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Reimagining Economic Systems to Support Children and Families

Shrinking disparities across the board requires innovative solutions to the current systems that begin with support at the foundation: the home. There are various opportunities in economic systems for improvement that could contribute to reducing wealth disparities. This chapter provides background on how wealth inequality is affected by race and provides examples of potential solutions being developed in different parts of the country. It concludes with a discussion of the challenges and suggestions for short- and long-term goals for reimagining an economic system of care.

UNDERSTANDING RACE AND IMPACTS ON WEALTH

Two speakers presented on issues of systemic racism in our economic system and how those issues negatively impact the health and well-being of children and families. Darrick Hamilton, university professor and director of the Institute on Race and Political Economy at The New School, outlined various concerns with the current system and how those concerns contribute to negative downstream impacts. Additionally, Kimberly Noble, professor of neuroscience and education at Teachers College, Columbia University, shared policy implications of poverty reduction efforts, as well as how such efforts can affect children.

System Stratification and Inequality

When it comes to wealth, race is a stronger predictor of one’s positioning than class itself, began Hamilton. Regardless of race, though, he

described America’s extreme concentration of wealth at the top as dysfunctional, noting that the bottom 50 percent of earners own about 1 percent of the nation’s wealth. To look at this another way, those earning more than $1.5 million each year have more of the nation’s wealth than the bottom 90 percent of earners. In 1944, President Franklin D. Roosevelt called for an economic bill of rights in his State of the Union address. As Hamilton explained, Roosevelt knew that full citizenship demanded more than just political rights, it required economic rights. He applied this concept to the current pandemic, a real-life situation in which the Black mortality rate in the United States is more than double that of the White mortality rate. Beyond mortality, nearly one-half of Black-owned businesses have closed due to the pandemic, revealing the larger political and economic vulnerabilities. He highlighted the racialization of the public response to poverty and economic security in the country, which he noted is part of a larger narrative about who is deserving of assistance and who is not.

In the Great Recession of 2008, Hamilton said, recovery from joblessness took a long time, inequality grew, housing security worsened, and young people found themselves with a great deal of debt. While there are several policies that can change this reality for the current economic crisis, Hamilton argued that we do not have an adequate social safety net in place. Instead, conventional wisdom views the market situated as an efficient, self-regulating solution to all of our problems. There are consequently numerous state and federal interventions, as well as public and private partnerships, that can compensate for the deficits and incentivize people to get more education or work to become more employable. Glaringly missing from this system is an acknowledgment of the role of power and capital, Hamilton stressed. These elements are self-reinforcing, and without government intervention, they function as designed, generating systems of stratification and inequality. He called for increased understanding of the roles of power and capital in our political economy and advocating for structures that can actually lead to equitable distribution of resources.

While many like to describe a market economy as one that has benefits of choice and freedom, Hamilton said, “Choice is an illusion if an individual lacks basic needs like a job, adequate income, shelter, food, and health care.” It is actually wealth that gives choice and freedom. He framed inequality as derived from a cultural poverty thesis in which minority populations and poor people are undervalued and have little education. Even in terms of debt, he highlighted the “good” and “bad” types of debt and the different implications they have in society. Black American students tend to take out more debt at every level of education and are overrepresented in graduate education, but racial disparity and substandard economic outcomes persist and even worsen at higher levels of education. Reiterating the example of maternal mortality presented by Williams, Hamilton said

that Black expectant mothers with a college degree are more likely to have their infant die than White expectant mothers who drop out of high school. And a Black man with a college degree is nearly three times more likely to die from a stroke than a White man who dropped out of high school. Hamilton noted that this is due in part to an overemphasis on the functional role of education to the detriment of understanding the functional roles of power and wealth. He further questioned the framing of inequality as an opportunity gap, saying that this perspective reinforces market norms and puts the burden of inequality on individuals instead of looking at the responsibility of the overarching system. While he stressed the importance of a high-quality education, he cautioned that it is limited in its ability to rid society of the generational and ongoing legacies of racism.

