What effect did government backed student loans have on the tuition prices? Why were soldiers targeted by payday loan outfits? How are most lottery winners paid out? Answer any one of those questions and you'll answer your own question.

It would be a lot more interesting if the investments were in clean energy, life sciences, the types of things that would make someone's life much better once they are an adult.

Yes this has been proposed before by Bill Ackman: https://www.youtube.com/watch?v=o9XHKc22wGk

It would make the rich richer. The 501:st company will be less valued than the 500:th that is included in some index. You’d have to counteract that somehow but otherwise not a bad idea.

This applies to all the traditional retirement accounts invested in index funds as well, so i think your criticism is not specific to this particular program