This seems like the biggest no-brainer in the history of no-brainers to me.

Brad Gerstner, CEO of Altimeter Capital, has proposed the most fool-proof way I have ever seen to shrink the wealth gap in our country.

It is not food stamps, rent subsidies, or disability checks, I’ve depended on them all at one point or another and, while they work great for what they do, but they are far too limited in scope.

“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” — Albert Einstein

The idea is revolutionarily simple in its design — all good designs usually are. Ask any of your engineering friends what happens when you add unnecessary complexity to systems — they break!

The proposal is this:

“Gerstner is working with lawmakers on both sides of the aisle to promote a program known as Invest America. This potential legislation would create investment accounts seeded with $1,000 for each of the 3.7 million children born each year in the U.S. The total cost would be $3.7 billion each year to the federal government — less than one-tenth of 1% of the national budget.”

We live in a polarized world right now, there is no doubt about it. Red thinks blue is evil, blue thinks red is dumb. No one thinks the government works for them.

54% of people under 40 have a negative view of capitalism. How could they not? Does anyone under 40 see evidence of a system working in their favor?

75% of households earning $40,000 or less say they have no personal savings or money invested in the stock market.

How do we fix these things? By giving future generations proof of ownership in the American dream.

I have little doubt a proposal like this will go nowhere in Congress. Those people have no incentive to work together to solve problems and instead fundraise off of the ability to be louder and crazier than the last person who occupied their seat.

But, I spend a lot of time thinking about local politics and local solutions. Roane County, broadly, but Rockwood more specifically: I’m not from here, but I work here, Kesney’s family is all here, I see the high school kids walking to and from school. Rockwood, in a lot of ways, is the town history forgot — which is not unique or uncommon — rural minings towns were decimated in the middle of the last century. Big industry came in, then left when it could make its products cheaper in Mexico or China. When jobs leave, pills take their place. You can see it everywhere down in downtown.

You want to rebuild Rockwood? Give the kids here a fighting chance to break even. Hell, give them a head start. Show them proof that their community — and their country! — cares about them enough to set some money aside for future growth. Show them they have an ownership stake in their country via a broad based index fund. Show them it’s in their interest for business to thrive in this country — because they’re getting a share of the profits.

Here’s how Gerstner envisions it.

“Think of 401(k)s from birth, where corporations like Uber or United will then match those grants to those kids at birth, where parents now who were afraid [or] didn’t know how to open up an account can now save 50 bucks a week or 100 bucks every couple of weeks,” he said. After three decades, “a 30-year-old today would have over $270,000 in their Invest America account.”

An account with a $1,000 initial deposit and $200 monthly contributions growing at a 7% annual rate over 30 years would yield a balance of about $254,000, according to Make It’s compounding interest calculator. Up the rate of return to 8%, and the balance jumps to about $311,000.

But what if no one contributes? Even then, getting a head start makes an enormous difference over an investor’s lifetime. An American with $1,000 in their account at birth could expect a balance of about $107,000 by age 67, provided the portfolio grew at an annualized rate of 7%. If that same investor started with $1,000 at age 20, the account would grow to just $26,000.”

I’ve poured over the city of Rockwood’s audited budget from 2022. (This is my definition of fun!) The city reported $51.1 million dollars of revenue last year — a town of five and half thousand people reported $51 million dollars of revenue!

I know, I know, there are expenses to be paid, shortfalls to prepare for, yada yada yada. I get it.

But there is enough money here to participate in an Invest America-type program without any help from the federal government. We could do it without raising taxes!

According to census data, there are about 450 kids under the age of 5 in Rockwood city limits.

Investing $1,000 in and for those kids would be $450,000. Limit it to newly born babies inside city limits and you’re looking at about 90 kids a year. $90,000 is all it would take! To put it in Rockwood terms, that’s less than half of the annual budget for the golf course.

We can do this if we want to do it.

Here’s the link to the article I’ve pulled most of my information from. (There’s a helpful video in there too.)

https://www.cnbc.com/2023/10/02/ceo-compounding-interest-can-shrink-the-wealth-gap.html

Let me get off my soapbox, let the adderall wear off, and go back to remembering people don’t give a damn what I think. 🙂