For everyone in society to have their own authentic agency, Hamilton emphasized the need for resources. There is a set of “enabling goods and services that are so critical to individual life and liberty that we cannot be pricing and rationing their quantity, quality, and access in order for corporations to maximize their profits,” he said. Instead of our current system, he called for policies that strengthen public options to directly compete with inferior private options that do not guarantee universal quality and access to basic human needs such as health care, housing, education, and capital. He also highlighted the need for policies supporting free mobility throughout society without psychological or physical threat of state-sanctioned harm. He was encouraged by the mobilization of protestors across the country and the world coming together to bring about change, noting that younger generations and social movements are beginning to redefine economic good to embrace morality, humanity, and sustainability. These values will be critical, stated Hamilton, if we are ever going to have an authentic coalition uniting our diverse population. Finally, he called for a total rejection of the unsubstantiated rhetoric that gaps in so-called grit and social responsibility are the sources of inequality, together with the neoliberal paternalism in which the government attempts to coerce people they deem as defective or “less than” to make better decisions. He concluded with a call to be bold and change the paradigms and create initiatives that truly empower people with economic security, dignity, and agency to achieve their self-defined roles.

Childhood Income and Life-Course Predictors

Taking a more microlevel view of race and wealth, Noble described Baby’s First Years, a national study with which she serves as a principal investigator. It is funded by the National Institutes of Health and a consortium of 22 foundations and is designed to test the causal connections between poverty reduction and brain development among very young

children.¹ We know that children from low-income families tend to enter school with lower levels of academic skills, she said, and frequently these differences persist as they get older. Researchers have learned, though, that even small differences in family income in early childhood can predict better outcomes later on. A $4,000 increase in family income between prenatal and age 2, for example, has been associated with increased earnings when those children grow up, increased time in the labor force, and other benefits (Dahl and Lochner, 2012). She pointed out, on the other hand, the limitations imposed by the reliance on correlational data by all of the studies to date, which makes it difficult to truly attribute those benefits to a particular intervention. She suggested that it is time for research to look at causation. That is the basis of the Baby’s First Years study, she explained, the first randomized controlled trial of poverty reduction in early childhood in the United States. She described their methodology, with 1,000 low-income mothers recruited in 2018 from four cities: Minneapolis-St. Paul, New Orleans, New York, and Omaha. Upon enrollment, all mothers began receiving an unconditional cash gift each month for the first 40 months of their child’s life. The amount of the cash payment was the focus of the intervention, with the treatment group receiving $333 per month, and the control group receiving $20 per month. She noted that their baseline randomization was successful, as they saw no differences between the two groups at the outset.

Noble outlined the goals of the study more specifically, saying they are trying to assess whether increasing income among families of low socioeconomic status improves children’s developmental outcomes and brain functioning by the time they reach age 3. They are also looking at whether this increased income improves family functioning and better enables the parents to support their children’s development. Their theory of change consists of two pathways, she explained. The first is that increased income will allow mothers to be able to buy things like books and toys or invest in better housing in better neighborhoods or better quality childcare. The second pathway emphasizes reduced stress. Because mothers have this additional income, they are theoretically less likely to be worried about paying monthly bills or feeding their children and can devote that cognitive energy to providing a nurturing environment for the family. She hypothesized that both of these pathways are likely active, and they are trying to carefully measure them along the way.

Elaborating on the data collection portion of the study, Noble described the electroencephalography (EEG) they were able to conduct in the child’s home during the follow-up survey at 1 year. She explained that children who are at risk of learning and attention problems typically exhibit a

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¹ For more on this study, see https://www.babysfirstyears.com.

higher amount of low-frequency electrical oscillation and a relative deficit of high-frequency electrical oscillation. They hypothesized, then, that the EEG of infants in the high-cash group would be more likely to show more relatively high-frequency oscillations and fewer low-frequency oscillations, but these analyses are still ongoing. For the final data collection portion of the study, she said that they were planning to conduct a comprehensive assessment of the children’s cognitive development (language and executive function, social-emotional development) at around age 3. They will also look at both children’s and mothers’ stress physiology by measuring the stress hormone of cortisol.

