Many proposed safety-net reforms, such as a fully refundable child tax credit (CTC), would offer unconditional cash transfers to low-income families. These transfers discourage parental work, marriage, savings, and investment in human capital. Moreover, these behavioral responses may socialize children into making similar choices when they become adults. Reducing immediate poverty, then, might come at the price of lower upward mobility for children.

Children from lower-income families who are ineligible for the full CTC would receive annual federal contributions to a “success sequence savings account”—a baby bond—equal to the maximum CTC minus the CTC they received. These funds could be used for asset-building purposes once a child turned 18, with allowable distributions contingent on meeting criteria related to the success sequence—graduating from high school, accumulating a work history, and avoiding single parenthood. By providing sizable benefits but restricting access to those benefits to low-income young adults demonstrating responsible decisions, the policy would incentivize pro-opportunity behavior on the part of parents and children.