{"text":[[{"start":6.96,"text":"The writer is a former chair of the US Federal Deposit Insurance Corporation"}],[{"start":11.62,"text":"Elon Musk wants to donate one share of SpaceX to every child in America. Assuming he can reach all 73mn of them, this donation would represent about 1.1 per cent of his total holdings, or $10bn at the current share price. This looks like an incredible act of generosity. Yet, there are risks inside this gift horse."}],[{"start":32.92,"text":"In an age of wealth inequality, Musk’s gesture, if followed by other tech titans, could incrementally help spread the benefits of capital investments more broadly in the US, where the richest top 10 per cent of households own almost 90 per cent of all stock."}],[{"start":48.16,"text":"With capital claiming an increasing share of national income at the expense of labour and AI likely to accelerate that trend, we need to help future workers claim a bigger slice of the corporate pie. Direct contributions of stock are certainly simpler and more immediate than trying to do it through forced government redistribution or inefficient non-profit bureaucracies. And making the donation in childhood will let beneficiaries enjoy many decades of compounding growth to build financial security. Children can experience at first hand the benefits of capitalism and the shareholder economy."}],[{"start":82.54,"text":"Musk has not specified how he intends to make his contributions but reports suggest he will make them through Trump Accounts. These are tax-favoured accounts for children under the age of 18 created by Congress in 2025 and overseen by the US Treasury department. The Treasury will contribute seed money of $1,000 for every child born between January 2025 and December 2028. Other children must rely on private donations."}],[{"start":null,"text":"
"}],[{"start":109.82,"text":"One risk is that tech moguls could use Trump account donations as a way of influencing politicians and the public. Musk raised eyebrows by announcing his planned donations just a few weeks before this year’s US midterm elections, where he has heavily invested in Republican candidates and AI was a hot issue with voters. It’s easy to see how Trump account donations could be weaponised, for instance, to fend off efforts to make the super-rich carry a fairer share of taxes. Why increase their taxes when they are already giving so much away?"}],[{"start":141.14,"text":"Such problems could be ameliorated if, instead of donating SpaceX stock, Musk followed the lead of other wealthy donors like the Dell family who have made cash contributions to be invested in broad-based index funds. This is clearly in the best interests of the children. Broadly diversified stock indices consistently outperform individual stocks."}],[{"start":162.84,"text":"Nonetheless, the Treasury department has proposed temporary regulations allowing individual stock donations even though the statute seems to require Trump accounts to hold only index funds. Worse, the regulations force children and their custodians to accept the stock and prohibit them from selling it for five years. Many, if not most of these accounts, particularly among modest-income households, will have low or zero balances. Stuffing them with one or more high-flying tech stocks teaches kids all the wrong lessons about the importance of diversification."}],[{"start":196,"text":"Their accounts will be exposed to extreme volatility and the risk of significant price corrections given the lofty valuations of so many tech companies. Forcing these young shareholders to hold on to their stock benefits donors by keeping blocks of shares off the market if the company falters, but is hardly in the best interests of the child."}],[{"start":215.6,"text":"Understandably, the Treasury department wants to provide the wealthy with strong incentives to give. But there are better ways. The Treasury should at least eliminate the five-year lock-up if custodians sell and reinvest the money in diversified funds. Or it could require that donations be at least 90 per cent cash, with only 10 per cent in shares, or fractional shares. Outside this narrow exception, all Trump account investments should be limited to approved index funds."}],[{"start":242.44,"text":"This would give donors a modicum of brand advertising, without exposing children to risky concentrations. The child could see and compare how the stock performs versus the index fund, which in itself would be highly educational. I trust Musk is sufficiently confident in SpaceX that he would not mind kids being able to compare its performance with the broader market."}],[{"start":263.52,"text":"There are obvious issues with individual stock donations, and Treasury should work harder to address them. Clearly a gift is better than no gift. But in structuring the gift, the interests of the kids should be put before those of rich donors. Otherwise, cynicism about our capitalist system will only increase."}],[{"start":283.08,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794018938_4186.mp3"}