How One Congressman’s Plan to Give Everyone Free Money Could Actually Pass

Written by Zack Beauchamp

A Democratic Congressman is about to propose an ambitious plan to fight economic inequality by giving money to every American child — and there’s a chance Republicans will actually support it.

On Tuesday afternoon, Rep. Joe Crowley (D-NY) [released] an outline of legislation that would create a retirement savings account, called a USAccount, for every American child at birth. The government would provide $500 in seed capital — roughly $2 billion per year in total government expenses, making it a relatively cheap program. Crowley’s legislation would match the next $500 a family chooses to deposit through a Child Tax Credit (CTC) expansion. Families could put up to $2,000 per year in the child’s account on top of the government’s contribution; money from USAccounts can only be withdrawn by parents to pay for higher education. The child can withdraw cash after his/her 18th birthday to fund a college, a home purchase, a new small business, or a traditional retirement account.

Poor families would get even stronger support. As it stands right now, the CTC allows each parent to claim up to $1,000 per child. Families who don’t pay enough in taxes to claim the full amount per child can get a check from the government for up to $3,000; Crowley’s plan would expand that number by $500 per year in government donations to the child’s savings account.

“Many Americans are having a tough time making ends meet and paying for family expenses, let alone setting aside meaningful funds for their future financial security,” Rep. Crowley, the vice chair of the Democratic caucus, wrote in a letter to other Congresspeople provided to ThinkProgress. “As a result, we are seeing a new generation of Americans growing up with no assets and little ability to either climb the economic ladder or simply weather a difficult time.”

There’s real evidence backing Crowley’s claim. In 2009, four scholars at Pew’s Economic Mobility Project reviewed data on inequality and savings. It turns out, savings mattered quite a bit: “seventy-one percent of children born to high-saving, low-income parents move up from the bottom income quartile over a generation, compared to only 50 percent of children of low-saving, low-income parents,” the report found. High-saving adults in the bottom fifth were over 50 percent more likely to advance relative to low-saving peers.

Savings also help keep people out of poverty. Having $2,000 in liquid assets makes a family significantly less likely to face food insecurity or be forced to skip going to the doctor. This makes intuitive sense: If you’ve got money tucked away, you’re better prepared when disaster strikes. Yet, according to the Center for American Progress’s Joe Valenti and Christian Weller, “about two in five American families report that they would ‘probably not’ or ‘certainly not’ be able to come up with $2,000 in 30 days to deal with an emergency.” The figure is higher for young and minority Americans.

Federal proposals like USAccounts have been around for a long time. The first version, called KidSave, was proposed in the 1990s. But unlike many other good ideas kicking around, this one has always had bipartisan support. In 2005, then-Sen. Rick Santorum (R-PA) was one of the main boosters of the ASPIRE Act (the most recent version of universal savings accounts before Crowley’s legislation). Santorum and other Republicans liked the ASPIRE Act because it made “every young person an investor;” all money that went into the accounts would be invested in bonds or the stock market using the same system that manage federal employees’ savings accounts. Crowley’s plan is similarly market-friendly, allowing parents to invest with the same federal system or a Treasury-approved broker.

No one is quite sure why previous iterations of USAccounts didn’t become law. “KidSave drew support from liberals and conservatives, from unions and business interests, from the Heritage Foundation and AARP,” the American Enterprise Institute’s Norman Ornstein writes. “But for reasons I can’t explain, it went nowhere.”

Because Crowley’s law uses the CTC to fund savings accounts, it may stand a better chance. The centerpiece of Sen. Mike Lee (R-UT)’s tax reform plan is a huge expansion of the credit. Lee is widely seen as one of the Tea Party’s Congressional leaders, so the idea of using the CTC to fight inequality may not be as anathema to Congressional Republicans as you’d think.

The CTC is also popular among leading Republican and conservative thinkers. Influential writers like Ramesh PonnuruRoss Douthat, and Reihan Salam all support significant CTC expansions. If they joined conservatives like David Brooks and Michael Gerson in supporting child savings accounts, the idea could quickly catch on in conservative intellectual circles.

