Elon Musk is acknowledged by U.S. President Donald Trump during Trump’s joint address to Congress at the US Capitol in Washington, DC, on March 4, 2025.
Saul Loeb | Afp | Getty Images
Stock markets are experiencing fluctuations. Inflation is anticipated to rise once again, albeit potentially just temporarily, particularly if President Trump acts on his expansive tariff threats against global trading partners. Trump, along with his top economic advisors, has indicated he intends to implement these measures on April 2, suggesting that any short-term market dip or economic “detox” is a necessary cost for the long-term health of the U.S. economy. Additionally, Trump is ramping up pressure on the Federal Reserve to reduce interest rates to mitigate the impact of tariffs as concerns about financial well-being resurface among American citizens.
There’s at least one more avenue for the administration to ease public anxieties.
As Elon Musk’s so-called Department of Government Efficiency (DOGE) advances its mission to streamline government operations, the proposal of returning savings to taxpayers in the form of checks has re-emerged in headlines. Although this idea has fluctuated in favor, Trump has previously shown enthusiasm for it. “I love it. A 20% dividend, so to speak, for the money we’re saving by targeting waste, fraud, abuse, and other issues,” Trump remarked to journalists at one point.
The precise amount of any DOGE dividend check is uncertain, but some analysts have estimated that a 20 percent dividend could translate to $5,000 for each taxpaying household (20 percent of the “savings” from government cutbacks could lead to that figure). Even James Fishback, CEO of the investment firm that initially proposed the dividend concept, remains unsure about the eventual dividend amount.
“Now, for those who want to criticize this plan and claim that DOGE could never deliver $2 trillion in total savings, we disagree, but let’s suppose they’re right,” Fishback stated in an interview with NBC News. “If it’s only $1 trillion, then the check could be reduced to $2,500. If it were just $500 billion, then the check would be $1,250. That’s still meaningful money.”
While the notion of unconditional checks may seem appealing, numerous economists caution that it may prove to be a misguided approach.
“Distributing $5,000 per person into the economy appears beneficial on paper, but it’s akin to dousing an already raging fire with gasoline,” warns Aaron Cirksena, CEO of MDRN Capital.
The potential checks might trigger a resurgence in inflation.
“If people spend it, demand surges, and inflation follows. If they save or invest it, the immediate impact is less pronounced, but long-term effects hinge on market reactions. The principal danger? Brief relief could morph into enduring inflation issues,” Cirksena explained.
Kevin Hassett, head of the National Economic Council, recently declared in a CNBC interview that the DOGE dividend checks are a “great deal of sense,” contending that those predicting inflation from such payments have a limited understanding of economics.
“Everyone insists that mailing these checks will be inflationary. However, consider that if the government spends the money, it spends a dollar and you receive whatever multiplier effects anyone envisions; if they choose to return the money to the public, then if they spend a dollar, it’s a wash. Should some of it be saved, inflation could decrease. The claims of inflation resulting from this are really just a misunderstanding of economic principles,” Hassett argued.
However, economists express concerns regarding the viability of the proposed payments as sound fiscal policy.
John W. Diamond, CEO of Tax Policy Advisers and adjunct professor of economics at Rice University, recently articulated in a Wall Street Journal Op-ed, co-authored with former Secretary of State James Baker, that entitlement reform linked with a robust application of DOGE can assist in managing the federal deficit — but the reliance on DOGE alone is insufficient. Diamond advocates for DOGE (while clarifying his reservations about the entire approach) but believes that funneling funds back to taxpayers is illogical.
“I cannot support the DOGE dividend; it contradicts the idea of reducing spending to lower the deficit while simultaneously returning money to taxpayers,” Diamond asserted. “All funds should be directed towards deficit reduction; returning money to current taxpayers merely shifts the financial burden to future taxpayers,” he added.
A significant factor relies on the recipient’s utilization of any possible payout, according to Alice Kassens, director of the Center for Economic Freedom and a professor of economics at Roanoke College. “The proposed plan is for the dividends to exclusively benefit net income tax payers. The expectation is that this will not function as a stimulus (unlike pandemic-related stimulus checks aimed at maintaining consumption) but instead will be saved by households with a higher tendency to save,” Kassens stated.
