Commentary: Why the world should copy Trump for once

CRITICISMS OF TRUMP ACCOUNTS

Critics of Trump Accounts make the point that many US families – possibly the same 40 per cent or so that do not have any stock market investments – lack any meaningful cash savings. For these families, the new accounts will give them an extreme relative exposure to share price swings. They may also be without basic financial provision such as health insurance, so a stock market account feels like an odd luxury.

Complex rules around the scheme could also limit its effectiveness. (The Child Trust Fund initiative in the UK, which gave children born between September 2002 and the end of 2010 at least £250 each, operated similarly but was ultimately scrapped, leaving more than £1 billion in unclaimed accounts.)

Trump accounts have other shortcomings, too. The choice of funds and suppliers is extremely limited, at least for the time being.

The US focus of the available funds may be a logical quid pro quo for the subsidy and tax benefits, but that bias may also magnify risks by limiting diversification. The behaviour of the S&P 500 has until recently been dominated by the fortunes of the so-called Magnificent 7 tech stocks.

Most of all, it would have been better not to politicise a good idea: Eligibility is restricted to Trump’s term in office. 

Though this has been partly mitigated by the initiatives of others, notably philanthropists Michael and Susan Dell, who have committed US$6.25 billion for an additional US$250-a-head donation to the accounts for children aged 10 and under.

All told, though, these flaws – and the vainglorious Trump branding – cannot fundamentally undermine what is a good plan. It should reinforce an already healthy US investment culture and could, if the world can swallow its growing antipathy to anything Trump-related, inspire copycat initiatives across the globe.