Senator Ted Cruz of Texas believes that the federal government should provide each child $1,000 at birth to be invested in the stock market. “Every child in America will have private investment accounts that will compound over their lives, enhancing the prosperity and economic participation of the vast majority of Americans,” Cruz said. Around 3.6 million children were born in the US last year, meaning that the federal government would need to set aside $3.6 billion a year to fund this program.
Cruz’s program would permit family and friends to add $5,000 annually to these private investment accounts, with the hope that the compounding interest will give these kids a head start in life. “What I’m interested in is giving these kids the ability to climb the economic ladder much, much faster to accumulate wealth,” Cruz told CNBC. “I think there’s a real power to making them investors and stakeholders in the economy.”
This is not a completely new concept. Senator Cory Booker of New Jersey proposed providing newborns with funds for investing that would be worth up to $2,000, but rather than investing in the private sector, they would hold treasuries or “baby bonds.” Hillary Clinton also proposed a “baby bond” worth up to $5,000 during her first presidential campaign, costing the public $18 billion annually.
Future generations pay for social programs and the surmounting national debt. Cruz, Clinton, and Booker fail to realize that these programs require funding which comes from these future taxpayers. In a December 2024 interview, Federal Reserve Chairman Jerome Powell stated, “We’re borrowing from future generations. And every generation really should pay for the things that it needs.” Massive spending packages are detrimental in the long run and cause more harm than good.
There’s a strong chance that many parents would simply pocket the funds or not know how to properly invest it in the market. Around 62% of Americans currently hold equities, but the majority own through retirement accounts. Only 21% of American families directly own stocks. The public education system should begin teaching future generations about investment and personal finance, as one in four Americans are financially illiterate.
Suppose lawmakers actually want to improve the lives of future generations. In that case, they need to stop adopting policies that saddle the American public with debt that they then forcibly collect through increased taxation.