In such scenarios, a DOGE dividend could enhance the national savings rate, thereby supporting future investment and economic growth.
“The strategy is to allocate the majority of the savings identified by DOGE to reduce the national debt, with merely a small fraction — 20 percent — earmarked for the dividend payment to taxpayers. While this would lessen the debt less than if all savings were allocated to that end, the long-term boost in personal savings, investment, and economic growth could partially counterbalance this,” she explained.
Concerns about ‘sugar rush, adrenaline shot’ for the economy
Nonetheless, many market watchers and economists remain skeptical.
Cirksena indicated that while a fraction of any new payments to the public might be saved, akin to the behavior observed with COVID-19 stimulus checks, a significant amount will likely drive immediate demand for goods and services. If the supply doesn’t keep pace, prices will inevitably rise. Furthermore, while infrastructure expenditure can also trigger inflation, it unfolds over a longer timeframe and is invested in projects that enhance economic productivity, rendering it more sustainable.
“It boils down to the circulation of the funds,” he noted.
There’s a contrast between providing taxpayers with $5,000 and the government investing in initiatives like the Inflation Reduction Act.
“Infrastructure spending is slower; it is distributed progressively and contributes to wages, materials, and productivity-enhancing endeavors. It generates lasting value,” Cirksena remarked, while direct cash stimulus can feel akin to a sugar rush — immediate spending, rapid demand spikes, and greater risk of inflation without sustainable economic growth. “One represents a brief adrenaline boost, while the other functions as a long-term strengthening strategy,” Cirksena summarized.
At present, the administration is not emphasizing a DOGE dividend in its public communications. Beyond tariffs as an economic priority, Trump’s recent address to Congress stressed tax cuts and infrastructure investment. If the administration is concerned that tariff policies might exert short-term inflationary pressure on the economy, this position is logical. Distributing $5,000 per person at this juncture would act like adding fuel to a fire that’s already aglow.
The administration appears to be focusing on economic growth through investments and tax incentives rather than direct cash distributions, Cirksena observed, noting that Trump’s attention on tariffs and domestic production suggests a shift of resources toward industries instead of directly into consumers’ wallets.
“Thus, it seems out of place,” Cirksena remarked.
Jonathan Ernest, an economics professor at Case Western Reserve University, observes that now is an unusual period to inject stimulus, given that all signs indicate a robust economy. It may present a sound political maneuver rather than an economic one, but ultimately, Ernest warns, it could hinder the Fed’s endeavors to control inflation and lower interest rates.
Issuing a stimulus check now, in light of inflation still remaining above the Fed’s target, risks igniting demand, which would inflate prices, Ernest cautioned, and he added that it might diminish the Fed’s ability to accomplish its objectives. “A stimulus at this time does not align with the current monetary policy, which has effectively steered towards a soft landing thus far,” he mentioned.
The Fed Chair Jerome Powell noted after Wednesday’s FOMC meeting that a portion of any increased inflation could stem from tariffs, although a decline in economic growth would counterbalance that, albeit it may “delay” the Fed’s progress in achieving its 2% inflation target.
Ernest also posits that prioritizing deficit reduction by the administration contradicts the concept of issuing stimulus checks.
“Sending out stimulus checks would be a contradictory approach, as we are facing deficits; instead of directing savings toward mitigating the deficit, we would be distributing it back to consumers,” Ernest stated.
The Treasury Department currently records the national debt at $36.22 trillion.
This does not preclude the DOGE dividend proposal from resurfacing, particularly if the economy decelerates beyond the administration’s comfort, and especially as mid-term elections approach.
For now, the Fed asserts that external recession risk surveys do not influence their decisions, and economic data remains relatively robust. However, concerns of recession are mounting as we approach the end of the year, and slower GDP growth is anticipated in the markets. Concurrently, job reductions in the federal government and deportation policies contribute to uncertainties regarding a national labor market that remains stable, although hiring has indeed slowed.
Ironically, Ernest suggests, the very policies implemented by the administration regarding job reductions at the government level may destabilize the economy sufficiently to warrant consideration of stimulus payments.
“Typically, we consider these measures during an economic downturn when we seek to stimulate demand by increasing consumer capital to support the economy,” he stated.
