The $1,000 Lie: Why Trump Accounts Are the Wrong Answer to the Right Question

Billionaires are lining up to seed investment accounts for kids, but we already know how to end child poverty — and waiting until age 18 isn’t it

In December 2025, something ostensibly remarkable happened. Michael and Susan Dell pledged $6.25 billion to fund new “Trump Accounts” for American children. Ray and Barbara Dalio followed with $75 million for Connecticut kids. BlackRock and BNY announced they would match government contributions for their employees’ children. Headlines celebrated the generosity. Treasury Secretary Scott Bessent launched a “50-state challenge” calling on billionaires in every state to follow suit.

The idea may sound wonderful: give every baby born between 2025 and 2028 a $1,000 investment account that compounds over 18 years at which point it converts to a traditional IRA account, potentially growing into a nest egg of at least around $700,000 for retirement, or to help with college, buying a home, or some other approved reason to withdraw money without a 10% early withdrawal penalty. Who could oppose giving kids a financial head start as young adults?

I oppose it. At least as an alternative to what we should be doing. Not because giving kids money is bad — it’s not. But because this is the equivalent of offering a starving child a coupon for a meal they can redeem in 18 years. It’s offering a drowning person swimming lessons that begin after they’ve already drowned. It’s a cruel joke dressed up as generosity, and the science is overwhelmingly clear about why.

Understanding What Trump Accounts Actually Are

Before we can evaluate Trump Accounts, we need to understand what they actually are — and what they’re not. The details matter, because the headlines are misleading.

Under the One Big Beautiful Bill Act signed July 4, 2025, the federal government will deposit $1,000 into investment accounts for every U.S. citizen born between January 1, 2025 and December 31, 2028. This is the only group eligible for the government’s seed money. Children born before 2025 or after 2028 can have Trump Accounts opened on their behalf, but they receive nothing from the government, as currently proposed.

The accounts are invested in low-fee U.S. stock index funds until the child turns 18, at which point they convert to traditional IRAs. Parents, relatives, employers, and nonprofits can contribute up to $5,000 annually. Employers can contribute up to $2,500 per year tax-free through cafeteria plans. The money cannot be withdrawn before age 18, at which point it can only be used for approved reasons without penalty until age 59 and a half.

Now here’s what the headlines obscure about the billionaire donations. The Dell family’s $6.25 billion isn’t adding $250 on top of that $1,000 government seed. It’s going to a completely different population: 25 million children who are age 10 and under and were born before January 1, 2025. These children don’t qualify for the government’s $1,000 at all. They’re getting $250 — period.

The Dalio donation follows the same model: $250 each to approximately 300,000 Connecticut children under 10 who were born before 2025. So when you see headlines about billionaires “supercharging” or “boosting” Trump Accounts, understand that the billionaire money and the government money are going to different children. A baby born in 2026 gets $1,000 from the government. A 7-year-old born in 2018 might get $250 from Dell or Dalio — but only if they meet additional criteria.

The Zip Code Exclusion Problem

Both the Dell and Dalio donations come with a geographic restriction: children must live in zip codes where the median household income is below $150,000. According to CNBC’s analysis of Census data, only about 3% of U.S. zip codes have median incomes above that threshold, and 87% of Connecticut zip codes qualify.

This may sound reasonable until you think about what “median” actually means. A zip code with a median income of $160,000 still has families earning $30,000. It still has service workers, home health aides, restaurant employees, and their children. It still has families experiencing working poverty. They’re just surrounded by wealth rather than concentrated with other poor families.

This is the fundamental problem with means-testing by geography rather than ensuring universality. Poor children exist in wealthy zip codes too. A child growing up in poverty in Palo Alto or Greenwich faces all the same developmental challenges as a child growing up in poverty in rural Mississippi — perhaps more, given the higher cost of living and the psychological strain of poverty amid abundance.

When you start carving out exceptions based on zip codes to exclude those who aren’t in need, you inevitably leave behind some of the children who need help the most.

The Trillion-Dollar Problem We’re Ignoring

Child poverty in America isn’t just a moral failure of society itself. It’s an economic catastrophe we pay for every single day. According to research from Washington University in St. Louis, childhood poverty costs the United States over $1 trillion annually — roughly 5.4% of GDP. This comes from lost economic productivity, increased healthcare costs, higher crime rates, and the downstream effects of child homelessness and maltreatment.

Let that sink in. Every year, we hemorrhage more than a trillion dollars worth of resources because we choose not to prevent child poverty. But here’s what makes this choice truly inexplicable: a comprehensive benefit-cost analysis by Columbia University’s Center on Poverty and Social Policy — updated in April 2024 with the latest evidence — found that making the enhanced Child Tax Credit permanent would cost about $97 billion per year but generate $1.5 trillion in social benefits. That’s a return on investment of approximately 15 to 1. For every dollar we invest in directly reducing child poverty, we get back fifteen dollars in improved health outcomes, higher educational attainment, increased lifetime earnings, and reduced spending on healthcare, child welfare, and criminal justice.

