Key facts
- President Donald Trump's "Trump accounts" program provides a $1,000 seed deposit for newborns.
- Trump has claimed these accounts could grow to $100,000-$300,000, or even $1 million with strong market returns.
- Economists like Justin Wolfers and Darrick Hamilton dispute these growth projections, calling them exaggerated or dishonest.
- The program offers tax advantages that primarily benefit wealthier families able to make maximum annual deposits.
- White House estimates project accounts could reach $271,000 by age 18 and $13 million by age 55 with a 10% annual return.
- Experts suggest the program may widen the wealth gap, as lower-income families are less likely to contribute beyond the initial deposit.
President Donald Trump is actively promoting a program called "Trump accounts," which provides a $1,000 seed deposit for every newborn in the U.S. The initiative, launched in early July, aims to help children start investing in their future. Trump has made ambitious claims about the program's potential, suggesting these accounts could grow to hundreds of thousands of dollars, or even $1 million, by the time a child reaches adulthood, particularly if the stock market performs well.
However, many economists and financial experts are questioning the feasibility and impact of these projections. They argue that the promised growth figures are vastly exaggerated and based on highly optimistic assumptions, such as a consistent 10% annual rate of return over decades. Critics like Justin Wolfers, an economics professor at the University of Michigan, have called these estimates "ridiculous, dishonest and misleading."
Furthermore, experts suggest that "Trump accounts" may inadvertently widen the wealth gap between affluent and low-income families. While the program offers tax advantages, these benefits are most significant for wealthier families who can afford to make the maximum annual deposit of $5,000. In contrast, families unable to contribute beyond the initial $1,000 seed deposit are projected to see much smaller growth, potentially reaching only $6,000 by age 18, according to White House estimates. Darrick Hamilton, an economics professor at The New School, described the program as an "income transfer" rather than a true wealth-building tool for the less affluent, noting that the wealthiest 20% are more likely to benefit from the tax breaks.
A White House spokesperson, Kush Desai, defended the program, stating it offers middle-class parents the same wealth-growing opportunities as high-income families, with billionaires also pledging donations. Desai asserted that billionaires giving money to working-class children would not worsen inequality.
Some Republicans and business leaders have lauded "Trump accounts" as a way to integrate children into the capitalist system. Senator Ted Cruz compared it to "Donald Trump's New Deal," emphasizing individual capitalism. However, Hamilton views it as part of a larger Republican plan to privatize the social safety net. He and others have drawn comparisons to "baby bonds" proposals, such as one introduced by Senator Cory Booker and Representative Ayanna Pressley, which aimed to provide larger government contributions to lower-income children.