Economists worry that inflation could result from the plan being weighed by President Donald Trump to cut big checks to the public from money clawed back by Elon Musk’s Department of Government Efficiency.
Analysts also worry about the idea of sending out new stimulus when the debt and deficits are already high.
“I think it’s a poorly conceived idea,” Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner.
He pointed out that inflation is too high right now and is a major concern for taxpayers. Trump’s tariffs could also further increase, putting upward pressure on prices.
“It would be a one-time event, presumably, but it would further muddy the inflation outlook, at least in the near term, and would be counterproductive with respect to trying to bring down impacts from rising debt,” Hamrick said.
Trump appeared to endorse the idea of a DOGE dividend this week.
“There’s even … a new concept where we give 20% of the DOGE savings to American citizens, and 20% goes to paying down debt,” Trump said.
Inflation is now running at about 3% annually, a full percentage point above the 2% level that the Federal Reserve considers healthy, according to the consumer price index.
The inflation of the past few years has been blamed on various factors on both the supply and demand sides of the equation. Notably, though, Republicans have placed blame on the explosion of stimulus spending during the pandemic alongside ultralow interest rates.
The idea is that when people are given extra money, they often don’t put it into savings but rather go out and spend it, increasing demand for goods and services. When demand rises, the prices of those goods and services then increase, given constraints on supply.
So, some economists have found it puzzling that the Trump administration is considering more stimulus for taxpayers.
However, Kevin Hassett, Trump’s director of the National Economic Council, has pushed back on the notion of a DOGE dividend causing inflation. He argued that they would “absolutely not” be inflationary.
“If we don’t spend government money and we give it back to the people, if they spend it all, then you’re even,” he said. “But they’re probably going to save a lot of it, in which case you’re reducing inflation.”
Desmond Lachman, a senior fellow at the American Enterprise Institute, told the Washington Examiner there are other variables at play that need to be looked at in the context of cutting checks from the money saved by DOGE.
He said that increasing the budget deficit is inflationary, pointing out that Trump and Republicans are attempting to pass a massive new tax cut extension that would, without huge offsets, cost trillions of dollars.
Lachman said that the stimulus checks can’t just be looked at in a vacuum but have to be looked at in the context of the tax cuts.
“They can’t afford to just give away the savings; they need to make savings on the spending side,” he said. “They can’t just give it away and have the tax cuts — otherwise that’s going to be inflationary.”
People received several stimulus checks during the economic downturn amid the pandemic. The Federal Reserve Bank of St. Louis found that U.S. fiscal stimulus during the pandemic “contributed to an increase in inflation of about 2.6 percentage points in the U.S.”
Romina Boccia, director of budget and entitlement policy at the libertarian Cato Institute, said that theoretically, the Fed could mitigate some of the effects of the stimulus spending by raising interest rates but admitted the idea is still not a good one.
“You’re still looking at a pure government redistribution transfer payment at a time when we already have $2 trillion annual deficits,” she told the Washington Examiner. “The right way to approach this is to use DOGE’s savings to reduce the deficit and thereby reduce our debt.”
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Boccia also pointed out that the tax cuts aren’t fully paid for. She said that even if DOGE were able to save $2 trillion, something she said is very questionable, those savings should first go toward paying down the fiscal effect of those cuts.
“And if there’s anything left over again, again I think that’s questionable, then that should go toward actual deficit reduction,” she added.