund babies. His baby bond proposal aims to provide opportunities for low-income Rhode Islanders to build wealth and overcome financial barriers. The plan entails creating a $3,000 trust for each baby born into a family on public health insurance. Over 18 years, the deposit would grow into a $12,000-$15,000 nest egg, which could be used for higher education, vocational training, buying a home, starting a business, or buying a vehicle. The proposal is part of a larger effort to address inequities in Rhode Island and help all residents meet their basic needs.

A report by Rhode Island KIDS COUNT highlighted the economic disparities between the wealthiest and lowest income children in the state. Black and Hispanic children are seven times more likely to grow up in poverty and have fewer opportunities to own homes. Diossa’s proposal aims to narrow this divide and provide a pathway to economic stability for disadvantaged families.

The implementation of similar baby bond programs in other states, including Connecticut, has demonstrated the potential for positive outcomes. Connecticut became the first state to implement a baby bond program, and several other states have introduced or are studying the idea. Diossa’s proposal is currently awaiting a legislative sponsor and a funding source.

While the long-term benefits of baby bonds are promising, convincing lawmakers to support the program may be a challenge. The return on investment, both for individuals and the economy as a whole, is significant, but it requires a long-term perspective. Diossa emphasized the importance of investing in the future and providing opportunities for the next generation, even if the immediate impact may not be seen during his tenure as treasurer.

Data and research will be essential in evaluating the effectiveness of baby bond programs. While there is theoretical evidence supporting their potential to reduce wealth disparities, real-world data is yet to be collected. Connecticut is currently exploring methods to track and measure outcomes for its trust beneficiaries. In the meantime, efforts are focused on raising awareness among Medicaid families and ensuring proper management of the initial investments.

Ultimately, the success of baby bond programs relies on sustained funding and support from policymakers. Diossa’s proposal is part of a nationwide conversation about closing the racial wealth gap and providing equitable opportunities for all. By addressing the systemic inequities that have perpetuated wealth disparities, baby bonds have the potential to transform the lives of future generations.

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Rhode Island General Treasurer James J. Diossa, left, shown shaking hands with Rep. Ray Hull, a Providence Democrat, at Gov. Dan McKee’s State of the State Address on Jan. 16,

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