Portrait of an adorable baby boy playing with dollars at home
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On the Fourth of July, the federal government will start depositing $1,000 in the stock market for every eligible American newborn. Though the regressive policy has been created by the Trump administration it contains a kernel of an idea pushed by workers, unions, and the left for a century. Workers want wealth, not only wages.
Wealth is a claim on future income, the kind you hold whether or not you punch a clock and sell your labor. Wealth buys choice, leverage, and a cushion for the vagaries of a market economy. Any sensible person wants a diversified portfolio. Trump Accounts grasp that reality. The July 4 baby accounts and the retirement accounts that will follow next year are a real start for sharing wealth – funded by government revenue to households.
Wealth is bargaining power. One worker holds three months of savings and a small stake that grows while she sleeps. The other with the same paycheck holds neither. They earn the same wage and live different lives. The first can refuse a midnight work shift, ride out a layoff, or move toward a better job or retirement. The second takes what is offered and has much less bargaining power. The space between them is not income. It is wealth.
Every child born from 2025 through 2028 receives the seed money, parked in a low-cost stock index fund that rides the U.S. market for 18 years. Parents, relatives, and employers can add up to $5,000 a year, with employers covering as much as $2,500 of it, and the balance compounds without tax along the way.
The catch is the distribution. The nonpartisan Congressional Research Service notes that a child whose family adds nothing finishes near $5,000 at 18, while a child whose parents and their wealthy friends max the account out finishes above $300,000. Same program, same rules, a sixtyfold spread fixed at birth. An account that rewards the families with the most to give builds the most for the children who need it least.
Allowable charitable donations can help ease the program’s regressive bent. Michael and Susan Dell have pledged $6.25 billion to add $250 to the accounts of eligible children in lower-income ZIP codes. But a $250 charitable top-up is a supplement and not likely to scale.
That regressive design has led able thinkers to the wrong conclusion. Michael Lind, the writer and New America co-founder, argues in Commonplace, the magazine of Oren Cass’s American Compass, that a decent wage and a safety net should be enough, and that handing workers a stake in capital insults the dignity of their labor.
Lind is half right, and correct to be wary. Sen. Ted Cruz called the accounts a "dirty little secret"—a way to start with babies so that seniors raise no alarm when the goal shifts to privatizing Social Security.
And on the surface, Lind's premise is unobjectionable. He warns against "the implicit delegitimation of income earned by labor" and insists that a person should be able to join the middle class "without owning title to any major assets at all," provided the worker has an adequate wage and good social insurance.
Fair enough, as far as it goes. But a wage and a safety net are not enough. Lind’s ideal ignores what workers have actually bargained for in the United States, and what pro-worker social democracies already provide. Australia requires employers to pay 12% of wages into a worker’s own portable superannuation account, on top of wages. When American workers hold real bargaining power, this is what they buy. 82% of union-represented workers are enrolled in a retirement plan, against only 53% of nonunion workers.
Therefore, union contracts and social democracies alike pair strong wages and entitlements with deliberate policies that help ordinary households accumulate assets too. The choice Lind poses—wages and Social Security, or a capital stake—is a false one.
We need more policy effort to help workers build wealth to augment Social Security. The 401(k) promised that individual accounts could turn every worker into an investor. Four decades on only 72% of private-sector workers had a retirement plan at work, and access climbs with pay and company size. Among the lowest-paid quarter, fewer than half join a plan even when one sits in front of them. An account open to all but funded by whoever can spare the cash does not spread wealth. A voluntary account inviting voluntary contributions widens the wealth gap.
A wage, even a strong one, is a standing order to keep selling your labor. A paycheck lasts as long as your next shift, your health, and your boss’s balance sheet. Wealth is another matter. It is income you hold without asking anyone’s permission. By that test, the very safety net Lind defends is itself wealth. A guaranteed pension is a claim on income for life. His own ideal already hands workers a fortune. The wall he builds between honest wages and suspect ownership falls the moment you ask what wealth actually is.
The answer to a regressive design is a fair design. Baby bonds, built by my colleague Darrick Hamilton with William Darity Jr., flip the logic so the public trust grows largest for the children born with the least, which is why they would narrow the racial wealth gap that ordinary saving never reaches.
A guaranteed pension does the same work later in life. The Guaranteed Retirement Accounts I designed with Tony James pay an owned income for life, spendable as a retiree sees fit. Free college is a claim on knowledge no one can repossess. Each is wealth by Lind’s own definition, and each is built to reach the people the market skips.
The dignity-of-work argument sounds like a defense of workers but it asks workers to take the paycheck and call it freedom. The safety net Lind defends is itself wealth, so his own ideal already hands workers the very thing he says betrays them. Wealth was never a betrayal of work. It is the wage that work has been promising all along.
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