Baby Bonds, Billionaires, and Making Capitalism Cute Again
Trump accounts, or Section 530A accounts, were created by the Big, Beautiful Bill on July 4, 2025. Congress allocated $1000 for every child born from Jan. 1, 2025, through Dec. 31, 2028. But anyone under 18 can have a Trump account. These follow the structure of individual retirement accounts. The dividends and appreciation in the accounts are not taxed, but individuals will have to pay taxes when they withdraw money from them. Contribution limits also apply to these accounts. (RELATED: The Quiet Engine Behind Gen Z and Millennial Malaise)
Private sector leaders Michael Dell and Brad Gerstner proposed Trump accounts. They hope Trump accounts can revolutionize America’s social safety net through private philanthropy rather than unsustainable (and unjust) taxpayer transfers. They created and co-chair the Invest America Foundation to encourage and coordinate philanthropic contributions to kids’ Trump accounts.
Millions of people in the United States have no equity in the stock market. Or in housing. Or in other assets. They stand on the sidelines watching incredible fortunes be made and massive accumulations of wealth. These people understandably doubt the value of our current economic system. Backlash against the market economy has already resulted in Democratic Socialists being elected as mayors of New York City and Seattle, as well as a 5 percent wealth tax on California’s November ballot.
Advocates of Trump accounts want to counteract this hostility using the power of investment. Dell & Gerstner also want to improve financial education in the U.S. by simplifying how people track and fund Trump accounts for their children, grandchildren, nieces and nephews, etc. Many more people will now have a stake in how the economy and stock market perform. And they will be able to see how investment compounds over time.
[T]he $1,000 put in Trump accounts for children born during Trump’s second term will be worth $4,000 by the time they finish high school. It’s not nothing…
Two of the most important rules in investing are to diversify and to let your investments compound over time. The Trump Accounts follow these two rules by requiring investment in low-cost diversified index funds and by allowing the investment to compound until the child is (at least) 18 years old. After 18 years of compounding at an average 8 percent annual return, the $1,000 put in Trump accounts for children born during Trump’s second term will be worth $4,000 by the time they finish high school. It’s not nothing, but it’s also modest.
But the real power behind Trump accounts is their potential to channel and unleash massive voluntary contributions of wealth to future generations. The Invest America Foundation wants to use Trump accounts as a philanthropic focal point from companies matching contributions of their employees, to states wanting to coordinate their tax code and investment laws, to billionaires wanting to contribute part of their wealth to wide swaths of the population. (RELATED: Congress May Finally Touch the ‘Third Rail.’ Inflation Will Hold Them Accountable.)
Billionaires have never had a clear mechanism to do so. They create foundations and trusts to “do good” for society, but these foundations create their own set of grifters and often end up wasting money and funding projects that don’t help recipients all that much — just look at the Gates, Ford, and Rockefeller foundations. (RELATED: Bill Gates Has Discovered Something More Profitable Than the Climate Apocalypse)
But how can billionaires give money to millions of people they don’t know? Doing so would involve enormous coordination costs and would invite grifters. A system of federal accounts, however, monitored and administered by the national government, can provide an incredible vehicle for philanthropists to donate directly to recipients. The wealthy can donate to large subsets of the population, by zip code or demographic, through the Trump account program.
Michael and Susan Dell have set the tone by committing $250 to twenty-five million kids’ Trump accounts (over $6 billion in total) — kids born before 2025 who won’t receive the $1,000 of federal seed money. Ray and Barbara Dalio have committed to match the Dells’ $250 contribution for roughly 300,000 children in their home state of Connecticut (roughly $75 million). It’s not hard to imagine that other billionaires will contribute significant capital to these accounts based on the areas and the kids they are concerned about.
Gifts by the wealthy (like the Dells and the Dalios) are private and voluntary philanthropy, not legal theft and redistribution by politicians. The ultrawealthy have far more money than they could ever spend on consumption. And often far more money than they want to pass on to their heirs. Foundations and trusts will remain a big avenue for philanthropy, but this direct cash transfer to millions of children is a new option due to the Trump account program.
Government programs like Social Security and Medicare were supposed to be social safety nets, but they are deeply flawed programs where people feel entitled to benefits that the government can’t afford to keep paying. These entitlement programs were never about real ownership or investment, but about government redistribution of money from taxpayers to the elderly.
Trump accounts are different.
As with any government program, there are risks to Trump accounts. Congress will always be tempted both to expand its subsidies of taxpayer money to these accounts to buy votes and also to modify or even raid these accounts to capture more tax revenue. Congress could also create a legal entitlement (a guaranteed minimum) of how much eighteen-year-olds’ accounts must be worth. Doing so would change this program dramatically and make it more like the broken programs of Social Security and Medicare.
But we have reason to hope for the best. Besides padding Trump’s ego and legacy, Trump accounts may actually lay the groundwork for an ownership society. More importantly, they directly address the dislocation and anger many young people feel about not being part of American economic success.
If these accounts can expand “investment” culture and mindset, if they can give millions more Americans a stake in the success of the U. S. capitalist economy, and if they can channel billions of dollars of private, voluntary philanthropy to give millions of children a better financial start in life, we may find ourselves with a radically different, and better, American social safety net.
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