Baby Stocks

Despite all that has been written about wealth inequality in the United States, Table 1 shows that current policy proposals do not directly address the root of the problem, which is the U.S. stock market. And yet every financial planner knows the data in Figure 1 below, which shows how U.S. stocks outperform all other assets over time.1,2 Thus, we must ask why our national conversation is stuck on baby bonds, basic income, or even cash reparations for slavery when we should be discussing baby stocks? Common sense says the best way to build wealth for Americans who lack it is exactly the same as for those who have it—that is, by owning a stake in the U.S. stock market.

A national stock plan would be easy to create and it would be the most cost-effective way to build wealth for all citizens over the long-term. To do this, the country should give every American child an index fund of the whole U.S. stock market on the day they are born, and then make them wait at least 35-40 years before they can access this social investment. Although additional contributions can be allowed, sustained holding is required in order to recover from market crashes and capitalize on compound interest, just as in Figure 1. Such a plan would support the core American values of both democracy and capitalism, avoid the pitfalls of socialism, reduce wealth gaps across race and class, and improve public health by addressing socioeconomic effects on medical outcomes. 

To understand why baby stocks are the best solution to wealth inequality over the long run, we need to think more about compound interest, the distribution of market ownership, the limits of taxation, and reparations for capitalism. These issues are explained in the following pages.