Why Billionaires Are Giving Money to Kids

[MUSIC] For generations, rich Americans have given some percentage of their wealth away. Vanderbilt, Rockefeller, Carnegie, the kinds of names you might see on a fancy building. If you think about philanthropy, what billionaires have done is they've donated wings to hospital, they've paid for libraries, right? They've donated buildings to universities, and they've launched their own charity foundations. That's Conrad Puzier. He and another one of my colleagues Eric Schwarzel have been looking into this new philanthropy trend. Very rich people have wanted to give their money away for a very long time. They've just done it in very different ways. So what we're seeing is this new trend of billionaires basically giving small amounts of cash to lots of American kids. Tech billionaire Michael Dell and his wife Susan just announced that they are donating more than $6 billion to American children. Elon Musk has a giveaway of one share of SpaceX to every child in the United States and the social media. It's a trend that actually combines several different approaches we've seen in the past several years and actually kind of funnels them all through Washington in a way that is completely new. It's basically just billionaire saying we're just going to give cash to millions of American kids and we're going to do it through these government accounts called Trump accounts. It has never been anything like this in America. What's behind this trend? Why are today's billionaires even making these pledges? First off, maybe they're just do gooders who love giving cash to kids. So that's certainly possible and that may be part of it. But there are also more cynical interpretations of why this might benefit them. The Trump accounts and some of the big donations to them have come at a time when the tech industry is very unpopular. I mean, the tech community needs all the reputational help it can get. Welcome to the journal, our show about money, business and power. I'm Imani Moise. It's Thursday, October 29th. Coming up on the show, the new age of philanthropy in America and why it involves the government. Billionaires in America have never been richer and the rest of the country has some feelings about that. There's this feeling among a lot of Americans that the economy's not working for them, right? And then you look at the richest getting richer and richer and that causes resentment. Like if you look at all the surveys, there's all these polls that basically say the vast majority of Americans think that billionaires have too much power, that they're too rich and also that their taxes are too low, right? Billionaires famously basically never pay taxes if they're smart about it, and a lot of people think that's unfair, partly or wrongly. Then at the same time, there is this idea of increasing political power in the hands of billionaires, right? And this is fed by all these stories about massive campaign donations, right? Like whether it's the Sora's family or Elon Musk or just rich Americans just giving a ton of money to politicians. That resentment is compounded by how people feel about the tech industry. Nine of the 10 wealthiest Americans come from tech. It's not just that billionaires are richer than them that have ever been. It's also that they increasingly come from the tech industry, right? And tech is an incredibly unpopular industry right now. There's a lot of anxiety about AI taking away people's jobs. There's anxiety about data center. It's been a lot of negative stories about negative effects of social media. So all that stuff comes together and what you have is basically you have billionaires being unpopular and then you have the tech industry being unpopular. And if you're a tech billionaire, it's kind of double bad for you, right? You're like unpopular from two sides. And so that I think gives tech billionaires, especially an incentive to want to do something about their negative perception. Of the billions that were donated to charity in America last year, half of that money came from tech moguls. The big ones are Michael and Susan Dow as pledged money and then of course Elon Musk. He hasn't actually put space shares in yet, but he's pledged. As a world's richest man, Elon Musk, who made much of his money through the tech industry, is a popular billionaire to dislike. Elon Musk is like the fam's example, right? He is worth close to $1 trillion, I think, latest estimates. And I don't know, two years ago, he was worth like less than half that. And that's all because of his stock holdings, right? Like he owns a ton of shares in Tesla and SpaceX and whichever other companies, and those have appreciated. So it's really this growing stock market that's led to this divergence in wealth between typical Americans and the richest. Why do these billionaires care what people think? They're not paying their bills necessarily. If the majority of Americans think that you have too much money and too much power in a democracy, that might mean that people will do something about that and that power or money will be taken away from you, right? The more people feel negatively about billionaire as they're more likely they're going to vote for ballot measures or politicians who want to perhaps raise taxes on billionaires. Right now, there's a measure on the ballot in California to create a one-time wealth tax on people with a net worth of more than $1 billion. And there are other proposals to tax the wealthy that have been considered in states like Maine and Washington. And for a high profile billionaires, the backlash