Daniel Wolfram
An economist warns that a change to “Trump Accounts” turns child savings into a corporate bailout scheme.
Last year, at the behest of the Trump administration, Congress set up tax-deferred savings for every American child through the “One Big Beautiful Bill.”
The program called Trump Accounts makes sure newborn babies start with $1,000 in their bank accounts if the parents have signed up for it.
The initiative quickly became popular. But now an analyst warns that the Trump administration allows billionaires into the kids’ piggy banks.
A new, generous start
The Trump Accounts quickly got 70 million subscribers after enrollment began.
The core idea of baby bonds had initially gotten praise from both sides of the aisle, including Democratic Senator Cory Booker and Republican Senator Ted Cruz.
However, a new rule altered how funds enter those accounts and made it profitable for the ultra-rich. Under the update, wealthy donors can give stock in single companies to groups of at least 5,000 children in a chosen region and age group.
Stocks forced upon the newborn babies
Some giant companies with a lot of government contracts like SpaceX have already pledged shares to millions of kids. But the big problem is that these receiving families cannot sell donated stock for five years, which means they might be on the hook for any potential debt if the stocks fall dramatically.
Writing an op-ed for The Bulwark, economics columnist Catherine Rampell warned that this mainly benefits rich donors.
Rich executives often offload shares when they expect a price drop. By giving stock away, donors claim tax write-offs on assets that may soon lose value.
Rampell argues that the Trump Accounts have become a billionaire Ponzi scheme. “Our president is helping rich donors offload overvalued stocks onto children, who are forced to hold the stocks for five years whether they want to or not.”
No way out
Rampell further argues that “in this case, the gift recipient is a captive audience, which may help set a sort of price floor on a falling stock.”
Rampell questions if the change is legal since Congress limited accounts to index funds. Families cannot reject donated shares, even from weapons manufacturers or casinos.
The new rule states donors hope the five-year lockup makes families “feel that they have a stake in the fate of the corporation to a greater extent than if the child’s holdings of the corporation were only through an index fund.”
Rampell noted, “They just…said it out loud,” concluding that: “In short, this is about enlisting American kids in Trump-style transactionalism, right from birth.”
