Hamill: Trump accounts are no substitute for Social Security

Treasury Secretary Scott Bessent tossed out an unexpected comment on July 30. He said that “Trump accounts” might lead to an eventual privatization of social security.

The recent big bill included many tax and other budget provisions, one of which was a new savings account for newborn children, named a “Trump account.”

The federal government committed to contribute a single $1,000 to the accounts of qualifying children born in 2025 through 2028.

Families and employers can choose to contribute as much as $5,000 per year for the account beneficiaries.

Contributions grow tax-free and can be withdrawn when the beneficiary reaches age 18. However, distributions before age 59½ are generally penalized.

This all sounds like some form of an IRA, which it is. Right now, it applies only to children born in a four-year window.

Outside of elective contributions by family and employers, the government’s participation is a single $1,000 contribution.

Let’s compare this to Social Security. But first, let’s review the nation’s history of planning for social insurance.

In 1795, Thomas Paine, a controversial figure and author of “Common Sense,” suggested a 10% tax on inheritances.

This tax would be used to pay 15 pounds sterling at age 21, and 10 pounds sterling at age 50. The purpose was to create a good start in life and to care for the elderly.

In 1862, the federal government created a pension benefit for disabled Civil War veterans and widows and orphans of the war.

By 1934, more than half of the elderly lacked an income to be self-supporting. Much of the population supported some form of social support payments.

Former U.S. Sen. Huey Long proposed his “Every Man a King” plan, which would give a pension to everyone age 60 or older. It would be financed by limiting private wealth.

The 1933 Townsend plan, named after a California physician, proposed a $200 monthly payment to anyone age 60 or older, financed by a national sales tax.

President Roosevelt supported a social insurance plan based on a worker contribution.

This was a “social” plan because it was not focused on self-interest but the broader economic security of the nation’s people.

It was an “insurance” plan in that it protected against the “hazards and vicissitudes of life.”

On August 14, 1935, Roosevelt signed the Social Security Act into law. From 1937 to 1940, qualifying individuals received a single lump sum payment.

On January 31, 1940, the first monthly payment went out to Ida May Fuller of Ludlow, Vermont. Her memory survives as a trivia question response.

Trump accounts are individual accounts not supported by the government (other than a one-time $1,000 contribution over a four-year period).

Families with the wherewithal to add to those accounts could leave the beneficiary with a healthy sum at age 18, and more at 59½.

It is difficult to imagine that many employers would opt to make permitted $2,500 annual contributions to the accounts.

Most of us know someone whose economic security — and dignity — were preserved by social security. That knowledge informs my shock at Secretary Bessent’s remarks.

My grandmother had an eighth-grade education; my grandfather, a sixth-grade education.

They lived in what my grandmother called “half a house.” A shared porch and mirror image floor plan with the neighboring house.

My grandmother worked at a rug mill and took in piecework sewing. My grandfather worked at a dairy, as a piano player, and as a semi-professional baseball player.

My grandfather died of lung cancer before receiving Social Security. My grandmother lived until 94 and, after “Pop’s” death, had no income but Social Security.

Our family could not support her unless she came to live with us. She helped raise my sister and I, but needed the dignity of knowing she had her own half a home.

My family probably would not have survived economically without my grandmother’s help so that my mother could work the night shift at the hospital.

A “Roosevelt account” modeled on the Trump account would have meant nothing to my grandmother. No one in the family had the equivalent of $5,000 per year to fund it.

Social insurance means we are in this together and that we protect the less fortunate from the hazards and vicissitudes of life.

Trump accounts seem to be one more way of tax-advantaged saving for those who can already save. Add it to the list, which now numbers 11 such accounts.

But none of those resemble Social Security. Change it if it has strayed from its original purpose. But Trump accounts cannot replace it.