could be more targeted. It's a particularly dangerous for Elon Musk because he's so associated with the Trump administration and there's already been talk among Democrats that if they take control of Congress, they might investigate his companies and his company's government contracts. So there is real political risk and there is a real reason for billionaires to want to do something about that. So far, the Dow donation has put $250 in investment accounts for millions of American children in lower-income zip codes. And Elon Musk said he would donate one share of his company's SpaceX to every child in America next year. At the time of his pledge, each share was worth about $150. I mean, if this is a share that that quintuples in value or triples in value, that's great for the family in question. Conrad says one of the key things here is that this is a pledge to give away shares, not cash, which comes with a financial advantage for the company too. For SpaceX, this just creates political goodwill, potentially, right? You get all these people who get a free share on SpaceX and that might make them think more positively about your company and about Elon Musk. It also creates a stable base of investors. There are also more cynical interpretations of why this might benefit them, right? And so a big one is taxes. So if you donate to charity, you can deduct that from your taxable income, which is a big deal if you're a billionaire, right? And then if you donate stocks to kids as opposed to cash, the benefits are even greater. So Elon Musk has said that he wants to give a share of SpaceX to every American kid. If he does that, he saves one as taxes, then if you just gave cash. Basically, SpaceX stock has exploded so much in value that if Musk sold, he would face a massive capital gains tax bill. But tax experts told Conrad if Musk donates the shares, he gets to deduct the full value from his taxable income and save on that tax bill. A representative from Musk Foundation didn't respond to request for comment. There's another concern when it comes to this new type of giving, and it has to do with the way these donations are being branded. Created Trump accounts for Trump accounts to fund the Trump accounts program for about the new Trump accounts. What makes this really controversial is that these are named after Trump, right? They're Trump accounts. And that makes it politically a different thing. And there are some people, especially in the left, who criticize the program for that reason. So how did the new age of billionaire philanthropy get the Trump stamp? That's next. The man behind the Trump accounts program pitches it like a tech industry native. My colleague Eric Schwarzel recently talked to him. The architect of it is a guy named Brad Gersner, and he has spent much of his career as an investor, primarily in the tech space. When I would talk to Brad, I noticed that he often spoke in the language of Silicon Valley or the tech investor world. He would talk about what has the best ROI. And his belief is that investing in the stock market does a few things. He says that it was around 2020, obviously, where we're still all in lockdown, COVID shut down parts of the economy, that he observed that even though there were a lot of people out of work and a lot of people with a lot of economic anxiety, that the stock market was going crazy, and that the stock market was really hitting these all-time highs. And he started to think about how he could help people participate in that, who might not otherwise have an avenue to invest in the stock. market. And so we came up with this idea of investment accounts that would essentially be given to children at birth. And those investment accounts would accept either deposits that were sort of there from the government, but also could come from private donors, could come from their parents, could come from anyone, but like kids though, like what made him settle on the ID of investment accounts for children. First of all, it'll allow these accounts to sort of take advantage of compound interest over those first 18 years. And it would also allow all of these children to feel like they have a bit of a stake in the U.S. economy. And he was pointing out that he had had this experience when his own children were born of trying to set up these custodial accounts. And it was just this like bureaucratic nightmare, like this, like you know, so much paperwork and that kind of thing. And it really observed that it was a bit of a barrier to entry for a lot of parents. And so we thought, okay, if we can just get this and make this very simple and very easy. You don't even have to think about it, but you know, but your child's already enrolled just by virtue of being born. And for donors, Gerstner thought that his program would appeal to them compared to more traditional ways of giving, because this way gives money directly to individuals. And he's very quick to say that he thinks this is additive, that it doesn't need to replace necessarily the world of NGOs and nonprofits and so on. And that if you want to give your money in those more traditional ways, that's totally fine too. This is just an opportunity as he would put it to make a large donation at scale very quickly and very easily. By 2021, Gerstner was pitching his idea to government officials, but he told Eric that it didn't really get much traction with the Biden administration. But that in the second Trump term, Gerstner had told me that when he raised the idea to the Trump administration, the president himself was very enthusiastic and said that he saw this kind of