The Proposal and Its Price Tag
President Donald Trump announced on Wednesday night at the Republican National Committee's Midterm Convention in Dallas that he would issue a $5,000 dividend to every adult U.S. citizen if Republicans keep control of both chambers of Congress after the November midterm elections. Vice President JD Vance told Fox News that the payment would be funded by tariff revenue and aimed at the middle class. However, tariffs generate only about $125 billion annually, far short of the $1.25 trillion needed to pay roughly 245 million adults, according to Erica York, senior economist at the Tax Foundation's Center for Federal Tax Policy. She estimated the government would need to borrow, raising the federal deficit to $3 trillion from about $1.8 trillion.[S1][S2]
The Committee for a Responsible Federal Budget (CRFB) projected that a $5,000 dividend in 2027 would cost over $1.2 trillion, more than all three COVID-era stimulus payments combined. CRFB found it would more than double the primary budget deficit for next year, from $780 billion to $2 trillion, and push the total deficit to $3.1 trillion. As a share of the economy, the deficit would rise from 5.8% of GDP this year to 9.4% in 2027.[S2]
Inflation and Market Risks
According to economists, handing out one-time checks would push prices higher by encouraging a wave of household purchases, echoing the federal stimulus payments that helped drive consumer costs to a four-decade peak in June 2022. Erica York pointed to 2023 research from the Federal Reserve Bank of St. Louis showing pandemic checks lifted inflation by 2.6%. She argued a $5,000 payout would jolt an economy that does not need stimulus, making the very problem it targets worse. Maya MacGuineas, who heads the CRFB, branded the idea fiscally reckless, asking how borrowing an additional $1.2 trillion to mail everyone cash could be considered sensible.[S1][S2]
Markets could be unsettled as well. Since U.S. debt just crossed $40 trillion for the first time, York said buyers of Treasury bonds would probably insist on higher yields to compensate for greater fiscal risk. She called the prospect of roughly doubling deficits insane. Heather Long, chief economist at Navy Federal Credit Union, noted that the bond market is already jittery about inflation and the $40 trillion debt load, and she expects the plan to push borrowing costs even higher. She added that Wall Street is mostly shrugging off the idea because it seems unlikely to advance in Congress.[S1]
Political and Economic Reactions
The White House stood behind Trump's economic record. Spokesperson Davis Ingle said Trump has repeatedly confounded his critics, pointing to accomplishments including Trump Accounts, cheaper prescription drugs, border security, no taxes on tips, rising real wages, reworked trade agreements, and the return of manufacturing jobs. Speaking in an exclusive interview, Trump said he doubts lawmakers would have to sign off on the $5,000 payments. In his speech, he also floated scrapping credit card swipe fees, which he claimed would save a typical household roughly $1,200 annually.[S1]
Skeptics are unconvinced. Ryan Young, a senior economist at the Competitive Enterprise Institute, told FOX Business the plan will not come to pass even if Republicans prevail in the midterms. He said voters are already uneasy about the $40 trillion national debt, and this would pile more than $1 trillion onto it all at once. Young also cautioned that the checks undercut Trump's push for cheaper borrowing, since extra money circulating would lift inflation and probably push the Fed to raise rates in response. He added that $1 trillion in fresh spending would lift yields on government debt by straining the government's finances, with hesitant bond buyers demanding more compensation for added risk.[S2]
