Only weeks later than promised, this post delves into some of the more noteworthy elements of the DLC’s American Dream Initiative (ADI). As a matter of substance, the ADI program contains several proposals noteworthy for their recognition that financial independence in the global economy depends on asset ownership and lifelong education. This reality is the product of the increased risks faced by families because of rising income volatility, increased transience of jobs, and rising fixed costs for housing, medical insurance, and transportation. The ADI’s emphasis on expanding savings, establishing lifelong education, and lowering insurance costs is an effort at managing the heightened risk faced by middle class families today.

The proposals that I’ll briefly consider here—the American Dream Accounts and Baby Bonds—recognize the importance of property ownership in both providing owners with the basics of financial independence and offering incentive to develop the traits and habits necessary for future success. Bruce Ackerman and Anne Alsott of Yale Law School offered a rationale for expanding asset ownership in their 1999 book, The Stakeholder Society. The two co-authored a short synopsis in the American Prospect available here.

American Dream Accounts would require employers to enroll workers into retirement account programs that feature automatically increasing contributions from pay checks. Employees must opt-out of these accounts, a default rule that should ensure the largest possible enrollment. These accounts can be managed by the employer. Employers will also have the alternative to accept tax credits to enroll employees in pay-deduction IRAs or a variant of the federal government’s risk-calibrated Thrift Savings Program. This plank of the ADI is adapted from a similar proposal by the Hamilton Project that can be read here. Expansion of the number of families with retirement savings creates a private cushion in advance of the expected insolvency of social security, but accepts greater uncertainty due to the reliance upon the market and rising life expectancies.

Baby Bonds are similar to the UK’s Children’s Trust Fund and guarantee a $500 savings bond to all children born. An identical bond is given ten years later to children from low- and middle-income families. Money from this account would be limited to certain kinds of expenditures: college and job training, the purchase of a first home, and transfer into retirement savings. Baby Bonds are similar to the KIDS Accounts included in the ASPIRE Act introduced by a bipartisan coalition of legislators including Senators Charles Schumer and Rick Santorum and Rep. Harold Ford Jr. The direct economic impact of so small a bond would not likely in and of itself be the most noteworthy aspect of this program; instead, the predominant impact of Baby Bonds would be cultural.

Baby Bonds accomplish several ends aimed at encouraging the habits needed to manage the greater insecurity faced by middle class families. By providing all children with a savings bond, the universal necessity for savings is enshrined as a national value from the earliest age for both children and parents. The provision of a second, means-tested bond is a traditional transfer program to those that stand to benefit the most from asset ownership. Limiting use of the bond to education, home ownership, and savings reinforces their importance for ensuring that the price of opportunity remains within reach. Little in the way of formal studies is available on the success of the program in the UK; readers are invited to post links to stories on the success of the program abroad.

ADI revisits some middle-class friendly policies considered in a variety of different guises over the past decade within the framework of the “middle class squeeze” narrative that has emerged in the past few years. The language of the proposal recycles the “opportunity and responsibility” talk popular with DLC officials in past campaigns, but the polices are tailored to address the increased risk profile of working families today and should appeal to a broad segment of voters and activists if the right messengers step forward.