"Trump Accounts" Offer $1,000 For Babies Amid Massive Social Spending Cuts

Donald Trump’s “One Big Beautiful Bill” (OBBB), which has narrowly passed in the House and now moves into the Senate, contains a multitude of cuts to social programs that will negatively affect millions of families to the tune of billions of dollars. But one provision, so-called “Trump Accounts” seeks to help families start saving from birth. “This is a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation, and they’ll really be getting a big jump on life, especially if we get a little bit lucky with some of the numbers in the economies into the future,” Trump said Monday.

Babies born between January 1, 2025 and December 31, 2028 — essentially Trump’s second term — would be automatically enrolled in the program that seeds a savings account with $1,000, provided the child is a US-born citizen, and both the parents have Social Security numbers. The account would track the overall stock market, and parents would be allowed to contribute up to $5,000 a year. According to reporting by CNN, an account left completely alone for 20 years could expect to grow to approximately $8,300.

However, these funds cannot be touched until the child is 18 years old. Once an account holder turns 18, they have some choices about how to cash it out. If they use the money to pay for college, job training, opening a small business, or making a down payment on a first home, they would be taxed as long-term capital gains. If the money is spent on anything else — a Ferrari, medical bills, rent — it will be taxed as ordinary income.

It should also be noted that the withdrawal rules aren’t exactly straightforward: only half of the cash value may be withdrawn between the individual’s 18th and 25th birthdays. There are also penalties for withdrawing funds early, even for emergency situations.

While the scheme does not enjoy universal support, it does enjoy some bipartisan support. And while there has been criticism that such a program will be more likely to benefit wealthier families — who can afford to contribute to their children’s accounts — than poor ones, any amount of money available to a young adult is certainly helpful.

But the OBBB’s potential benefits to families come at a cost. The omnibus tax bill proposes massive cuts to programs like

• Medicaid & Children’s Health Insurance Plan (CHIP): Cuts to these programs, which appear to be a sore spot for Congressional Democrats and many Republicans alike, would amount to more than $863 billion over the next ten years.
• Supplemental Nutrition Assistance Program (SNAP): The country’s largest food assistance program, which serves more than 23.6 million Americans including 13.8 million children, would be cut by nearly $300 billion
• Women Infant’s Children (WIC): A program that provides food and nutrition education to infants and breastfeeding parents, would have its fruits and vegetables benefits cut by $1.3 billion.
• Child Tax Credit (CTC): While this benefit would be increased from $2,000 per child per year to $2,500, new rules about eligibility would revoke the CTC from up to 4.5 million children.
• Education: OBBB proposes myriad cuts to education to the tune of billions via the elimination of federal Direct Subsidized student loans and deep cuts to Pell Grants, which could substantially diminish many would-be students’ ability to afford to earn a degree. It also includes a $5 billion voucher program to benefit private schools; experts ultimately expect this boon to private school families will negatively affect tax revenues and, as such, public budgets.

Trump has pushed for OBBB to be passed on July 4, but the bill faces an uphill climb as lawmakers balk at some of the deepest cuts, particularly to Medicaid, and the assessment that it would add nearly $3 trillion to the national debt. Democratic opponents would need five GOP defections to defeat the bill, which can pass or fail with a simple majority. While Republicans boast a slim majority in the Senate — 53 to 47 — it is still a majority.