Trump’s plan to give babies money

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0:23Hey folks, a few of our Australian friends reached out to us about something in this episode. Specifically, we mischaracterized the country's superannuation program. Mainly, employers are required to participate, and the government organizes it. Because of this, we are removing it from the episode, so if you're going back for round two, it's going to sound a little different and be a little shorter. Thanks as always for the support, and we appreciate all the feedback that we received on this episode.

0:52Were you born yesterday? Well, if you were, I've got some good news. Trump accounts will be the first, I guess you could say, real trust funds for every American child. Congress authorized spending billions of dollars to fund investment accounts for all American children born from 2025 onward.

1:11Brooke Masters: Michael and Susan Dell are committing to one of the largest private donations in American history. And now some big name billionaire donors are lining up to add to the pot.

1:28This is Swap Notes, the weekly podcast from the Financial Times, where we talk about all the things happening in U.S. politics, finance and the economy. I'm Mark Filippino. And this week we're asking, what's the point of these so-called Trump accounts? Here with me to discuss is Alex Rogers. He's the FT's U.S. business and politics correspondent. Hi, Alex. Hey, Mark. And we've also got Brooke Masters, the FT's U.S. managing editor. Hey, Brooke.

1:50Brooke Masters: Hey, how are you? I'm doing well. So let's start off with the basics, Alex. What is a Trump account? The new Trump account is a tax-deferred savings account for children under 18 years old. It's for children who were born between 2025 and 2028, and up to$5 ,000 is allowed per year per child, and they can be contributed from all different types of sources, parents, families, employers. And that money is supposed to only be invested in a low-cost U.S. equity index fund, such as one tracking the S &P 500. And contributions begin on July 4th, 2026. Alex, why is that called the Trump account? It's called the Trump account because that's what Donald Trump wants.

2:30And this proposal was passed, and Congress has won so-called one big, beautiful bill. Republicans in the House and the Senate passed this legislation. This provision was in that bill, and then Trump signed it into law. And to get Trump's support for this proposal, the Republicans on the Hill named it the Trump account. Right, and the$1 ,000 that this program would put into each account would go into the stock market. So this brings us up to the news. This week, Michael and Susan Dell, who got a fortune from the Dell Technology Company, pledged billions of dollars into this program. Give me the details here.

3:06Yeah. So this new investment account, which is tax deferred until you're 18 years old and you're allowed to withdraw the funds, allows every baby to start off with an account that attracts the S &P 500 or a similar U.S.-based ETF. And what Michael Dell decided to do, the billionaire from Dell Technologies, is to make sure that it goes to not only babies born from 2025 to 2028, but babies born before. So every child under the age of 10, you know, through their parents or their guardians can apply for one of these accounts as well. The donation, the$6.25 billion donation, one of the biggest donations in U.S.

3:46history, will allow up to 25 million children under the age of 10 years old to have$250 in their account. Which I'm personally psyched about because now my kid is finally pulling her weight. Brooke, where does this idea for this kind of account come from? Is it strictly a MAGA Republican idea? No, actually, I think you should think about this as this is the new generation of, you know, when our parents were children, they used to, people would buy bonds as a present when babies were born.

4:15Brooke Masters: Yes. And, of course, bonds have a fixed payment and fixed interest rate. And this is basically a stock market version of that. And it's funded by the government. It's actually an incredibly popular program with Democrats as well, because the idea is, you know, kids whose parents have money to save and can put it aside are already creating what are called 529 accounts. Yes. Where you put aside money tax deferred or tax free, actually, and you can spend it on education. But the bottom half of the American economy, people who don't have extra money, those kids are now going to get at least a little bit of money.

4:48Brooke Masters: And over the course of 18 years, a thousand dollars can turn into some real money. Yeah. And especially with the cost of college right now, you need every little bit that can help. The Trump administration and other people in the government have been trying to get donors to chip in for a while. Why do you think, and this is either for Alex or Brooke, that the Dells wanted to invest in this program? What's in it for them? I think one thing to think about is Trump across the board has been trying to get his billionaire buddies and people who want something from him to give money to something, whether it's his ballroom or something else.

5:17Brooke Masters: And this is something that is actually universally pretty popular and feels less like grift and feels more like something good for America. So I think very smart of the Dells to jump on this. Yeah, it's good PR for them. Alex, before the Invest America program passed through Congress, you actually spoke to Texas Senator Ted Cruz, one of the Republicans who pushed for it to be passed. What did he have to say about the accounts? So Ted Cruz was playing poker with a buddy last year who told him about this idea from his friend, Brad Gerstner. And Ted Cruz and Brad Gerstner got on the phone and they started talking about it.