There are pitfalls in this approach to inequality. Crowley wants USAccounts to help people “afford college, invest in a home, cover unexpected emergencies or take the risk of starting a new business,” but some similar proposals would only allow money to be withdrawn to pay for college and/or retirement. These limited accounts obviously don’t help poor Americans pay for basic necessities or survive through emergencies, and the research on their effect on mobility and access to education is murky.

But given how deadlocked major federal legislation tacking inequality has been, Crowley’s plan isn’t a bad place to start.

This post originally appeared on ThinkProgress

Photo credit: Thinkstock


Jim Ven
Jim V1 years ago

thanks for the article.

Mary B.
Mary B3 years ago

David (sigh) Everything you've said is common info, and I already know it.It was in the process of learning about various money theories that I started saying 'wait a minute', this doesn't make sense, even if it's true, and how would anybody know? What I am advocating for is a new way to distribute the means of exchange so that nobody has to live in poverty, while a few hold the most wealth. Do you have any solutions to offer for that problem that could emerge from the present economic system? If not, then I'm not interested in your stinkin' history lectures. People who just repeat the status quo info, will only perpetuate the status quo reality that leaves the vast majority of the worlds people in poverty and that is unacceptable.I also do not have to tolorate your condesending insults. So unless you plan on apolagizing and offering some solutions to income inequality, I have no interest in anything further you have to say.

Cat S.
cathie S3 years ago

NOPE not going to work { Having $2,000 in liquid assets makes a family significantly less likely to face food insecurity or be forced to skip going to the doctor} now this is where this messed up because this family doesn't have the money the banks do and these families can NOT touh this money unless it is for school so why would that statement be in this story MAKES YOU WONDER DOESN'T IT?

Anne F.
Anne F3 years ago

fund community colleges so that young adults can learn more; raise the minimum wage; tax the profits of BIG OIL; simplify the income tax;

Mary B.
Mary B3 years ago

Damn it Care2 will you get that letter counter back on! We are getting very sick of our posts being cut off, especially when we are making an effort to stay within the perameters.

Mary B.
Mary B3 years ago

David, do you have a printer with which you make your own money? If yes, it's against the law and you'll be going to jail. If no, then you need to admit that the government creates the money which is supposed to be given to all members of the country.You can't just skip ahead to the part where people have been paid and the IRS, an 'independent agency' within the treasury dept. collects taxes, and start your lecture there.And tho there has been a' wealth at the top monatary structure' for ages [royalty and serfs] saying free market capitalism is 'just another name for it' is pure BS. Free market capitalism might actually work well if all the regulations were in place to support such a system, but they aren't as Robert and others have pointed out
many times.When you start with inaccurate assumptions all the logic that fallows may be totally spot on, but you'll still end up with nothing that resembles real life.And calling me a commie and socialist doesn't mean I am one. If you actually understood what I was saying, you'd have noticed that I do NOT advocate 're-distribution' of wealth thru taxes, or loss of personal freedom. I repeatedly say, it is the governments duty to get the money into mainstreet economy direct from the treasury, and giving people a living wage monthly stipend is the fastest way to do that.Then they can learn to budget and purchase wisely,they could also work where they are best suited to work, and businesses can pay minimum wage if that's all they can af

Jacklyn W.
.3 years ago

So it is true... in America the streets are lined with gold, well the ones leading to the maternity wards anywhoo.

I think you'll all myth out with this idea - smile.

Carol P.
Carol P3 years ago

Not sure that I have enough understanding of the proposal based on one post to have an opinion and I'm sure that there are problems.

But where is the money coming from? If it has to be borrowed in order to fund the savings accounts, then we would be in effect stealing from future generations in order to give to future generations.

Jonathan Harper
Jonathan H3 years ago

Good luck!

Jonathan Smithsonian