Noble hopes that the results of this study will have the potential to provide direct evidence of the effects of poverty reduction on the developing brain, which can then inform debates about social services programs. She acknowledged that income is not the only or even the most important determinant of children’s brain development, but it is one to which policy can be responsive.

EXPLORING SOLUTIONS

Additional speakers presented potential solutions to address the persistent inequities in our current economic system. Mouhcine Guettabi, associate professor of economics, Institute of Social and Economic Research, University of Alaska, Anchorage, described one of the longest-running cash transfer programs in the country. William Darity, Samuel DuBois Cook professor of public policy at Duke University’s Sanford School of Public Policy, reviewed economic policy solutions such as the baby bonds idea proposed by Congress that might address the racial wealth gap.

Cash Transfer Programs

Guettabi discussed the Alaska Permanent Fund Dividend (PFD), which he described as the longest running unconditional cash transfer in the world at 38 years. He referred to the concept of “universal basic income” (UBI),² which was highlighted by Andrew Yang during the 2020 presidential primaries, and commented that Alaska provides an example of a successful implementation of a UBI program. The discovery of oil in Prudhoe Bay, one of the largest oil fields in the world, resulted in the establishment of the PFD in 1976 to save a portion of the revenues. The PFD receives a percentage of

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² UBI is a universal cash benefit paid to all citizens. It does not have a work requirement, is universal, is not means-tested, and is directed at individuals rather than households. UBI typically give every citizen a check each month (National Academies of Sciences, Engineering, and Medicine, 2019).

revenue and investment from oil production and has grown substantially in value, reaching $65 billion in November 2019. The PFD still gets some oil money now, he explained, but it has diversified itself since its establishment. Most of the growth, then, has resulted from investments in stocks, bonds, and real estate. While the majority of the amount is principal and cannot be touched regardless of the program, about $10 billion is currently in the earnings reserve, which is the spendable portion.

While some Alaskans resist the idea that this fund was intended as UBI at its inception, Guettabi shared the five original arguments for the program, which included elements of equity and the setting of an income floor. Alaska eliminated its income tax in 1980, and people who were supportive of the dividend through PFD wanted to ensure the benefits of this new oil also supported lower-income Alaskans, thinking this would help deliver benefits more equitably while also building a stronger safety net for low-income residents. The proponents also thought that paying dividends would provide a greater economic return than spending the same amount of money on capital projects or loans to residents. They envisioned the earnings would build a political constituency to protect the fund’s principal against raids by special interest groups.

The creation of the PFD resulted in many questions about how it should be used and who should benefit, Guettabi explained. After many discussions, it was decided in 1982 to allocate a 5-year rolling average of the returns from the fund to Alaskan residents. Every adult and child receives a check once a year from the state, with the distribution variable depending on the year, with amounts ranging from $300 to $2,100. So far, he said the fund has distributed $24 billion directly. As an example, if the annual distribution was $1,000, a family of four would get $4,000.

Though there has not been much research on the program, Guettabi shared the evidence that is available. Evaluation topics have included employment, crime, health, poverty, and others. Considering economic impacts, researchers found that the dividend has substantially reduced poverty, especially among the elderly and Alaskan natives, who tend to live in communities that are typically more cash-poor. He did note that many native corporations have begun distributing their own dividend to their communities as they have become wealthier over time, but there has still been a substantial role for poverty reduction from the PFD. There were two studies on children’s health, one focusing on birthweight and the other on childhood obesity. The birthweight study found a positive, causal association—though modest—of the PFD on birthweight, especially for low-income mothers. For childhood obesity, Guettabi and other researchers found that an additional dividend payment before the age of 3 (differentiated depending on what month the child was born) is associated with a fairly significant reduction in childhood obesity at age 3 (Watson, Guettabi, and Reimer, 2019).

