Trump Accounts Will Increase Wealth Inequality

Many people saw the ad for Trump Accounts during the Super Bowl. Advocates for baby bonds, publicly funded investment accounts for children, may be confused and think that Trump Accounts are baby bonds or something similar. Latoya B. Parker and Dedrick Asante-Muhammad of the Joint Center for Political and Economic Studies have written a short opinion piece explaining why Trump Accounts are not baby bonds. In fact, Trump Accounts are, in a sense, the opposite of baby bonds. Baby Bonds are designed to reduce wealth inequality; Trump Accounts will increase wealth inequality.

Parker and Asante-Muhammad point out that with baby bonds, as conceived by economist Darrick Hamilton, all babies receive an investment in a trust account, but children from households with the lowest amount of wealth receive larger deposits. In other words, the structure of baby bonds is progressive and with them wealth inequality diminishes as the investment grows over time.

Trump Accounts are not progressive. In practice, they are likely to be highly regressive. As Parker and Dedrick Asante-Muhammad write, “Trump Accounts give the same modest $1,000 to every child and then turbocharge the advantages of families who can afford to contribute thousands more each year.” This means that children from the wealthiest families are likely to build far more wealth with Trump Accounts than children from families in poverty.

This is another policy helping the rich get richer from the Trump administration.

This first appeared on CEPR.

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