“Some of the most expensive parts of the federal budget and tax code started small but eventually grew into monsters. The likeliest candidates for that result in the GOP's tax and budget bill are the new Money Accounts for Growth and Advancement, aka MAGA or Trump accounts.
This is one more government tax-preferred investment account like IRAs or 529 plans, albeit with some different rules.
Unlike those accounts, the government will make a one-time $1,000 payment to be invested in a stock-market index fund for babies born between 2025 and 2028. Parents could add up to $5,000 a year to the accounts, though without a tax write-off. The funds will grow tax deferred, but no withdrawals are allowed until the child turns 18.
The bet is that over time the balance would grow as it's invested, and that after age 18 the new adult can tap some of the funds to, say, buy a house. The Republican political gamble is that the accounts will give young Americans a stake in the capitalist economy that they can watch grow as the stock market rises.
"Every child in America will have private investment accounts that will compound over their lives," Texas Sen. Ted Cruz, a promoter of the accounts, said earlier this year, "enhancing the prosperity and economic participation of the vast majority of Americans."
Mr. Cruz's intentions are good, but this political gamble could backfire. The accounts with their automatic government payments are likely to become another entitlement program that grows over time. Congress will surely extend the payouts beyond 2028.
The cautionary tale is the child tax credit, which arrived on the political scene in 1997 as a $400 benefit but has since grown and been expanded partially into a "refundable" check for those who owe no income tax.
The Trump baby account is preferable to annual social welfare payouts via child tax credits. But the House Republican bill delivers both. The $2,000 child tax credit from 2017 is made permanent and increased to $2,200 for couples earning up to $400,000. Democrats aspire to make the credit fully refundable and paid in monthly checks.
You won't be taking a risk if you bet that Democrats will use these Trump accounts to build something approaching a universal basic income when they regain power. The $1,000 opening deposit will soon become annual and larger.
This isn't speculation. Democratic Sen. Cory Booker of New Jersey has long proposed a baby bond. His idea is a $1,000 government payment at birth -- and then up to $2,000 more every year depending on a family's income. While the Trump accounts are universal for now, look for the left to cut them off by parental income as Mr. Booker would.
The child tax credit hasn't arrested America's declining birth rate, and neither will promises of a payout in 18 years. Ask any of the many countries around the world that have thrown billions at monthly payments, arranged government dating, and much more to no great baby boom. The only affluent country defying the birth dearth is Israel. It's a hint that national culture and an animating purpose matter far more than subsidies.
The Trump accounts also complicate the tax code with another subsidy. The Tax Foundation estimates that the tax code has no fewer than 11 tax-preferred accounts from education to healthcare and retirement -- with various rules and tax treatment. A rational government would unite these accounts into a single universal savings account that Americans could more easily understand.
It's nice to think the Trump accounts will be an investment in future capitalists, and we hope so.
But it's as likely that this will become another form of government spending that puts further pressure on the federal fisc and for higher tax rates or a value-added tax.” [1]
1. The GOP Starts 'Trump Accounts'. Wall Street Journal, Eastern edition; New York, N.Y.. 07 July 2025: A16.
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