WASHINGTON – Typically, the offspring of affluent families secure financial leverage as they stumble into adulthood through means like trust funds. Unfortunately, this advantage is not extended to less wealthy peers, who may be left without any assistance, or might even shoulder the responsibility of supporting their own families.
Imagine, however, if every child could receive a financial head start at the cusp of adulthood, disregarding their family’s economic standing. This concept underpins a proposal presented by the House GOP with backing from President Donald Trump. The proposal suggests the creation of tax-deferred investment accounts, known as “Trump Accounts,” for infants born in the U.S. over the next four years. These accounts would kick-start with an embedded fund of $1,000. Upon reaching 18, the recipients could access this accumulated fund to aid in purchasing a home, furthering education, or launching a small business. The funds could be withdrawn for other purposes as well, albeit they would attract higher taxation under such circumstances.
President Trump outlined this initiative as a mechanism to empower families, stating at a White House event, “This is a pro-family initiative that will provide a substantial benefit to upcoming generations, leveraging the robust performance of our economy.” This initiative promises a jump-start into adulthood, provided economic conditions are favorable. Although symbolically significant, the financial input remains modest within the broader $7 trillion federal budget. With a 7% return rate, the initial $1,000 investment could grow to about $3,570 over 18 years.
The foundational idea resonates with the “baby bonds” approach previously initiated by two states—California and Connecticut—and the District of Columbia to bridge economic disparities. By bestowing the emerging generation a stake in Wall Street, there may be a cure to the disillusionment with capitalism among some youth, posits Utah Republican Rep. Blake Moore. Moore, who championed the proposal’s integration into extensive House spending legislation, observed, “While our economy thrives, not every individual recognizes its potential benefits.” By instilling in the succeeding generation an appreciation for investment and financial acumen, a prosperous path might unfold for them.
Under this bill, families across all income brackets could avail of the “Trump Accounts.” However, eligibility criteria necessitate at least one parent to present a Social Security number along with work authorizations, thereby excluding certain immigrant categories’ U.S.-born children from this benefit. Different from other baby bond programs predominantly targeting underprivileged audiences, this proposal casts a wider net across income strata.
Proposing economist Darrick Hamilton from The New School, the original architect of the baby bonds concept over 25 years ago, forewarned that the GOP’s proposal would widen, rather than narrow, wealth disparities. Originally, Hamilton’s vision championed a universal program wherein children from financially struggling families would receive more substantial endowments than their affluent counterparts, thus striving for a more balanced platform. Crucially, government entities—not private Wall Street firms—would manage these funds. Hamilton critiqued the proposal stating, “It is upside down. It’s going to enhance inequality,” further stressing that even with accruing interest, $1,000 is insufficient to notably impact a child mired in poverty.
Brad Gerstner, a Silicon Valley investor and pioneer of the proposal, admitted in a CNBC interview last year that these accounts might serve to address the wealth chasm and waning faith in capitalism, which poses a looming existential threat to the U.S. “The rise and fall of nations hinge upon burgeoning wealth gaps and a populace losing faith in the system,” he stated. “We are not powerless; we can act.”
Critics cautioned that economically disadvantaged families grapple with far more immediate needs. As Republicans and Trump continue to face backlash over proposed reductions to programs critical to financially strapped families with children—such as food assistance and Medicaid—this proposal emerges. Supporters of the baby bonds notion remain wary, noting Trump’s intent to cut higher education grants and programs aiding young adults, precisely the demographic “Trump Accounts” aim to support. Ongoing legislative proposals threaten critical lifelines like Medicaid and food assistance upon which many families depend.
Eve Valdez, a southern California youth and foster care advocate who emerged from the system herself, noted that young adults emerging from poverty often face difficulties meeting basic needs like rent and transportation, expenses that are not covered by Trump Accounts. When she turned 18, Valdez experienced homelessness, further underscoring the inadequacy of eventually accessible accounts for meeting immediate, pressing needs faced by families today. Shimica Gaskins from End Child Poverty California emphasized, “Access to health care for children and food assistance for families is where focus should be directed.”