Poverty Killer

Can we eradicate poverty? Not manage it, not reduce it, but kill it off entirely. Charities, politicians and economists have worked on this for decades. Last year, a new answer emerged from US policy makers. One that shifted from welfare to ownership. 

Although not the first time it has been suggested, the “Trump Account” is the largest social welfare experiment in close to a hundred years. The universal baby investment account is for babies born in America from December 2024 through January 2029. All newborns receive a thousand dollars (USD) into an investment account when they are born from the government. It is essentially a form of superannuation for newborns. The parents are free to add to this whilst the children are under the age of 18. This gives every child a stake in the economy from day one.

The purpose of this policy is to kill poverty before it ever starts. Kids from the poorest families will likely face incredible hardship and their families are unlikely to be able to contribute much further to the accounts. That thousand dollars could make a world of difference for society’s poorest because that thousand will have grown quite meaningfully by the time they can access it.

Using a conservative rate of return for these accounts to keep them in line with most similar of other financial products. At age 18 if you had no more contributions your account would have still more than tripled. By the ages of 20 to 25 it would be enough for a car or even a chunk towards a house deposit. By retirement you would have almost a hundred thousand dollars in your pocket. That’s upward mobility with no additional government spend or family help. 

This giant financial experiment is not without risks. Ones that will likely take decades to play out. Let’s be honest, the account works better with more contributions. The poorest will likely have the need to pull it out as early as possible, negating some of the gains that would have come. Modern 18 year olds may also be partial to blowing it all on small luxuries rather than milestones. There is a real concern that a teenager who hasn’t had access to a proper financial education may mishandle the money. Further policy will likely be needed for this account to be fully effective. 

The larger effect that lawmakers hope this new program will have is huge by comparison. It creates a generation of National Stakeholders. When young people have money, economies move. We’ve seen it before. When the post-war Baby Boomers first gained disposable income, they didn’t just buy cars and clothes, they built industries. Their spending helped fuel entire sectors of manufacturing, retail, entertainment, and housing. It gave rise to confidence, ambition, and an economy that grew from the bottom up. The same dynamic could emerge again. A generation with their own investment accounts will enter adulthood not as consumers of debt, but as owners of capital. That changes how they spend, what they build, and how they see their place in the system. What worked once to ignite prosperity could very well work again. This time, with compounding. 

Not only does it boost the economy and raise GDP, it reduces crime and promotes better health. Much of crime comes from the side-effects of poverty and a lack of reasonable opportunity. Putting money into the hands of young people, when they arguably need it the most in life, creates a pathway. A pathway to a car to get to a job. A pathway to business. A pathway to university. A pathway out of abusive relationships. Welfare supports consumption, but ownership builds capital, mobility and choice. Poverty costs the economy far more in downstream effects along with the human cost. It is cheaper to plant a tree than to rebuild an entire forest. 

The cost is also relatively small compared to other social welfare programs too. To implement this in Australia, it would have cost roughly two hundred and ninety million dollars in 2025. That is 0.0164% of our yearly GDP or almost the exact same as a program like the instant tax write off scheme. In other words, perfectly in line with similar welfare programs if not cheaper overall.

Some commentators that have criticised the policy have pointed out that more money won’t fix all family dysfunction. They are probably correct. Money alone won’t fix every form of family dysfunction, but generational poverty is far more about access to assets than lack of morals. Whether the baby investment accounts can break that cycle is still unknown. For the first time in decades policy makers are trying something big enough to matter. Time will tell whether the eradication of generational poverty is within reach.