In our newest report, Accelerating Equity and Justice: Basic Income and Generational Wealth, IERE (formerly known as IASP), and our partner Jim Pugh from the Universal Income Project illuminate a pathway to security and justice in these uncertain times. This report reveals how combined monthly Basic Income and Kids’ Futures Accounts promote family economic mobility at an unprecedented scale. When put to work in tandem in the form of a Just Futures Fund, these programs have the power to eliminate income and asset poverty for U.S. households virtually and significantly increase racial wealth equity.
“Normal” was the problem before COVID-19, which now exposes our economic, social, and health vulnerability and utter inadequacies of our safety net infrastructure. Our current landscape features massive and widening wealth and income inequality, sluggish poverty amidst ostentatious wealth, homelessness on the rise, stagnated living standards alongside stalled social mobility, one-third of Americans running out of money before their next paycheck arrives, onerous debt burdens, artificial intelligence and automation-induced employment anxiety, cavernous and deepening racial wealth inequality combined with aggravated race and ethnic tensions. The current policy response is not helpful; instead, it’s part of the problem as safety net and wellbeing programs are under severe attack.
In this policy brief, we critically examine the existing evidence and theories pertinent to cash transfers and wealth-generating programs, highlighting bold promises, evidentiary foundation, and challenges. The next section builds upon what we know about cash transfers and wealth accumulation to design a realistic Just Futures Fund policy proposal. We model the estimated impacts for this bold policy design with racial justice and equity as our North Stars. Spoiler Alert: [the results are incredibly impressive, transformative, disruptive, popular, and doable].
What is a Just Futures Fund?
The Just Futures Fund combines the promise of cash transfers in the form of a $1,000 per month basic income to every US adult with an additional $250 for each child in a family every month with a Kids’ Futures Account, which would invest money in our next generation through government deposits in interest-accruing accounts that would be accessible at age 18. Every child would receive $1,000 at birth, and, depending on their parents’ assets, they could receive up to $2,000 per year. A very important component of this policy is that income and asset waivers for deposits and payments made through this plan would keep families eligible for the social safety net programs they rely on.
The Just Futures Fund has the power to virtually eliminate income poverty for U.S. households
Through basic income payments poverty is reduced significantly, especially for people of color (Figure 1). Overall, poverty of African Americans would be reduced by almost three-quarters, from 19 percent to four percent, and from 16 percent to three percent among the Latinx population. For both populations, largest declines are evident for young adults (age 18-34), and for older adults (age 65 and older) among Latinx people where a universal cash transfer policy of $1,000 would entirely eliminate poverty for nearly 1 in 5 currently living in poverty.
Greatest impacts are for households of color with children. The Basic Income proposal shows the largest drop in poverty for African American households with children, falling by 21 percentage points for all, and 25 percentage points for single parent households. For Latinx two-parent household with children, poverty would be eliminated while it would be reduced to one percent for African American two-parent households.
The Just Futures Fund would allow families to plan for the future by virtually eliminating Asset Poverty
Wealth transfers in the form of Kids’ Futures Accounts demonstrate a remarkable reduction in asset poverty and racial wealth inequalities, overall and for households with children. Eighteen percent of all households and more than 22 percent of households with children are in deep asset poverty due to current debt, and an additional 18 percent of all and 17 percent of households with children are asset poor. Establishing Kids’ Futures Accounts cuts these rates by more than half to 12 percent of deep asset poverty and 24 percent of total asset poverty among all households. More striking is the reduction of asset poverty (including deep asset poverty). With current asset poverty rates about 50% for Black and Latinx families with children, these rates would be reduced to 1.5% for Latinx and to 5.8% for Black families (Figure 2).
This form of wealth transfer almost eliminates deep asset and asset poverty for household with children vastly lifting families out of debt and asset poverty, leaving only three percent still mired in deep asset poverty and very few left in asset poverty.
The Just Futures Fund would dramatically increase the wealth of families of color and put racial equity in Reach
Adding the estimated values of Kids’ Futures Accounts to household wealth for households with children dramatically improves their non-housing wealth holdings. The median non-housing net wealth for households with African American parents is $2,910 and $6,652 for Latinx parents. After implementing Kids’ Futures Accounts and adding the estimated amounts accrued over 18 years, with modest interest, non-housing wealth increased to $71,479 for African American families, and $84,724 for Latinx families (Figure 3).
Wealth disparities are reduced most dramatically for households with children, the target population for establishing Kids’ Futures Accounts. For African American parents, the non-housing wealth gap closes from eight cents to 71 cents for each dollar a typical White family owns. Contrasting Latinx parents with white parents, the current wealth inequality of Latinx families with children of 17 cents would close to 84 cents for each dollar a typical White family owns. This increase in wealth for households at the crucial moment of children transitioning to adulthood has implications for financial and nonfinancial family wellbeing. Kids’ Futures Accounts also greatly reduce current racial wealth inequality levels for all households because of their direct effect on families with children. Currently at seven cents for each dollar a White household owns, the overall Black-White wealth gap would close to 41 cents. For Latinx households, the gap would close from 14 cents to 68 cents (Figure 4).
Beyond the colossal financial improvement of households shown here, these paired policy building blocks are a means to furthering larger well-being for all. While not specifically studied in the analyses, we know from an abundance of research of the wide-ranging impacts of providing individuals and families with guaranteed incomes and Kids’ Futures Accounts. These were highlighted previously in our state-of-the-art review. These include better education and employment outcomes, improved physical and mental health, better social connections, all together a big bump for overall wellbeing for many U.S. households.
In this time of pandemic, universal cash transfers are touted as the emergency solution to one of the greatest disasters of our time. Economic justice always requires a commitment to security for all, not just a one-time payment in the time of emergency.
Such a cash transfer plus generational wealth policy obtains wins for racial justice and equity, eliminates barriers, removes traps, provides access. The case for public support both to put our shared values into action and big policy ideas is widespread and growing. Moving bold, disruptive, and transformational policy means taking back the password for policy and reprogramming policy with equity, wellbeing, and racial justice at the center. It’s a question of the power necessary to activate social change. Some of the big ideas under consideration are currently being tested, though too often at miniature scope with restrictive conditions. Nonetheless, these field tests feel real, tangible, and above all achievable, thus glimpsing the future we want to create.
We owe it to Americans.