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Bush, Clinton Both Flirted With 'Baby Bonds' Concept


President Bush and former White House adviser Michael Gerson.

While Sen. Hillary Rodham Clinton travels the country accusing President Bush of running a disastrous administration, it turns out the two have at least one thing in common. They both flirted with the idea of a taxpayer-subsidized investment account for new babies, only to abandon it in the face of conservative backlash.

The New York senator voiced her idea during a forum sponsored by the Congressional Black Caucus in September, suggesting every child born in the United States be given a $5,000 account that would grow over time and could be accessed when they turn 18 for college or a downpayment on a house. If no other money were added to the account and it earned 5 percent annual interest, it would be worth $12,000 by age 18. But with 4.3 million babies born each year, such a program would cost more than $21 billion annually.

Former New York mayor Rudy Giuliani pounced on the idea as an example of profligate liberal ways. In speeches and debates, he gleefully mocked such "Hillary baby bonds," imagining they would come with her face on them and even emailing mockups to reporters. "Now, I know this never occurs to the people like Hillary and the other Democrats here in Washington," he said in one speech, "but you know something? I got news for you: This costs money." Clinton quickly abandoned the concept, calling it "just an idea I threw out," not a formal proposal, and her campaign said she would not include it in her economic platform.

Now it turns out that Bush considered something very similar -- and it got quashed for very similar reasons. Michael Gerson, the president's former senior adviser and chief speechwriter, writes in his new book, "Heroic Conservatism," that he advocated a program called KidSave that would set up tax-free savings accounts for every poor child at birth subsidized with "a few thousand dollars." Over time, he writes, it could "begin to equalize the wealth gap in America." In his book, Gerson did not define what he meant by "poor" or "a few." But to pick a number, a $3,000 account would grow at 5 percent annual interest to $7,200 by age 18. According to the Children's Defense Fund, about 900,000 children are born into poverty each year, so such a $3,000 subsidy would cost $2.7 billion annually.

As Gerson tried to have the idea included in the president's State of the Union address in 2004, he ran into the same sort of reaction internally that Clinton did on the campaign trail. "The KidSave proposal," he writes, "made its way into several drafts of the speech -- until it was killed by the concerted effort of our economic team, who objected to 'free money' for the poor."

Gerson presented this story as part of a pattern of battles within the Bush administration over what he considered "compassionate conservative" policy ideas. Gerson repeatedly fought for money for AIDS patients, malaria victims, prisoners transitioning back into society, Gulf Coast residents recovering from Hurricane Katrina, death-row defense attorneys and other marginalized groups, often running into the same sort of resistance that killed KidSave. His book, he says, is intended to argue that conservatives need to embrace the struggle to help the disadvantaged in society if they have any hope of competing in electoral politics.

The idea of money for babies at birth is not unique to the U.S. political debate. Britain started a similar program in 2005 and Spain is considering it. Australia, Japan and Singapore all offer cash for babies.Russian President Vladimir Putin last yearoffered women thousands of dollars to have babies. Of course, Russia and some of those others are doing so to combat stagnant or falling populations. The stillborn Bush and Clinton plans were aimed at helping children escape poverty or get a jumpstart on life.

Nor are they the first to propose such an idea in this country. As the Los Angeles Times noted recently, then-Sens. Rick Santorum (R-Pa.) and Jon Corzine (D-N.J.) unveiled a plan in 2004 to give every baby a $500 endowment that they could not use until age 18, when it and any investment growth could be spent for college, home purchase or business startup.

Still, whether the idea has merit or not, the Bush and Clinton retreats probably mean it won't go anywhere anytime soon.

-- Peter Baker

Posted at 9:00 AM ET on Nov 1, 2007  | Category:  Morning Cheat Sheet
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Comments

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arrrrrrrrrrrrrrrrrrrrrgh. 2 people that do not have a clue about the value of a dollar. Here is an idea, quit wasting MY money lower my tax burden, then I will decide who I will help or not, instead of being forced to. When will washington stopping spending MY money so foolishly! most americans live pay check to pay check, why should anyone get a free ride?. I can't wait for public health care, Walter Reed hospital sounded fabulous and I can't wait for politicians to start "borrowing" from that fund and run it into the ground. I have lived over seas, socialized health care SUCKS, those that can afford it buy Health Insurance so that they don't have to be on a 6 month waiting list and don't think that the best doctors will work for the government, they will be with a private practice so that they can make more money. Again here is an idea, quit wasting MY money so that my tax burden is less and I can afford Health Insurance! or put it back into the economy. WASHINGTON NEEDS AN ENIMA!!!!!!!!!!!!!

Posted by: johnnyboy3 | November 1, 2007 7:51 PM

Unfortunately 18 years just isn't enough time for a rather meager amount of money to grow into something really worthwhile. A better proposal would be to give give every baby born in the USA $5k in a broadly based index fund that couldn't be touched until they were ~67 years old. Using the inflation adjusted rate of return for the stock market for the past 75 years, every American would retire with close to a million dollars (at today's value) in the bank.

Posted by: wolfcastle | November 1, 2007 7:06 PM

Why not have the government initiate the account with a $500.00 payment at birth, but allow parents or grandparents to add up to $1,000.00 each year and receive a tax credit of 1/2 of the deposit. The additions would be irrevocable gifts, the accounts could only be used upon reaching 18 for direct payments to colleges or approved vocational training programs. It's too simple for our government to do, and, worst of all, no political "friend" benefits.

Posted by: gmclemore | November 1, 2007 3:35 PM

Why do the best ideas always get shot down by arrogant fools? The genesis of this idea is "The Stakeholder Society" book by Bruce Ackerman. Asset inequality in America is far worse than income inequality, and giving children the starting funds they need to pay for college or start a business is an obvious benefit to society as a whole.

There's lots of ways to avoid the straw-man criticisms that come up - like don't give it to 18 year-olds except for college.

Unfortunately, we'll probably have to wait two decades to see the results in Britain before we do anything here.

Posted by: schmidtb98 | November 1, 2007 3:26 PM

Instead of giving away the treasury these "statesmen" should immediately stop screwing with the economy and put national, multi-national and international corporations on notice to go it alone without government subsidies. The economy would improve to the point where no one would need a handout.

Posted by: rlbowolick | November 1, 2007 2:51 PM

This is a test comment

Posted by: labellaelle | November 1, 2007 12:53 PM

Hillary might get into hot water on this one, but instead of offering a money bond to have babies, what about offering a money bond NOT to have a baby??

Posted by: donna.curtis | November 1, 2007 12:43 PM

What a silly idea. Everyone knows that in DC, when the federal employees get a wage increase, the price of bread and milk follow in step. All this silly program would do is create industries ready to pounce on the billions of dollars each year as kids turn 18, trying to steer that money to cars, X-boxes and whatever can turn a profit. And people will figure out how to get that money out in cases of "emergencies".

Instead how about taking $21 billion and putting it into SCHIP or a national college scholarship fund or a national childrens healthcare program? My god these politicians are such boneheads, looking for what SOUNDS good instead of what IS good.

Posted by: bevjims1 | November 1, 2007 12:05 PM

What I don't understand is, we have spent I don't know how many billions for this illegal and extremely unpopular war, but whenever any amount of money comes up to help our own society--which, whether you want to admit it or not, we are a society that needs to help itself before it goes out trying to help other countries--that plan is immediately shot down. And what's wrong with helping poor people? Have we lost our heart as well as our mind thru this administration?

Posted by: jasmine_t_sims | November 1, 2007 11:07 AM

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