We actually know this works because we’ve done it before. In 2021, the American Rescue Plan expanded the Child Tax Credit, making it fully refundable and delivering monthly payments directly to families. The result? Child poverty fell by over 40% — the largest single-year decline on record. The poverty rate dropped to 5.2%, the lowest ever measured. Black child poverty fell by more than half. Hispanic child poverty dropped from 30% to 8%. Each CTC dollar even generated $1.25 in local economic activity. Consumer spending grew the economies of Main Street USA.

Then Congress let it expire. Child poverty immediately more than doubled, shooting back up to 12.4% in 2022 — the largest one-year increase on record, right after the largest decrease. Child hunger spiked 25%. By 2024, nearly 10 million children were living in poverty again. Local businesses across the country took a hit.

What We Actually Learned From the Enhanced CTC

The year following the enhanced CTC’s expiration gave economists a treasure trove of data to analyze. What they found demolishes every argument against direct cash support for families. First and most importantly: the monthly payments had no negative impact on employment. Study after study confirmed that parents kept working just as much as before. If anything, employment increased because over 11% of families used the money to pay for childcare, removing a major barrier to work.

Even more striking: approximately 300,000 households became new small business owners while receiving the monthly CTC. Lower-income parents, defined as making less than $50,000 annually, showed the largest growth in self-employment. The economic security provided by guaranteed monthly payments didn’t make people lazy — it made them entrepreneurs.

The payments reduced desperation in ways that should trouble anyone with a conscience. Before the enhanced CTC, research documented parents selling their blood plasma and taking on predatory payday loans just to feed their children. During the six months of monthly payments, that desperation measurably declined. After the payments stopped? A survey by Parents Together Action found that 45% of parents reported skipping meals so their kids could eat. 64% had to spend down their savings. 84% of parents said the CTC had made them less anxious.

Research funded by the National Institutes of Health found that the enhanced CTC reduced anxiety symptoms by 3.4 percentage points — a 13.3% reduction at the population level. The effects were even larger for Black and Hispanic parents. Other research found that when women receive income boosts from tax credits, an additional $1,000 decreases physical and sexual violence against unmarried low-educated women by nearly 10%. Violence against women and children isn’t just a crime problem. It’s a poverty problem.

The Science of Why Timing Matters

The proponents of Trump Accounts will tell you that $1,000 invested at birth could grow to $1 million by age 28 if the maximum $5,000 amount is contributed annually. They’ll point to the magic of compound interest. What they won’t tell you is that the brain also compounds — but in the opposite direction when exposed to poverty.

The study of epigenetics has revealed that growing up in poverty can literally rewire developing brains. Chronic stress from poverty is associated with dysfunction in the prefrontal cortex and amygdala — regions critical for learning, memory, emotional regulation, and decision-making.

The Great Smoky Mountains Study, led by epidemiologist Dr. Jane Costello at Duke University, provides extremely compelling evidence. Starting in 1992, researchers followed 1,420 children in rural North Carolina, including 349 Cherokee children. Then in 1996, a casino opened on the Cherokee reservation, and every tribal member began receiving semiannual dividend payments — about $4,000 to $6,000 per year.

The results were stunning. Within four years, the number of Cherokee families in poverty dropped by half. Behavioral problems among Cherokee children declined by 40%, falling to approximately the same rate as children who had never been poor. High school graduation rates improved. Crime rates dropped. A decade later, researchers found that the youngest children when the payments began were a third less likely to develop substance abuse or psychiatric problems as teenagers.

Most remarkably, the children who received cash during childhood showed permanent improvements in two key personality traits: conscientiousness and agreeableness, both of which are associated with higher lifetime earnings.

Another study cleverly used birth timing and tax benefits to track long-term impacts. It found that an increase of just $1,300 in the first year of a child’s life resulted in that baby growing up to be an adult who earned 1% to 2% more income. Math and reading scores increased. High school graduation rates improved. The researchers concluded that “the longer-term effects on child earnings alone are large enough that the transfer pays for itself through subsequent increases in federal income tax revenue.”

The Rx Kids Revolution

If anyone still doubts that cash during childhood — not 18 years later — transforms lives, look at Flint, Michigan. In January 2024, Flint became the first city in America to launch a universal prenatal and infant cash program called Rx Kids. Every pregnant woman receives $1,500 during pregnancy and $500 per month for the baby’s first year of life. No strings attached. No bureaucratic hoops.

The results have been nothing short of miraculous. A population-level study found that Rx Kids cut preterm births by up to 18% and low birthweight births by up to 27%. The program prevented approximately 42 preterm births and 68 NICU admissions in its first year, saving an estimated $6.2 million in healthcare costs alone.

