Britain in the 2000s, under the centre-left globalisation-loving premiership of Tony Blair, is hardly where Donald Trump usually looks for inspiration. But the president seems enamoured of one of that government’s totemic, if now-scrapped, policies: investment accounts for babies.
Mr Blair couched the scheme in social-democratic virtues and called them Child Trust Funds. Mr Trump has been brasher. His have been nicknamed “Trump Accounts” and will be handled by IRS form 4547—a nod to their sponsor, the 45th and 47th president. Inscribing one’s name in the tax code is an underrated route to a sort of political immortality. William Roth was a Senator for Delaware for 30 years. Today, he is best-remembered not for his penchant for campaigning alongside a St Bernard dog, but for the Roth IRA tax-sheltered retirement account that bears his name.
Children born between 2025 and 2028 will get a $1,000 deposit from the government. (Or “a $1,000 gift courtesy of Donald J Trump”, as the official website puts it.) Families can contribute another $5,000 each year until the child turns 18. The investment would grow tax-free. On December 2nd Michael Dell, a technology billionaire, pledged $6.25bn to give 25m children under ten living in poorer areas $250 for their Trump Accounts. The intermingling of business, private philanthropy and government is another Trumpian signature. Mr Dell still owns around 40% of Dell Technologies, which regularly competes for government contracts.
Heroically, the White House has claimed that, if fully funded with $5,000 per year, these accounts could be worth $1.9m by the time the child turns 28. That would require American equity markets to return about 15% for almost 30 years straight. History suggests more plausible returns are under half that number, producing a pot worth $400,000 or so by 28: nothing to scoff at, but mainly reflecting that compounding nearly $100,000 over three decades can do wonders. Virtually all of that money would come from families, though. The government’s own $1,000 would probably grow to around $3,000 by the time the child turned 18, and $6,000 by 28.
There are plenty of better-targeted ways to tackle child poverty. But much like “no tax on tips” or “tariff rebate” cheques, in Washington today a good name makes up for a lot. ■
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