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Albert Einstein famously called it the “eighth wonder of the world” and one of the greatest “miracles” bestowed on humankind. Warren Buffett has called it the primary cause of his $160 billion fortune. And far from being a paean to mere frugality in the name of subsistence living, Ben Franklin’s famous adage that “a penny saved is a penny earned” is an homage to it.
Of course, the phenomenon in question is compound interest, and President Donald Trump‘s great gamble on government-funded investment accounts for the nation’s infants hinges on introducing the next generation to the prosperity created by compound interest over time.
LOW HOUSING SUPPLY REMAINS TRUMP’S BIGGEST OBSTACLE TO WINNING VOTERS’ ECONOMIC APPROVAL
Thanks to Trump’s One Big Beautiful Bill Act, passed in July, the administration was able to unveil the colloquially named “Trump accounts” for American minors. A tax-deferred savings account that functions like an IRA upon an American’s 18th birthday, the Trump accounts have made headlines. This is because of the government’s one-time, $1,000 seed funding in each account of any baby born during Trump’s second administration, as well as another $250 direct deposit from billionaire Michael Dell in the accounts of 25 million American children born in the majority of zip codes with median incomes below $150,000.
But the real gift isn’t the cash in the account. It’s the account as a vehicle to give an entire generation of young people skin in the game of the free market.
Conservative pro-natalist wonks are conspicuously unenthusiastic over the Trump accounts, and critics interviewed by CNN lamented that “a $1,000 baby bonus … wouldn’t even cover my month’s rent.”
But that’s not really the point. The Trump accounts are not another entry in a century of programs to juice the birth rate through carrots and sticks. They are about reviving the two secret ingredients that made America a superpower in the first place: belief in the American dream and, in the words of Franklin, “the money that money makes, makes money.”
Trump accounts are theoretically capped at $5,000 in contributions per year, with up to half of that amount allowed to come tax-free from a parent’s employer. Donations from government entities or nonprofit organizations are excluded from this $5,000 limit. But to avoid weaponizing nonprofit organizations as a loophole, government or nonprofit funding north of the $5,000 limit must go to a broad-based number of qualified beneficiaries.
Half of every tax dollar paid to the federal government goes directly to paying the oldest and wealthiest generation. Despite widespread agreement that our ballooning federal deficit costs ordinary Americans in the form of sky-high mortgage rates and elevated inflation, polling indicates that the public is spending even more generously on the only demographic that will never work again. But unlike Social Security, which simply depends on milking a shrinking share of young workers to bankroll a growing number of retirees to manufacture an artificial return on the supposed investment of payroll taxes, the Trump accounts are vested in the stock market.
If former President George W. Bush had succeeded in his plan to partially privatize Social Security 20 years ago, low-income workers who retired this year would be receiving benefits 8% higher than they actually do today. By the time the first millennials would be turning 65 years old, benefits for low-income retirees would be almost 30% higher than they would be under the status quo.
Why so? Because returns on capital are always greater than returns on labor.
Historically, this economic fact has been weaponized by leftists such as Thomas Piketty to turn the youth against free market capitalism. The Trump accounts do the opposite.
Let’s say a parent lets the Trump account for a baby born during this administration do nothing but collect dust for 18 years. Because the stock market averages a 10% return each year, this $1,000 investment from the government would be $5,560 by the time that child turns 18 years old, already a significant return, nearly six times the initial investment.
But what if, on top of Trump’s initial $1,000 investment, another $50 is added to the account each month? This can be a monthly $50 gift from grandma, $50 savings from cutting out one restaurant meal a month from the family budget, or even $50 from a parent’s employer redirected from their take-home pay. With an annual 10% average interest rate — this is literally the average S&P 500 return over the last century — Trump’s initial $1,000 investment and monthly $50 contributions over 25 years would result in $77,000.
Coincidentally, $77,000 is 20% of $385,000, just shy of the nation’s median home price. In other words, one little Trump account plus the equivalent of a monthly DoorDash order could allow your child to put a down payment on the median home when they turn 25 years old.
Capitalism has a marketing problem, not a math problem. But a combination of government overreach has convinced the youngest generations that capitalism is the culprit. Government zoning regulations brought new housing construction to a standstill, jacking up prices thanks to dwindling supply. The glut of government spending under former President Joe Biden resulted in catastrophic inflation, eroding the real value of wages and savings, and jacked up the interest and mortgage rates that froze the housing market in a game of musical chairs. Some young folks have disproportionately turned to the quick but unreliable fixes of day trading and sports gambling to try (and often fail) to spin the straw of devalued paychecks into gold. Others have abandoned capitalism entirely.
In the planet’s premier financial hub, a communist won the mayoral race not by screaming about the orange man who is bad and orange, but by proposing fairytale solutions to very, very real problems. New York City’s childcare is too expensive, but this is largely due to excessive labor regulations rather than insufficient government mandates. Housing is increasingly out of reach for young people, and yes, it always will be in Chelsea and Park Slope. But housing prices nationally have been skyrocketing well past the rate of real wage growth.
But housing prices, even in the NIMBY and inflation-fueled decade, have not superseded the rate of return of the stock market.
New York Mayor-elect Zohran Mamdani lost boomer and Generation X New Yorkers, but he won two-thirds of millennials and more than three-quarters of Gen Z. New York is obviously far to the left of the national average, but the broader trend holds nationally.
In a March 2025 poll by Cato/YouGov, the majority of Americans still reported favoring capitalism and opposing socialism, yet that may not be true for long. More than 3 in 5 Gen Z respondents said they have a favorable view of socialism. And that’s likely not just because younger voters tend to identify more with the Left. In a sweeping survey by the Manhattan Institute on the state of the GOP, Republicans overwhelmingly still support cutting spending and oppose raising taxes. But half of Trump 2024 voters, younger than age 30, said we should raise taxes instead of cutting government spending.
I have long wondered whether declining faith in capitalism could be a product of the simple fact that the young have a declining stake in capitalism or actual capital providing a return on their investments. And with taxes, inflation, and the resulting interest rates eating up larger and larger shares of young people’s paychecks, it’s not entirely the fault of all young people if they cannot invest their savings in the free market.
This is Trump’s gamble.
A record 62% of Americans own stock, but a majority of Gen Z do not. While boomers see the annual 10% return on their savings in the S&P 500, the workers who subsidize them saw their real paychecks shrink 4% over the course of Biden’s presidency.
THE POVERTY LINE IS NOT $100,000. ZONING IS JUST MAKING HOUSING TOO EXPENSIVE.
Especially with the mounting evidence that the majority of the nation’s recent birth dearth is due to the housing price explosion caused by supply shortages, the Trump administration should absolutely use the federal bully pulpit to coerce state and local governments to eliminate their regulatory stranglehold on new housing supply. Any other quick fix, as evidenced by expensive pronatalist gambits in Japan and Hungary, will be doomed to fail.
But the power of compound interest requires the one ingredient Trump used federal law to secure: time for the next generation. Trump accounts may not throw more immediate gobs of government cash at groceries or doctors appointments. But, as evidenced by the math of compound interest, they may very well give future children the ability to buy their first home before they turn 30 years old. Maybe parents just want quick fixes, but Trump is betting that what they are really holding out for is a better opportunity for their children to achieve the American dream. And by creating a generation of investors from infancy, Trump accounts are giving the future skin back in the game of what makes America great.
