"Election Dividends” Would Explode Deficit and Worsen Inflation

Speaking at the Republican Midterm Convention yesterday in Dallas, Texas, President Trump floated a new proposal to “issue a dividend to every adult citizen in the United States of America for $5,000,” contingent on the Republican party retaining their majorities in the House and Senate this November.  

We estimate this proposal would cost $1.2 trillion in a single year – over 3.5% of GDP – though the cost could be somewhat lower if the dividend were means-tested for higher earners. New tariff revenue, which is generating less than $200 billion a year, is already assumed in deficit projections, so it cannot serve as a pay-for to offset the costs.  

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget: 

This proposal is fiscally dangerous, economically backwards, and fundamentally unserious.

It’s hard to understand how anyone could look at our current fiscal and economic situation and think we need to borrow another $1.2 trillion to send everyone cash.

Debt is now as large as our entire economy, deficits are running $2 trillion per year, inflation is about 3.5%, and the 10-year Treasury yield is approaching 5%. This half-baked political scheme would make this all worse – exploding the deficit, ginning up inflation, and further driving up the cost of borrowing throughout the economy.  

While pandering is all too tempting to politicians, the reality is that the more goodies politicians promise, the more ordinary Americans will pay the price at the grocery store, on their mortgage statements, or in the burden they leave their children.

Under this proposal, deficits would rise to 9% or 10% of GDP next year. We need to start bringing them down toward 3% – bipartisan Members of Congress, business leaders, and outside experts all say the same thing.

If the goal is improving affordability, we need policies to reduce deficits, not expand them. Thoughtful deficit reduction is the best way to fight inflation, temper interest rates, boost income growth, and save Social Security and Medicare for future generations.

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For more information, please contact Matt Klucher, Assistant Director for Media Relations, at klucher@crfb.org.