Matthew Yglesias defends Hillary Clinton's baby bonds initiative. Briefly, the idea is to give every child a $5,000 savings bond to help pay for college.
Frankly, the idea has little appeal to me.
I would prefer to let parents invest the money in an IRA-like vehicle, so that they could put it into equities. Assuming a historically modest 6% after-inflation yield, $5,000 would become $13,463 when the baby is ready for college. But I would prefer to not let them cash it in yet: the money would grow to $208,231 when they are ready to retire at 65. Invested in an annuity, that would provide a monthly income of about $1,400, far more than the average Social Security check, which today is only $895. At a cost of $20 billion a year today, we could ease our children from life's greatest financial liability, old age.
Seems like a deal to me.
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