Megabill’s Baby Bonus Is Civilizational Strategy for Some, Questionable for Others

WASHINGTON—Parts of the One Big Beautiful Bill Act are being seen as encouraging people to have children at a time of falling fertility in the United States.

The version that passed the House in May raises the child tax credit from $2,000 to a maximum of $2,500 per child, while a draft from the Senate’s Finance Committee sets that new ceiling at $2,200. Both versions of the megabill include a tax credit for paid family and medical leave.

One eye-catching proposal is the “Trump account,” a savings vehicle tied to a stock index.

Newborn American citizens whose parents both have Social Security numbers would start life with a one-time deposit of $1,000 from the government. Parents or legal guardians can contribute more to the account until the beneficiary turns 18.

When asked in April about a similar “baby bonus,” President Donald Trump said: “Sounds like a good idea to me.”

House Speaker Mike Johnson (R-La.) said in early June that the policy “gives every eligible American child a financial head start from day one.”

The CEOs of Dell, Goldman Sachs, and other firms have praised the accounts, and Martin Capital’s Rod Martin described them on social media platform X as a “civilizational strategy” in response to the declining birth rate.

Skepticism

Some experts are skeptical that the pro-family element of the megabill could make a difference.

“In general, the literature would suggest that baby bonuses, if large enough, have only a temporary effect at best,” Willem Adema, an economist with the Organisation for Economic Co-operation and Development (OECD), told The Epoch Times in an email.

OECD analyses have linked paid parental leave, incentivized in the megabill, and support for child care to higher fertility rates.

Baby bonuses and comparable policies in Hungary, Japan, and Poland have had limited and mixed results.

Robert Breunig, a public policy economist at Australian National University, has studied Australia’s baby bonus. Under the policy, which was introduced in 2004 and discontinued a decade later, the government paid families who had, or adopted, new children.

Some research has linked the Australian bonuses to an uptick in the fertility rate. Yet, in the years before it ended, the fertility rate trended down again.

Breunig said some countries that adopted paid parental leave and other OECD-endorsed policies—for example, Sweden and Norway—enjoyed early fertility increases that soon sputtered out. In recent years, birth rates have generally gone down in both countries.

Like many at the recent Natal Conference, a gathering of pro-natal researchers and activists, Breunig stressed how hard it is to reverse cratering birth rates, a challenge of global proportions.

“Lots of countries have tried different policies of this type to get people to have babies, and they don’t really seem to work,” he said.

Although fertility is falling in many places, the world population is high, at more than 8 billion, and rising. Breunig thinks the numbers could strain the natural environment.

“Maybe part of this global declining fertility rate is some kind of organic response to the right level of population,” he said.

Amy Wax, a professor at the University of Pennsylvania’s Carey Law School, has her own doubts about the bill’s impact on births.

The conservative social welfare scholar told The Epoch Times that some changes in the megabill—more specifically, topping out the child tax credit at $2,200 or $2,500 rather than $2,000—probably wouldn’t make much of a dent.

“If you’re not trying to influence the number of children being born and you’re trying to make life better off for the children who will be born anyway, will it have that effect?” Wax asked. “There are open empirical questions.”

Windfall at 18

Under the baby bonus, parents or other legal guardians can add up to $5,000 per year to the proposed accounts, and it’s only possible to withdraw from the account once the child turns 18.

The Trump account is designed to be spent before the account holder’s 31st birthday. After that, whatever is left in the account is treated like regular income. Spending on schooling, small businesses, and starter homes is taxed at a rate to incentivize them over other spending.

The fact that the accounts are shielded until the beneficiary turns 18 could make them akin to a reverse retirement account, one that ties parents and children to the marketplace.

Assuming an average annual return of 10.33 percent—the average for the S&P 500 since 1957—a parent who adds $5,000 per year could deliver over $214,000 for their child. A parent who adds $1,000 per year could give their child more than $47,000. In the middle of the pack, a parent who deposits $3,000 per year could provide almost $131,000.

Alex Muresianu of the Tax Foundation, a nonpartisan think tank, warns, however, that the Trump accounts could make the United States’ tax code even more daunting. He instead recommends a universal savings account.

Breunig and Wax share similar worries.

“We’re really good at passing new laws. We’re not so good at going back and getting rid of the old ones that complexify everything,” Breunig said.

Wax said the Trump account “sounds complicated” and could have unintended consequences. She said that “red flags go up” over tax-advantaged spending on education and new small businesses.

“Any kind of fly-by-night operation [could] spring up to take advantage of this money,” Wax said. “To create a program like this sounds great, but you have to see what sorts of abuses and scams are generated by it.”

Lawrence Mead, a political scientist at New York University, has other concerns.

Mead thinks incentives fall apart when it comes to the poor. In his view, many at the bottom of the economic ladder are too focused on short-term survival to keep the long game in mind.

“That’s one of the great frustrations of anti-poverty policy,” he said. “All the early programs, all designed by economists who believe in incentives, they assumed there was a universal psychology that was as true for the poor as it is for the middle class. But it just isn’t true.”

Mead worries that the poor might not make the most of that potential opportunity.

“They can’t really show the self-discipline required to put money away for the future because they’re struggling to survive the present,” he said.

More Than Money

Wax also has reservations about how economists think, not least when it comes to the fertility crisis that has sparked debate about baby bonuses in the first place.

“Economists look under the lamp post because that’s where the money is,” she said. “The problem here is the factors that are causing the birth rate to drop are just so multifarious, so complex, that you’re not really going to solve it with money.”

Breunig also thinks other factors may be at play.

“A lot of young people are very concerned about the future and about the climate and about the planet, and I think that makes them reluctant to bring children into the world,” he said.

Wax cited crime and disorderly schools as factors lowering fertility rates, particularly among the middle- and upper-middle classes.

“Imagine if the crime rate in every neighborhood were the crime rate in my neighborhood. That would be transformative. Housing prices would come down. People could live anywhere, everywhere, and feel that it was a decent place to raise children,” she said.