Neww Jersey State Senator Michael Testa (R-1) highlighted the lunacy of Governor Phil Murphy’s plan to borrow $4 billion to pay for unnecessary new spending in his proposed FY 2021 budget plan, including a “baby bonds” program that would give newborns $1,000 to save for expenses later in life.
“In what world do you take a cash advance from your credit card to put money in your savings account?” asked Testa, a member of the Senate Budget & Appropriations Committee. “You would think a former Goldman Sachs guy like Governor Murphy would have better financial sense than that. Whatever benefit ‘baby bonds’ recipients get from the plan will be more than offset by the extra taxes they’ll pay over their lifetimes to repay billions of new debt. It’s lunacy.”
Under the proposed program, which would cost approximately $80 million in a full fiscal year, the State would set aside $1,000 into an account for children born in 2021 to families with incomes of up to $131,000 per year.
According to the New York Times, the initial $1,000 “baby bond” could be expected to be worth approximately $1,270, based on current interest rates, when payable to the child at age 18.
Meanwhile, the funding to pay for the program would come from $1 billion of taxes increases proposed by Governor Murphy along with $4 billion of borrowing that could take up to 35 years to repay.
Testa compared it to the Whitman “pension bond” debacle that Democrats have railed against for more than two decades. Of the $2.8 billion Governor Whitman borrowed in 1997, New Jersey still owes $2 billion in principal, with current payments costing state taxpayers more than $450 million annually. With interest, the total cost of repaying the initial pension bond debt will be more than $10 billion.
“Let’s be clear, Governor Murphy’s $4 billion bond plan is even worse than Whitman’s pension bonds that Democrats have complained about for more than 20 years,” added Testa. “The governor is going to saddle today’s babies with billions in new debt that they’ll still be paying off as they approach middle age. Is paying thousands or tens of thousands in higher taxes over a lifetime to get a $1,000 bond really worth it?”