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Trump Accounts are a ruse on the next generation

Summary:

President Trump’s Big Beautiful Bill Act (BBBA) introduces Trump Accounts, a provision offering $1,000 savings accounts for U.S. children born from 2025 to 2028, invested in diversified index funds. While framed as a benefit for future generations, critics argue it adds to the nation’s $100 trillion in unfunded liabilities, shifting financial responsibility from families to the federal government. This policy raises concerns about intergenerational debt and increased dependency on government programs, echoing historical precedents like Bismarck’s social security system.

What This Means for You:

  • Financial Planning: Parents should evaluate how Trump Accounts align with existing savings strategies like 529 plans.
  • Tax Implications: Be prepared for potential future tax increases to cover the program’s unfunded liabilities.
  • Long-Term Impact: Consider the broader economic consequences of increased national debt on future generations.
  • Policy Awareness: Stay informed about legislative developments to advocate for sustainable fiscal policies.

Original Post:

President Trump’s Big Beautiful Bill Act (BBBA) will add trillions of dollars in new debt. Here we will talk about one of the provisions of that bill: Trump Accounts.

Trump Accounts would provide all U.S. citizens under age 8 born from 2025 to 2028 with a $1,000 savings account that must be invested in a diversified index fund. If parents don’t open a Trump Account for their children, the Treasury Department will create one for them. Parents and relatives can contribute up to $5,000 annually until the child turns 18.

Trump Accounts seem like college savings (529) Accounts. They are anything but. Over the years, I have saved and contributed to 529 accounts for my children and grandchildren. These private savings have helped provide them with the education and training needed to pursue productive careers. They send a clear message: Families must assume responsibility for the health, education, and welfare of children and grandchildren, and these accounts create an incentive for them to assume this moral obligation.

While I have been saving and investing in my children and grandchildren, the federal government has burdened them with more debt and unfunded liabilities. Public debt held in the private sector now totals $36 trillion. If we add unfunded liabilities, total debt owed by American citizen now exceeds $100 trillion.

Trump Accounts will add yet another unfunded liability to the trillions of dollars in unfunded liabilities accumulating in Social Security and Medicare. The trust funds created to finance these entitlement programs will be depleted within the next decade. At that point, expenditure for these entitlement programs will be financed from the general fund on a “pay as you go” basis. As unfunded liabilities are passed down from one generation to the next, our children and grandchildren will pay the taxes required to service that debt. Thomas Jefferson viewed the passing of public debt from one generation to the next as immoral.

Trump Accounts send a quite different message to families compared to 529 accounts. The expectation is that the federal government, rather than families, must assume responsibility for retirement as well as other needs of the next generation. The fact that Trump Accounts will be financed with debt suggests that it is OK to pass public debt from one generation to the next. This is not what the founders had in mind.

Trump Accounts, like other entitlement programs, will increase dependency of American citizens on the federal government. This is in fact what Otto Von Bismark had in mind when he created the first social security plan in Prussia in the 19th century. Social security could bind citizens to the Prussian government, something that Bismarck viewed as essential to Prussian military ambitions, and we all know how that turned out.

President Trump is more cagey as a politician than Bismarck. By presenting Trump Accounts as a gift to the next generation, he can generate support for the BBBA. But as Milton Friedman argued, there is no such thing as a free lunch, and this ruse on the next generation will become more apparent as unfunded liabilities accumulate and a debt crisis approaches.

An intergenerational accounting system would reveal the burden of unfunded liabilities in entitlement programs on future generations. But Congress has chosen not to adopt this accounting system, and it is not hard to understand why. Legislators do not want to reveal how Trump Accounts will burden future generations.

The last thing we need is yet another federal entitlement program accumulating unfunded liabilities for the next generation to deal with. Gifting our children with a $1,000 savings account that they must then pay for in taxes over their lifetime is a cynical ruse.

Dr. Barry Poulson is on the board of directors of the Prosperity for US Foundation.

Image via Pixabay

Image via Pixabay. Pixabay License.

Extra Information:

Congressional Budget Office Report on Federal Debt – Explains the current state of U.S. debt and its implications.
Social Security Administration on Unfunded Liabilities – Discusses the financial challenges facing Social Security.
Tax Policy Center on 529 Plans – Provides insights into how 529 plans work and their benefits.

People Also Ask About:

  • What are Trump Accounts? – A proposed savings program for children funded by the federal government.
  • How do Trump Accounts differ from 529 plans? – They are government-funded and add to national debt, unlike privately funded 529 plans.
  • What are unfunded liabilities? – Financial obligations not backed by current assets, often passed to future generations.
  • How does national debt affect future generations? – It increases tax burdens and limits economic opportunities for younger Americans.
  • What is the Big Beautiful Bill Act? – A legislative proposal by President Trump with provisions like Trump Accounts.

Expert Opinion:

Dr. Barry Poulson emphasizes that Trump Accounts, while marketed as a benefit, represent a dangerous shift toward increased government dependency and intergenerational debt. This policy underscores the need for fiscal responsibility and transparency in addressing long-term financial challenges.

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