In terms of potential disincentives to work, which is often an argument against the premise of UBI, Guettabi shared that they have not found any evidence that there are any exits from the labor force that occur in response to the dividend distribution. Instead, what they have found is that low-income women tend to work fewer hours in order to spend more time with their families. Because the annual payments inject such a large amount of money—usually between $1 billion and $1.5 billion—into the economy all at once, more jobs are actually created instead of lost. Guettabi also noted that they have seen a causal effect of the distribution on some fluctuations in the short run on things like substance abuse, but when annualized, these deviations are quite small. Conversely, property crime drops in the weeks after the payment, but again the size on an annual basis is very small. Initially, consumption patterns have not been shown to change, but Guettabi said more recent research shows that there is a propensity to spend—particularly on nondurables—in the few months following the distribution.

While Guettabi believes the empirical research demonstrates that the program has been successful, it still has encountered some challenges. The state now draws money from the fund for both government services and the dividends to residents, but there sometimes is competition for where money gets allocated. He acknowledged that there is a lot of tension but also many lessons learned for future states or countries that are considering programs like this.

Baby Bonds and Similar Programs

Darity began his remarks by referencing Barack Obama’s response to a question in 2007 indicating that he opposed reparations for Black Americans. It became apparent that President Obama was opposed to any type of project that would direct resources exclusively to Black Americans. As a consequence of this constraint, Darity indicated, he began to work with Darrick Hamilton to develop a way to make some headway in reducing the racial wealth gap in the United States through a universal policy. “Wealth inequality in the United States is vast,” he explained. As of 2016, estimates show the top 1 percent of American households possesses 40 percent of total household wealth. Digging further reveals a staggering wealth gap by race. Black Americans constituted, for example, 13 percent of the nation’s population in 2016 but only possessed 2.5 percent of the nation’s wealth. The wealth difference between middle-income White households and middle-income Black households in 2016 was $154,000, according to the Survey of Consumer Finances. To begin to address this differential, Darity and Hamilton developed an idea called the “baby bonds” proposal, which would provide an endowment or trust fund for newborn infants that would be calibrated on the basis of their parents’ family wealth position.

To illustrate, Darity said families at the upper end of wealth distribution would be given a token contribution of around $50, but families with children at the lowest end of the distribution chain would receive an amount in the range of $50,000–$60,000. These funds would be accessible for the recipient when they reach young adulthood. This is important, he said, because while it is a universal program that includes all infants, the payment amount is not uniform. And while it can be described as a “race-neutral” project, he said it could have relatively greater benefits for Black families because Black wealth is so low. Newborn Black infants would be more likely to receive larger contributions on average.

Darity mentioned a few other options, predicated on the Baby Bonds idea, that also are under exploration. One is a policy in New Jersey, recommended recently by Governor Phil Murphy, which places a $1,000 deposit in each infant’s account, which they could access at young adulthood. The governor estimates that when a child reaches the age of 18 they would have approximately $1,300 available. Unlike the baby bonds proposal, Darity observed, this is a comparatively small uniform payment, so he sees the potential effect on wealth growth to be marginal, noting that this approach would have very little effect on wealth inequality.

Another proposal for which Darity expressed greater support has been developed by New Jersey Senator Cory Booker. It attempts to maintain the notion of universal payments, but it calibrates the amount on family income instead of family wealth. The motivation for this was that the government has much greater amounts of income data available than wealth data. Darity said that the Booker plan would give each child an initial $1,000 payment into an account, but then the annual payments would vary based on family income until the child is eligible to receive the funds in young adulthood. This is clever, Darity said, because it would prevent people from gaming the system. People would not be able to substantially reduce their level of income in a single year for the purposes of trying to get a higher amount for their child.

He shared some limitations of the baby bonds approach. Because it is based on the national median level of wealth, it sets a modest target for the equalization of wealth. Reducing the Black-White wealth gap at the median point requires less of a financial push than at the mean. As noted above, the median differential between White and Black households is approximately $154,000, while the household wealth differential is $800,000. He believes that targeting the median would be an inadequate measure for closing the racial wealth gap, given that 97 percent of the wealth that is held by White households in the United States is above the White household median level of net worth.