5:53And Ted Cruz included this provision in the one big, beautiful bill that passed this year. And Ted Cruz believes that this is going to make every child a capitalist and that young people who might be veering towards socialism are going to look at their account and see that they own. shares of NVIDIA and Apple and Meta and a bunch of other companies through this S &P 500 index fund. And once they turn 18 years old, they're going to realize that maybe corporations aren't so bad, Ted Cruz believes. Democrats have also supported this idea. Cory Booker has been talking about baby bonds for years as a way of addressing the racial wealth gap.

6:35Democrats didn't support the legislation that allow this provision to pass. But the proposal itself, again, has been one of, you know, an idea vanded route in Democratic circles for years. And so now you see both Ted Cruz, a Republican from Texas, and Cory Booker, a Democrat from New Jersey, urging the chief executives of the Fortune 1000 companies to contribute to Trump accounts. So maybe you'll see other chief executives supporting this proposal as well. Brooke, what do you make of these arguments about planting the seed early for kids to grow up and butt into capitalists? Does that hold any water?

7:09Brooke Masters: I don't know if they grow up into capitalists, but actually our whole society and our retirement system is built on people putting money out of their wages into 401k plans. You know, if you can get one, if you work for a small employer, you may not. So I actually think it's a really good idea because one of the other things they've been doing simultaneously is making it easier for people whose employers don't offer a 401k plan to do the same thing, you know, through a government program. There are a bunch of states that are doing that. So if kids already have little accounts, they can roll this account into that and they will already have this sense that there's a nest egg growing.

7:44Brooke Masters: And honestly, the magic of compounded interest is pretty amazing. And so, you know, it totally makes sense if a kid wakes up and it's like, wait, I'm part of this system. It's got to help with the whole sense in America. And you hear it in all the polling that people feel that, you know, houses are out of reach. You know, the good life is out of reach. Everybody's going to be worse off than their parents. I think it's a great idea, honestly. Yeah, me too. And I think just to add to that, you know, from a financial literacy point of view, a lot of people don't know how a 401k, I certainly didn't know what a 401k worked until I had one myself.

8:19Had I had one of these growing up, I think it would have made a lot more sense once I entered this world where I was contributing to a similar type of account over time. Going back to the politics of this, what happens to the popularity of a program like this if there is a stock market crash?

8:33Brooke Masters: I think people will freak out more out of a stock market crash because there will be new investors who have never really seen this. On the other hand, my kid was born in 1999. Money we got from grandma, bless her heart. She was wonderful. Went into a S &P 500 fund, which promptly hit the floor. But I will say by the time he got to college, it paid for a whole bunch of his college. It taught us a lot about sitting it out. And since you can't take the money out, actually, I think that might be a good thing. It might teach people to do long-term investing and avoid meme stocks. What do you think this program says about the current state of the American economy?

9:10Anything?

9:10Brooke Masters: I think what it says is that politicians on both sides of the aisle are very conscious of the growing sense of inequality and the growing affordability, what we have been calling the affordability crisis, that an awful lot of people in America feel like life is out of reach. And they are trying to find different ways to address it. And if you look at the U.S. economy, the stock market continues to boom despite the fact that lots of people feel very uncomfortable and unhappy, and they are trying to somehow square that circle. So coming back to our original question, I know that we've already kind of answered this, but let's just put a, you know, let's just dot this I.

9:45What is the point of these accounts? Will they have the impact the administration wants them to have? Alex, let's start with you. You know, I think that the Trump account, the idea of it has been a bipartisan one for a long period of time. It may be something that even if you're not a Trump supporter, it's an idea that you can get behind. The proposal itself costs$15 billion over the next three years. And for those who believe in it, they think that that's a small price to pay. Brooke, what do you think?

10:13Brooke Masters: My concern would be is if you give it to every kid, the haves, whose parents are already putting lots of money in 529 plans, honestly,$1 ,000 from the government is not something they really need. And in fact, if they have$5 ,000 to invest and they think their kid's going to college for complicated tax reasons, the 529 plan is a better deal. So I personally think if you means tested it, it would be a lot smarter. On the other hand, as we know from programs like Social Security, if you don't means test, they become very popular and very embedded and part of the system. We are, in fact, would be building another entitlement.

10:48Brooke Masters: It's interesting to see that the Republicans want to build another entitlement because that's not usually what they want to do. And at a time when Social Security is supposed to be going bust, I'm not sure that's a brilliant idea to build in another entitlement. On the other hand, at the moment, entitlements are skewed to the old. I'm kind of, you know, it does balance the scales a little bit. And we're not just mortgaging our kids' future for old people. We're giving them some money, too. I think that's an excellent place to end. I want to thank our guests. Brooke Masters is the FT's U.S. Managing Editor.

