20 May BILL TO GIVE EVERY AMERICAN BABY $1000 IN EMBRYONIC STAGE
Senator Ted Cruz has introduced a bill called the “Invest America Act” which would establish a “Trump account” with $1000 for children born after July 4, 2026, who are U.S. citizen with at least one parent who is a U.S. citizens at the time of birth and prior to January 1, 2029. Each Trump account would permit others (family members, friends, businesses, etc.) to contribute up to a total of $5000 annually into low-cost funds that follow the S&P 500 (managed by private companies on Wall Street). The funds would have tax-deferred growth until the child reaches age 18 when the child could use the funds for anything ranging from education to starting a business to buying a home. However, distributions after age 18 would be subject to capital gains tax unless the source of the contribution was from a qualified rollover (i.e. IRA) which is subject to income tax. No distribution could be made from the account before the child reaches age 18. The interest on the account cannot be forfeited or commingled with other property except a common investment fund or common trust fund.
After the year 2026, the $5000 contribution limit can be increased by the cost-of-living adjustment.
Cruz has stated that at an annual growth rate of 7% the account could grow to $170,000. Cruz hopes the bill will encourage more Americans to invest in the stock market. It is similar to a 401-K for children.
The proposal was part of the “Big, Beautiful Bill” which initially failed as it did not have the support of some conservative Republicans (since the bill did not go for enough in spending cuts and could add $3.8 trillion to the $36 trillion national debt without more spending cuts) in addition to lack of support from Democrats. According to the Congressional Budget Office, the Invest America Act would cost $17.2 billion. The bill passed the House after accelerating Medicaid work requirements which would occur after 2026 instead of 2029. It is estimated that cuts to Medicaid and food stamps would save almost $1.7 trillion. Nearly 71 million Americans receive health care coverage from Medicaid and approximately 42 million Americans receive food stamps. States would likely have to share more of the costs of the programs.
The 80-hour-a-month work requirement (or engaging in community service or attending school) would apply to adults 18 to 64, but it would not apply to parents, pregnant women, medically frail individuals and those with substance abuse disorders.
The work requirement for food stamps would also be for those between the ages of 18 and 64 and would include parents of children between 7 and 18.
The bill has now been passed to the Senate. It is likely that the Senate and House will work out differences in cuts and benefits this summer.
A few years ago, Democrat Senator Cory Booker originally introduced “baby bonds” with $1000 (similar to the Invest America Act) would be given to each American baby, but it was to be funded into federally funded savings accounts which had cutoffs for wealthier families and wouldn’t be managed by Wall Street. That idea was intended to close the racial wealth gap. Several states have set up baby bond programs. The failed “American Opportunities Act” would have the funds sit in an interest-bearing account (instead of stock market-related funds). The funds could be used for a home purchase and educational expenses when reaching age 18. Instead of reductions in government expenses such as Medicaid to help fund proposed Trump accounts, the American Opportunity Accounts would have reduced the federal estate tax limit (presently $13,990,000) to the 2009 limit of $3,500,000 (so more estate taxes would pay for the expense). The Invest America Act bill permits anyone to contribute an additional $5000 annually (that could be increased by the cost of living). It is part of the bill which would increase the estate tax limit to $15,000,000. The Invest America bill will likely be used by those with more discretionary assets.
Whether or not the Invest America Act passes or not, it is interesting that both Democrats and Republicans desire to help unborn Americans – it is just a matter of how it would be funded and who would be eligible.
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