First, consider student debt. Black Americans would gain disproportionately from student loan debt relief because they have larger average levels of higher education debt — $23,400 compared with $16,000 for white students. After accounting for the higher enrollment rate of white students, erasing student debt would result in an average Black gain in wealth of $8,424 and a white gain of $6,560. This translates into a reduction in the racial wealth gap of $1,864.
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It would reduce the median gap of $54,700 by 3 percent and the mean gap of $280,300 by less than 1 percent.
Now, look at baby bonds. Under proposals embraced by Senator Cory Booker of New Jersey, and others, the bonds would provide each newborn infant with a trust account calibrated by the parents’ wealth. The goal of this project is to ensure that all Americans have a basic level of wealth. It isn’t designed to achieve complete racial wealth equality.
Specifically, the focus is on bringing every child closer to the national median level of net worth during their young adult years, when they have access to their personal accounts. This would mean, in turn, that the typical Black child would have an additional $33,333 in net worth by early adulthood.
If no white youths received any benefit from the program — which I do not recommend — “baby bonds” would move the ratio of median wealth from 14 percent to 74 percent. This is a substantial change. Even so, using the mean, or average, standard, it would leave 75 percent of the racial wealth gap unchanged. And, of course, under actual proposals, white children would receive baby bonds, too, so the shift in the gap would be much smaller.
In short, the notion that either student debt forgiveness or “baby bonds,” taken separately or in combination, will erase the racial wealth gap would be sheer mystification. Both policies are desirable for a number of reasons, but making extravagant claims about their impact on Black-white differences in net worth is disingenuous.
Worse still, celebrating these worthwhile programs in misleading ways diverts us from actually eradicating America’s racial gulf in wealth. Using average household wealth as a metric, that gap comes to a total of about $11 trillion.