Uncle Sam's $1,000 Baby Gamble: Stock Market Riches for the Poor or a Taxpayer-Funded Debt Bomb?

Inside the Invest America Act's Promise of Million-Dollar Nest Eggs for Every Child—Wealth Equality Dream or Fiscal Nightmare in Disguise?

While I publicly was not supportive of this new “Big Beautiful Bill” (OBBBA), there are some very good things tucked in there (i.e., keeping the 2017 tax cuts, school choice and education freedom, rolling back of many federal regulations). That said, there were some terrible aspects to it, most notably the addition to the federal debt and deficit. Even under the rosiest of scenarios, it expands our debt, which is already at $37 trillion.

Another aspect of the OBBBA is the Invest America Act, which intends to help every American child by building long-term wealth through early investing. This will cost the government $3.7 billion per year, as, starting next year, the government will contribute $1,000 to each one at birth, which is then invested in funds that track the S&P 500 stock market index.

These accounts grow tax-free until the child turns 18, after which withdrawals are allowed and taxed as capital gains. Parents and others, including companies (i.e., the parents’ employer or philanthropists), can add up to $5,000 per year (adjusted for inflation). Still, investments must stay in S&P 500-tracking mutual funds or ETFs to keep things simple and focused on broad market growth. No early withdrawals are permitted before age 18, and there are penalties for over-contributing, ensuring the money compounds over time to create significant savings by adulthood, potentially. Likely, the child will accumulate around $1 million by the time they are 50 years old if they allow it to compound over that time.

Yet the bill's core flaws make it seriously problematic for those seeking the government to be fiscally responsible, as it relies on forced taxation to fund the initial $1,000 government contribution per child, essentially redistributing wealth from taxpayers to create what amounts to a state-mandated entitlement program.

That said, this will do what many upper-middle-class and wealthy Americans already do, by setting up accounts for their kids to grow. This bill will enable the poorest among us to accumulate wealth while learning about investing and the inner workings of capital markets, among many other benefits for our society.

So, what do you think? Do you believe the Invest America Act will be a net positive for America and Americans?