Washington should invest in Child Savings Accounts to help bridge income gaps

Published March 5, 2019 in the Seattle Times

“The Fleecing of the Millennials.” This is the provocative headline of a recent opinion piece by a New York Times columnist. David Leonhardt convincingly makes the case that the income gap between younger and older generations has been widening.

There’s nothing alarming about an older generation having more income and wealth than a younger one, of course. But Leonhardt investigates trends in this gap over time. He found that, on average, today’s young adults between the ages of 25 and 34 earn the same now as they did nearly half a century ago. Meanwhile over this same time period, the income of those between 55 and 64 grew by a quarter; and it grew by 75 percent among the retired population.

The squeeze put on the federal budget from debt repayment, Social Security and health care helps explain why the portion of public spending devoted to children under the age of 19 is in decline, an Urban Institute analysis found. In a few years’ time, we’ll be spending more on repaying our federal debt than we spend investing in children and youth.

I think this backdrop helps make the case for an important bill now under consideration by our state Legislature. House Bill 1592, and its Senate counterpart Senate Bill 5704, would establish Child Savings Accounts (CSA) for low-income children. If passed, Washington would join four other states with statewide CSAs. These programs use public funds to set up savings accounts for children, which over time grow from both private and public investments into them. Once children become adults, they can use their CSA to finance college or make other longer-term investments in their future.

Maine’s CSA is the one to emulate. For each infant born to a Maine resident, the state has been investing $500 into a college savings plan. The proposal before our legislature is modest by comparison: if passed, the state would invest $100 into accounts for each public-school kindergartner eligible for free and reduced lunch — with potentially more invested later. Not perfect, but at least it’s a start.

By themselves, Child Savings Accounts will not make the economic challenges facing today’s young adults vanish, nor rebalance the priorities reflected in our federal budget. But they represent an overdue step in the right direction.