Expert: Trump's $1K for Babies Idea Is 'Upside-Down'

President Trump turned his attentions Monday to one of the provisions in the GOP's spending bill that's making its way through Congress: the so-called Trump accounts that his administration hopes to set up for nearly all babies born during his second term. The tax-deferred savings accounts would be offered to infants born in the US between Dec. 31, 2024, and Jan. 1, 2029, with $1,000 already parked in it courtesy of the US government. Parents or others would be allowed to deposit up to $5,000 annually in each account, and when the child turns 18, they'd be able to use the funds, taxed as long-term capital gains, for specially designated purposes, including going to college, starting a business, or buying a home.

• Trump: "This is a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation, and they'll really be getting a big jump on life, especially if we get a little bit lucky with some of the numbers in the economies into the future," the president said Monday at a White House CEO roundtable, per the Washington Post.

• Mike Johnson: The House speaker also weighed in at the event, calling the five-year pilot program a "transformative policy that gives every eligible American child a financial head start from day one." He added, "If you have a 401(k), you understand the power of investing early for the future."
• The numbers: The AP calculates that $1,000 would grow to about $3,570 over 18 years of a child's life, given a 7% return. CNN extrapolates further, reporting that in March, the Milken Institute figured that $1,000 set up in a broad equity index fund would increase to about $8,300 over 20 years.
• Precedent: The AP notes that the savings accounts resemble the "baby bonds" that California, Connecticut, and DC have in place to reduce the income gap between the rich and poor. However, unlike the baby bond programs, which are geared toward the financially disadvantaged, babies from families of all socioeconomic levels would qualify for the Trump accounts.
• Criticism: Some detractors say this new initiative could actually make the wealth gap worse. "It is upside-down," New School economist Darrick Hamilton tells the AP, saying that although he believes all babies should receive such an account, those from poorer families should get more, as $1,000 wouldn't really help with their situation overall, even with interest tacked on. "It's going to enhance inequality."
• Criticism II: Others note that the Trump administration could help children better by simply not going after services in the pending legislation that families depend on, such as Medicaid, education grants, and food and housing assistance.
• Further feedback: CNN has more on the pros and cons of the proposed accounts, including the fact that at least one parent would need to have a Social Security number and work authorizations to qualify, which the Post notes would leave "some US-born children of immigrants out of the program."

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