program as fitting what he called his main street agenda. The Trump accounts as they call it pilot program, which will make it possible for countless American children to have a strong start in life. The program games support on the left despite being named after Trump. This is definitely an issue in a program that has created some strange Ben Fellows because obviously the administration is behind it. And some of the biggest donors to the Trump accounts program are also big Trump supporters. But there has also been a number of Democrats, Gavin Newsom, the governor of California, Cory Booker or Democratic Senator, that have all come out and supported the Trump accounts and encouraged people to donate to them. The program was officially created as part of the one big beautiful bill act that was passed by Congress last summer. The accounts rolled out with the following terms. Babies born between 2025 and 2022 or is even automatic $1,000 deposit from the government. Based on the average U.S. stock market return and inflation, that could be worth $5,800 by the time the child turns 18. But last month, the program announced some important changes to how these accounts work. Now, children will be auto-enrolled in the program at birth. A White House spokesperson said nearly 70 million Trump accounts have been created. Here's Conrad again. The way it now works is A, you no longer have to sign up for this, you're automatically enrolled if you're a kid. So it's no longer a choice really. And then the second thing is it's not just that billionaires can put cash in and that gets an investment in index funds. Billionaires can also now put individual stocks in, which is what Elon Musk wants to do, right? So Elon Musk basically says, "I'm gonna put this basic share and every kid's Trump account." And you can't say no to that. Someone's gonna put a share in your kid's account and you basically have to take it. There's no other way. And then you can't sell off for five years. So it's basically, you have no choice in the matter. There are also questions about a company getting potential preferential treatment from the government. You might end up in a situation where kids across the country feel like they have a vested interest in SpaceX because they do. And it creates a reliable base of supporters who might not raise an issue if SpaceX is afforded certain contracts or given sort of favorable treatment in some way, right? That essentially there's this kind of like buying off of public support because you have made everyone a very, very, partial owner in the company. SpaceX didn't respond to requests for comment. Beyond concerns about donations swaying opinion on companies, there's also political ones. The entire project is named after Donald Trump himself. And there are some people, especially on the left who criticized the program for that reason, right? They're basically saying, "This is basically a campaign ad for Donald Trump," right? Like ahead of the midterms, he can top this this voters. And I like, I had a kid in December. And she signed up in these Trump accounts, right? And. Congratulations, that way. Thank you. It's not just that you get like that you're aware that you have this money and the Trump accounts and that's in billionaire like donated, is that you get all these emails all the time. And it's like each month, it's like an update on your Trump account. And like, you get that email and it's like golden. And it says like Trump account and you keep getting reminded that, you know, you have this money and the implication is you have this money because of Trump. Even though it wasn't his idea and it was supported by Congress and all that stuff. But have these accounts had any impact on public opinion? Yeah. So it's not terribly effective, which is kind of surprising, right? Because you think like, "Oh, you're giving Americans cash, free shares." But I spoke to some families. I spoke to a mother in Georgia whose two kids got money from the Delas and their Trump accounts. And she basically said, "Oh, this is a great thing." You know, I'm supportive. She's also supportive of Elon Musk putting free space shares into those accounts. So she's very much on board with this. But then I asked her, "Okay, has it changed how you feel about Donald Trump? Has it changed how you feel about Elon Musk?" And she said it really hasn't. And she's upset about the cost of living. She's not happy with Trump's presidency. And she also makes feelings about Elon Musk. So that's interesting to me because even if people are happy about these gifts, it's not enough to really make them change their opinions. So what's your takeaway from reporting on this new program and this philanthropy trend? I think tech billionaires feel under siege. And I think that again, this gives them another incentive to just show people that, "Hey, we can also be the good guys." You know, we're not, we're not just just the bad guys. We're not just the ones building the data centers that you hate. We can also be the ones who give your kids some cash. I think the reason I loved reporting this story is because I think it told us so much about different parts of the country at this moment. I think it told us that wealthy people are always looking for what might be the best way to give their money away. But I also think that they find themselves at a point in the culture where they need to think a lot about their relationship with the rest of society. That's all for today. Thursday, October 29th. The journal is a co-production of Spotify in the Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.