As reported by NBC News, the concept of a stimulus check is emerging following Musk’s claimed struggle to secure a total of $2 trillion in savings. Last month, he revised his statement, referring to it as a “best-case outcome.”
Should the $2 trillion goal be achieved, Forbes estimates it could create a dividend pool totaling $400 billion. With approximately 79 million qualifying households, each could receive around $5,063. Conversely, a $1 trillion saving would yield about $2,531 for each eligible household. Approval from Congress would be necessary for the distribution of these checks.
Although the allocated funds would enhance taxpayers’ financial situations, some critics argue that issuing large checks may exacerbate inflation and conflict with the administration’s other tax initiatives.
There are also questions about whether these funds might be utilized for down payments or housing-related costs.
“My initial thought was that the $5,000 check could assist those struggling with insurance payments, as it would help cover significant additional costs for many homeowners,” stated HousingWire lead analyst Logan Mohtashami. “However, the original plan aimed to reduce demand to lower inflation and (mortgage) rates, and a one-time check of that magnitude would likely increase demand across a wide range of products.”
“Any stimulus check won’t effectively combat inflation if the intent is to reduce it, because those funds will lead to higher demand for goods and services.”
Not Your Pandemic Allowance
Daryl Fairweather, chief economist at Redfin, holds a different viewpoint. She asserts that the proposed DOGE dividends differ from pandemic-era stimulus payments.
“The previous checks contributed to a deficit since there were no taxes to balance them. This influx of unregulated money in the economy led to inflation,” Fairweather elaborated.
“In theory, if the government were to cut spending and taxes or provide a tax rebate proportionate to that, it wouldn’t exacerbate inflation, as GDP would stay constant due to the conversion of government spending into consumer spending.”
Fairweather expressed skepticism about whether the financing would be managed in a manner that avoids necessitating future tax hikes or cuts in government spending, suggesting such transfers could inadvertently reduce GDP.
She acknowledged that, in theory, lower interest rates could allow consumers more spending power despite unchanged inflation rates.
“However, if efficiency is not improved, it could lead to decreased efficiency due to cuts in necessary government functions,” she conceded. “This scenario could potentially incite inflation.”
Jeff Tucker, principal economist at Windermere Real Estate, expressed doubt about the significant impact of a $5,000 payment on housing markets.
“My primary concern lies with tariffs, which present a broad fiscal challenge for households by increasing the cost of many imported goods,” Tucker noted. “This will raise expenses and decrease the disposable income available after taxes.”
“I encountered one estimate suggesting that roughly 1% of after-tax income would be reduced due to the impact of the 25% tariffs on goods from Canada and Mexico — a substantial blow,” he mentioned. “Thus, $5,000 could effectively offset that reduction, as it usually constitutes a significantly larger portion than 1% of annual income for most households.”
“Overall, I believe there is a risk that if the DOGE dividends are distributed, it could generate an inflationary effect on the economy at large.”