This is not simply due to a small number of billionaires that constitute outliers at the upper end of the wealth distribution chain, he said.

Twenty-five percent of White households have a net worth in excess of $1 million, in contrast with only 4 percent of Black households. The baby bonds program was designed to address the wealth gap at the median, but the mean racial wealth gap would be a better target for elimination, Darity emphasized. He also called for reparations for the Black American descendants of former enslaved people, a race-specific initiative, to accomplish the goal of truly eliminating the racial wealth gap.

Baby bonds and black reparations need not be mutually exclusive, he explained. Baby bonds could serve to mitigate overall wealth inequality in the United States, but reparations for black Americans must be seen as a policy to erase the Black and White wealth gap.

As a final point, Darity commented on the wealth inequality within racial groups, saying that Black and White wealth inequality within the groups is extremely large and similar to one another. The uneven distribution of wealth among Black Americans, though, is spread over a disproportionately smaller amount of total wealth. Because Black wealth is so low, he said, uniform payments to all Black Americans to raise household wealth by $800,000 would consequently result in markedly reduced inequality within the Black American community (Darity and Mullen, 2020). The median to mean ratio within the Black American wealth distribution would rise from 13 to 87 percent, he said. He would love to see both baby bonds and reparations for Black American descendants of persons enslaved in the United States, and concluded “that’s the type of world that we should be working to achieve.”

MAKING PROGRESS ON ECONOMIC POLICIES

Discussion

Nathaniel Counts, senior vice president of behavioral health innovation at Mental Health America, asked the panelists for their thoughts on how listeners from key institutions could make progress on critical economic policies to benefit families and children and close wealth gaps. Economic policies can feel big and overwhelming sometimes, so the question often comes down to what one person can do at the individual level. Hamilton responded that the problems are as much political as they are economic. “We have evolved to a rhetoric that grounds inequality in deficits almost based on a dogma that somehow markets become the most efficient allocative process of determining worth, well-being, and merit,” he said. He again highlighted the important role of power in the narrative but said that inequality is fundamentally grounded in resources rather than deficit behavior. He thought drawing more attention to that narrative could help open up ways to relieve income inequality. During this pandemic, Hamilton

said, we know that aggregate demand is too low, and the country needs fiscal investment, but the question is how to do that. A top-down approach grounded in supply-side economics could lead us out of a recession but might also result in growing inequality. Alternatively, investing directly in the people might stimulate aggregate demand and create spillover effects through the building up of infrastructure projects such as roads and bridges like New Deal programs did.

Darity responded to the question saying that he believes we are in a political moment in which serious consideration of reparations enjoy greater prospects than at any point in his lifetime, perhaps even since the Reconstruction era. He referenced a survey done in the early 2000s that found only 4 percent of White Americans endorse reparations for Black Americans in the United States (Dawson and Popoff, 2004). More recently (2019), 16 percent of White Americans expressed support for reparations (Younis, 2019). This could be a consequence of several factors, he said, but there does seem to be a sea change in attitudes. Darity hopes this change is more permanent than ephemeral.

Operationalizing Reimagined Antiracist Economic Systems

Participants and panelists gathered in six small groups to further discuss the ways different systems could be restructured. Using the key messages presented by the panelists throughout the workshop, the small groups discussed short- and long-term goals for a reimagined antiracist economic system, as well as ways of contributing to this process in their own individual roles. Each group reported on their discussions to the larger plenary, and several themes emerged. A summary of the responses is outlined below.

Intersection and Interconnectedness of Fields

Carlos Santos, associate professor at the Luskin School of Public Affairs, University of California, Los Angeles, began with his group’s discussion highlights, saying that the enormity of the many issues in play was one of the items that was brought up. He also called attention to the “siloing” of sectors, which can hamper the realization of an antiracist society and the advancement of efforts in the economic domain. He said that they discussed the importance of fostering the intersection between social services, policymakers, and tax efforts, particularly for opportunity zone efforts. Counts also highlighted the intersection of various fields in his report. He called for incorporating the science and lived experience into the effort to center health and economic equity as an important part of policy implementation so that the full gamut of family health and economic needs

gets recognized. Counts also commented that this strategy could be adapted for use in advocacy messaging aimed at building a movement driving further policy change.