But it goes further. Evictions among participating mothers were reduced by 91%. Postpartum depression and anxiety plummeted. Food insecurity dropped dramatically. Perhaps most powerfully, in a city that had been devastated by the water crisis and years of institutional betrayal, trust in government and healthcare institutions began to rebuild.

A November 2025 study found that Rx Kids produced a 32% reduction in child maltreatment allegations among infants. Before the program, 21.7% of Flint infants experienced a maltreatment investigation within their first six months of life. After Rx Kids launched, that rate dropped to 15.5%. Related research found that a single $1,000 cash payment to low-income households decreases referrals to child protective services by approximately 10% and reduced physical abuse by 30%.

This is what investing in children now looks like. Not an investment account that can’t be withdrawn from at all until age 18 and without penalty until age 60, but money that prevents premature births, reduces child abuse, keeps families housed, and gives babies the healthy start their developing brains desperately need.

Who Really Benefits from Trump Accounts?

Let’s be clear-eyed about who benefits most from Trump Accounts. A child born to a wealthy family who maxes out contributions at $5,000 per year could accumulate hundreds of thousands of dollars by age 18. A child born into poverty, whose parents can contribute nothing beyond the initial $1,000, might have $3,000 or $4,000 after 18 years of compound growth. This isn’t leveling the playing field. It’s giving a head start to kids who already have one.

Meanwhile, consider who else benefits. All those billions invested in index funds will drive up stock prices. Who owns stocks? Overwhelmingly, the wealthy. According to Federal Reserve data, the top 10% of Americans own 93% of all stocks. When BlackRock and other financial giants announce their support for Trump Accounts, they’re not just being philanthropic — they’re supporting a program that will channel billions into the very markets they manage.

And there’s another troubling dimension. Treasury Secretary Bessent’s “50-state challenge” asking billionaires and corporations to step up has the uncomfortable whiff of a loyalty test. In an era where the federal government has shown willingness to use its power against perceived enemies, what message does it send when billionaires and corporations are publicly called upon to demonstrate their “patriotism” through donations to accounts bearing the president’s name?

The Real Question We Should Be Asking

Here is the fundamental absurdity of Trump Accounts: we’re being asked to celebrate giving a child born into poverty in 2025 a savings account they can access in 2043, while we simultaneously allow that child to grow up hungry, unstably housed, and neurologically damaged by chronic stress.

We know that child poverty costs us over $1 trillion annually. We know that ending it would generate a 15-to-1 return on investment. We know that the 2021 expanded Child Tax Credit cut child poverty nearly in half for about $100 billion per year while increasing entrepreneurship and having zero negative effects on employment. We know that programs like Rx Kids prevent premature births, reduce child abuse, and save millions in healthcare costs.

We know all of this. And yet, instead of making the obvious choice to invest in children now, we’re celebrating a program that kicks the can 18 years down the road — a program that will do precisely nothing to help the 10 million children currently living in poverty — 14.3% of all kids under 18.

What good is a college savings account to a child who couldn’t focus in school because they were hungry? What good is first-time homebuyer money to someone whose brain was permanently altered by the toxic stress of childhood poverty and ended up in prison? What good is business startup capital to an adult whose educational outcomes were damaged before they ever entered kindergarten?

The question isn’t whether we can afford to help children. We’re already paying — over $1 trillion per year in the costs of not helping them. The question is whether we’ll continue choosing an expensive pound of cure while rejecting the affordable ounce of prevention.

Billionaires want to donate to Trump Accounts? Here’s a better idea: demand to be taxed to fund an expanded, permanent, universal Child Tax Credit. Even better, get behind the End Child Poverty Act that would provide $469 a month to every kid in America. Fund programs state by state like Rx Kids in Michigan that put cash in the hands of families now, when it can actually change children’s lives, instead of locking it away until the damage is already done to further inflate the stock market.

The data is clear. The science is settled. The moral imperative is undeniable. Children don’t need investment accounts that mature in 18 years more than they need food on the table tonight. They need stable housing this month. They need parents who aren’t crushed by financial stress today and every day.

Trump Accounts aren’t a solution to child poverty. They’re a distraction from it — a shiny object that allows us to feel good about “doing something” while doing nothing that actually matters in the here and now. And every child who spends the next 18 years in poverty while their Trump Account compounds is a monument to our collective failure of imagination and will.

We can do better. We know how to do better. The only question is whether we’ll ever choose to.

And if we really want to make “every American a shareholder” as the Trump administration is saying they want to with these Trump accounts, we’d just do Universal Basic Income for all adults and kids and index that dividend to GDP growth.

“When every American owns a share of the most powerful economy on earth, every American will benefit from our nation’s growth. Every American will capture a portion of the productivity gains brought about by AI, robotics, and other world-changing technologies. And every American will be invested in the free-market system and its continued success.”

—Treasury Secretary Scott Bessent describing UBI without realizing it

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