11:15Thanks, Brooke. Thanks. And Alex Rogers. He's our U.S. Business and Politics correspondent. Thanks, as always, Alex. Thanks for having me. All right. We're going to take a quick break. And when we come back, we're going to do exit poll. This week, we're going to take a look around town.

11:39We are back with Exit Poll. Typically, on Swamp Notes, we take a look at what's happening inside the White House or inside the Capitol building. But what about the rest of the city? What about Washington, D.C.? Well, as it turns out, there are actually lots of good reasons to visit Washington right now. Stuff that not a lot of people will know about. Lila Reptopoulos is the U.S. editor of FT Globetrotter, and she spent the last several months putting together a bunch of those reasons for us. Hi, Lila.

12:07Brooke Masters: Hi, Mark. How are you? I'm doing well. So you just published a new travel guide, right? I did, yes. I published a new travel guide to Washington, D.C. But maybe I should back up and tell you why, what I do. Yeah, yeah, please do. Okay, so I am the U.S. editor of FT Globetrotter. We're a travel section in FT Weekend, and our beat is cities. So we publish insider guides to the world's great cities. We don't want you to go to a city for business or for the weekend and eat a bad steak at your boring hotel. We want you to get a sense of the spirit of the city, do some great stuff, eat some great food, see great art.

12:44Brooke Masters: And as of this week, we are live in Washington, D.C. We have launched some great stories and we're publishing kind of on from there. And just to give my own personal endorsement, I've used these travel guides. Many of. Self-directed investing, trading, full service wealth management, automated investing, financial planning, thematic investing, retirement planning. And to think that's just a small taste of what Schwab offers. because Schwab knows that when it comes to your finances, choice matters. No matter your goals, investing style, life stage, or experience, Schwab has everything you need all in one place.

13:22So you can invest your way. Visit schwab.com to learn more. Time. Washington, D.C., though. Interesting time to publish a guide on our city. Sure is.

13:37Brooke Masters: Kind of a delicate time, I would say. Yeah. You know, it's a kind of hard time. Tourism is down in D.C., but I found going down there to research and interview people and visit all of you in our D.C. Bureau, like, weirdly, now is actually a good time to visit. Like, there aren't that many lines. There are great hotel deals. The restaurants are incredible, and it's not that hard to get a table. And the city is amazing. It has, like, great bars where you feel like you may overhear some secrets. The music scene is excellent. And everyone's just like living their lives and kind of waiting for people to come hang out with them.

14:13Yes. Just give us a taste of the pieces you've been publishing for the DC Guide in particular. I feel like you've hit on a few things already.

14:20Brooke Masters: Yes. It was. First of all, it was like a real honor. Our reporters are covering maybe the biggest story in the world. They're extremely busy. They took time out of their days to write about places they love. One of my favorites is by our colleague Alex Rogers, who you just heard. I asked him to play a game of bartender telephone where basically he would go to get his favorite cocktail in the city and ask that bartender for his favorite cocktail in the city and then kind of follow the bartender recommendations all over. And, you know, six bars later, he was very hungover, but he really gives you a sense of the spirit of D.C.

14:59Brooke Masters: hospitality, of where people actually drink. yes and his baby I think was about a month old when I commissioned him to do this and his wife came with him boy how do I get that job anytime just ask another one that I really loved is our U.S. art critic Ariella Budick wrote this beautiful kind of scavenger hunt to her favorite corners of her favorite museums around the city and where can folks find this guy that we're talking about? It is very easy to find. I made it easy for you. FT.com slash DC brings you right there. And you can follow us on Instagram to follow our stories as they publish. We're at FT Globetrotter.

15:39Can't wait to dig into this. That's the FT's Lila Raptopoulos. Thanks, Lila.

15:43Brooke Masters: Mark, it was a pleasure.

15:51This is Swamp Notes, the U.S. politics show from the FT. If you want to sign up for the Swamp notes newsletter. We've got a link to that in the show notes. We've also got a link to the DC travel guide that we just talked about with Lila. Our show is produced by Henry Larson. It was mixed by Sam Giovinco. We had helped this week from Lauren Fidor. Special thanks, as always, to Pierre Nicholson. I'm your host, Mark Filippino. Our acting co-head of audio is Topher Forges. Original music by Hannes Brown. Check back next week for more US political analysis from the Financial Times.

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