Ross Marchand explains for Martin Center readers why so-called “baby bonds” would produce negative unintended consequences.

For too many politicians and presidential hopefuls, a free college education is a cure-all for inequality in America—so long as the federal government can pour enough money into it. Democratic presidential hopeful Sen. Cory Booker (D-NJ), for instance, has opted to make “baby bonds” the centerpiece of his campaign.

Under this policy, fleshed out in recent weeks, lower-income children would be given a large nest egg by the federal government which could be used for eligible expenses, such as a college education. …

… This program, designed to make Booker stand out from an increasingly crowded field of Democratic candidates, might appeal to the progressive wing of the party, but it betrays a fundamental naivete about how investment decisions and major life decisions happen. It’s no great secret that a child born to wealthier parents will, on average, do better than a child born to poorer parents. But an infusion of cash from taxpayers won’t close this gap or improve the situation of America’s genuinely struggling working poor. What it will have, however, is potentially disastrous unintended consequences on the economy and increase our already absurdly high tuition prices.

Booker’s proposal will cost at least $60 billion, funded by increasing the death tax along with capital gains taxes. Despite this significant cost, Booker fails to give detailed evidence on the merits of such a proposal and avoids discussion of any pitfalls.