We are living in an unsettled age. Income inequality is at its highest level since the roaring twenties, as more Americans face a growing opportunity gap. Communities across the country are fraying. Trust in one another and in key institutions is at its lowest in generations. Confidence in that deeply American idea that our children and grandchildren will have a better life than we have is significantly at risk.
Our history shows that in times of huge transition and challenge like this, we make great strides when we commit to big, transformational ideas, not just small efforts on the margins. Initiatives such as the Morrill Land-Grant Acts, Social Security, the GI Bill, and the interstate highway system were all born in the face of great change and transition.
The upcoming presidential election offers the opportunity for us to recapture the notion that we are all in this together. One big idea that would do this: Create a twenty-first-century civilian version of the GI Bill by marrying two concepts, children’s savings accounts and national service.
Here’s how it would work. Every child born in America would automatically have a savings account—let’s call them Serve America Accounts—established in his or her name, tied to his or her Social Security number. This account would be used to save for some aspect of the American Dream—postsecondary education, job training, a down payment for a first home, or seed money for a business or nonprofit. Funds could also be kept in the account and used for retirement savings. The federal government would make an initial deposit of $5,000 into each account. Any other contributions from family members or others would grow tax-free, much like 529 college-savings accounts.
However, in order to access the federal investment of $5,000 and any interest gained on that investment, the young person would first have to complete an academic year (10 months) of full-time national service sometime between the ages of 18 and 28. A wide range of options exist to fulfill that service year: becoming a teacher’s aide, or first responder, or community leader, or emergency medical service volunteer, or many other positions in communities across the country. Young people could also choose to serve internationally through the Peace Corps and numerous other programs.
A year of national service is a chance for young people to strengthen their communities and country by confronting pressing problems like illiteracy, homelessness, hunger, environmental challenges, and natural disasters. The experience helps young people develop the leadership, team-building, and professional skills that employers are looking for. By 2044, there will be no racial majority in our country. National service would be a powerful way to continue the work of the civil rights movement by uniting people across backgrounds in common efforts to make a difference. And it’s a worthwhile investment: One study found that for every $1 invested in national service, there are returns to society of $3.95 in the form of higher earnings, more output, and communitywide gains.
At an average rate of return of 7 percent per year, an initial investment of $5,000 would be worth more than $18,083 by the time the child reached age 19. If a family also contributed $500 per year, the account value would reach $38,039 by age 19. Other incentives could be applied to encourage and accumulate savings for low-income families, such as matched savings programs that are being piloted in a number of states. The idea here is to enable young people to have a real “nest egg” when they become adults. But it wouldn’t be a handout. All young people would earn the funds in their Serve America Accounts by performing a year of service.
If a young person decides not to do a service year by age 29, then the initial service investment of $5,000 and any interest earned on it would be forfeited. That money would be returned to the federal Treasury and used to provide startup investments for newborns. (Young people would still be able to claim any funds they or their family members contributed to their Serve America Accounts separate from the federal investment of $5,000.)
One potential funding source for these Serve America Accounts, suggested by Michael Young of United for a Fair Economy, would be to use a portion of the estate tax, which the Congressional Budget Office projects will raise $24.5 billion per year from 2016 to 2025. This would be a way for those who have benefited the most from America and the American Dream to invest in the next generation.
These Serve America Accounts would be akin to a modern-day civilian version of the GI Bill. After World War II, the GI Bill was arguably the most successful example of reciprocal democracy in our history. It provided access to higher education, vocational training, and the like for nearly eight million veterans, literally building the American middle class. The GI Bill wasn’t cheap; it cost the federal government upwards of $120 billion in today’s dollars. But a study commissioned by Congress demonstrated that it generated about $7 in returns for every $1 invested.
Tying these Serve America Accounts to national service would also create a cultural expectation that all young people should give a year serving their communities and our country. By making national service a part of the American way of life, we will create a common universal experience and build a stronger sense of citizenship while breaking down barriers of race, class, and religion. We can unleash the energy of our young people to tackle our country’s most pressing problems. These Serve America Accounts can provide all young Americans with a jump-start on achieving socioeconomic mobility as they enter adulthood, while also building a stronger ethic of citizenship and reinforcing the idea that we are all in this together. And every generation will have the chance to become a “greatest generation,” because they will have served and sacrificed together in causes greater than their own self-interest.