What did Donald Trump do today?
He had some ideas about how to make sure American children were prospering.
Today, Trump did a product rollout for a provision in his budget bill: "Trump accounts" for newborns that would come with $1,000 in seed money invested in a stock market fund. The press release said that it would help teach children the "miracle of compounded growth and set them on a course for prosperity from the very beginning."
As is the case with many provisions in that bill—most notably, the tax rate itself, which will be changed to massively benefit the wealthiest Americans—it won't actually help any family below a certain income.
Nevertheless, the plan makes for an interesting contrast with Trump's own upbringing. He has claimed—falsely—that his father had given him only a "very small loan" of $1 million, or 1,000 times as much money with which to seek his fortune. In reality, between his actual inheritance and various tax evasion schemes, Trump had been given about $413 million by the time his father died—not counting the value of Fred Trump's real estate business itself, which was a guaranteed income stream for Donald.
Ironically, Trump himself would have benefited from a lesson in the "miracle of compounded growth" in the stock market. Even as the value of the buildings he inherited skyrocketed thanks to the New York real estate boom, his own business ventures repeatedly failed or underperformed, to the point where his own net worth would indisputably be higher if he'd just invested his 413,000 "Trump accounts" worth of inheritance in an S&P index fund and let qualified business experts it.
If the "Trump account" plan sounds similar, it's because it's a watered-down and redundant version of an existing and superior program, the 529 Savings Plan. Those are established by parents to save tax-free for children's future educational needs, and are much more flexible. Even if a child chooses not to use the accumulated funds for education, up to $35,000 can be put in a Roth IRA, which is another kind of tax-free investment account. 529s and Roth IRAs can be used with almost any form of investment (not just a single index fund), and Roth IRAs can be tapped without penalty to pay for expenses many Americans encounter, like buying a first home, tuition, or medical emergencies.
Of course, they would also contain the seed money of $1,000. That is 5.3% the average cost of giving birth in a hospital ($18,835) for a parent whose Medicaid coverage was cut, as the same budget bill calls for.
41% of Americans rely on Medicaid to pay for the cost of each delivery (not counting prenatal checkups), and about 3.5 million babies are born in the United States each year. If only half of those parents lost their coverage due to Trump's budget bill, then the net cost to parents would be about just over ten billion dollars:
Why does this matter?
- There are ways to build Trump's brand that don't involve taxpayer money.
- There are many ways to improve the financial prospects of America's children that don't involve worrying about Trump's brand.