Communication

Several discussion groups on the second day of the workshop outlined goals on improved communication to reimagine economic systems. Santos said that there is a need to focus on empathy and communicating stories characterized by greater diversity to challenge people’s beliefs and encourage a vision of public education and economic assistance. Counts called for increased civic engagement and dialogue, highlighting the “importance of creating spaces and places where people can communicate and build knowledge and compassion together.” In a similar vein, Santos challenged academics and others on using deficit framing for communities. He said that it is important to hear that communities have internal resources and are not passive sufferers of oppressive conditions. There are community leaders actively engaging with residents, and we need to be mindful of how we speak on these issues. Deborah Klein Walker, adjunct professor at the Boston University School of Public Health and Tufts University School of Medicine, called for improving communication about the data on wealth in America, saying that most people do not realize the disparities are so vast between racial groups. She also suggested using youth and family voices to help spread that message.

On the topic of education, Harolyn Belcher, chief diversity officer and director for the Office of Health, Equity, Inclusion and Diversity at the Kennedy Krieger Institute and professor of pediatrics at the Johns Hopkins University School of Medicine, highlighted the importance of learning the entirety of U.S. history. Educating youth, teachers, and policymakers about the adverse health impacts resulting from Jim Crow laws, voter suppression, and residential segregation may support innovative strategies to address health disparities. She suggested that acknowledging the pervasive influence of institutional racism in U.S. public policy may help dismantle inequitable practices and promote acceptance of equity-based proposals like UBI and baby bonds. She said that there is a need to understand how to better communicate these different solutions to various audiences. According to Belcher, awareness of federally- and state-sanctioned trauma by acknowledging the full history of the United States may support distributive justice practices. Suzanne Le Menestrel, director of the Forum on Children’s Well-Being, suggested a revisiting of the history curriculum and promotion of changes in the K–12 space.

Improving Data and Research

A few groups noted some goals oriented around improving data and research to support changes in this area. Santos explained that some populations have been particularly overlooked in research and policy, and they need greater attention. There is a need to better understand the needs of Native Americans, for example, and the issues that affect their communities. Belcher also called for making research accessible as a tool at any level—federal, state, or local—but added that it needs to be compelling and credible. Local governance often has the least access to resources for collecting data and conducting research. Le Menestrel shared that her group discussed the need for a data clearinghouse. A clearinghouse could serve as a tool that outlines which policies have had impact at what level and what worked well in implementation. There is also a need for more data, she said, especially data broken down by race and ethnicity, highlighting Santos’ previous point on the paucity of data on Native Americans. As an example, Le Menestrel commented that First Focus on Children provides a comprehensive analysis of how kids and families fare in the federal budget each year, but even that has significant gaps in what can be reported (First Focus on Children, 2019).

Focusing on Root Causes and Equity Across the Life Course

Another theme was the importance of focusing on root causes and implementing interventions across the life course. Santos pointed to the numerous maternal and child health inequities and stated that public policy should not wait until women become mothers before addressing some of these challenges. Matt Lyons, director of policy and research at the American Public Human Services Association, called for a constant focus on the investments needed for an equitable economy. We cannot talk about economic recovery, he said, without addressing the root causes, especially now during a pandemic, things like access to childcare, economic support, food, energy, and housing security. At the end of the day, addressing these things constitutes an investment in our country as a whole.

A few short-term goals were also identified such as the need to be vigilant in calling out issues. Even if change is still a long-term goal, said Lyons, we cannot minimize the importance of continuing to act as voices and leaders in the conversation. Walker shared that their group prioritized obtaining a living wage at the national level as one thing that demanded focus right now. She also called attention to the lack of equity in Internet access, calling it a huge issue that needs to be resolved for the sake of equal access by all to the wealth of digital resources.