Analysts are increasingly concerned about the proposal to introduce new stimulus measures, given the already elevated debt and deficits.
“I believe it’s a poorly thought-out proposal,” stated Mark Hamrick, senior economic analyst at Bankrate, in an interview with the Washington Examiner.
He emphasized that inflation remains excessively high, which poses a significant concern for taxpayers. Additionally, Trump’s tariffs could increase further, exerting upward pressure on prices.
“While it might be a one-off event, it would complicate the inflation outlook in the short term and work against efforts to mitigate the effects of rising debt,” Hamrick noted.
This week, Trump seemed to support the concept of a DOGE dividend.
“There’s even … a new idea where we distribute 20% of the DOGE savings to American citizens, while 20% is allocated to reducing the national debt,” Trump mentioned.
Currently, inflation is running at about 3% per year, a full point above the Federal Reserve’s target of 2%, according to the consumer price index.
The inflationary trends observed over recent years are attributed to multiple factors on both supply and demand sides. Republicans, in particular, have pointed fingers at the surge in stimulus spending during the pandemic combined with extremely low-interest rates.
The underlying idea is that when individuals receive additional funds, they typically do not save it but spend it instead, which increases demand for goods and services. An increase in demand leads to higher prices for those goods and services, especially given the supply constraints.
As a result, some economists find it perplexing that the Trump administration is contemplating more taxpayer stimulus.
On the other hand, Kevin Hassett, Trump’s director of the National Economic Council, has refuted the claim that a DOGE dividend would be inflationary, insisting that it “absolutely will not” lead to inflation.
“If we don’t allocate government funds and instead return it to the populace, if they spend all of it, then the balance remains,” he explained. “However, they will likely save a substantial portion of it, which would actually help reduce inflation.”
Desmond Lachman, a senior fellow at the American Enterprise Institute, told the Washington Examiner that various other factors need consideration regarding the distribution of funds from DOGE savings.
He pointed out that an increased budget deficit is inflationary, highlighting that Trump and the Republicans are trying to enact a considerable new tax cut extension that would cost trillions without significant offsets.
Lachman asserted that stimulus checks cannot be evaluated in isolation but must be viewed in conjunction with tax cuts.
“They cannot simply distribute the savings; they must also achieve savings through reduced spending,” he stated. “They can’t just hand out money while pushing for tax cuts—otherwise, it will lead to inflation.”
Throughout the pandemic, individuals received multiple stimulus checks. The Federal Reserve Bank of St. Louis reported that U.S. fiscal stimulus during this period “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, noted that, theoretically, the Federal Reserve could alleviate some of the stimulus spending’s impacts by raising interest rates, but acknowledged this remains an unwise strategy.
“Ultimately, you’re still dealing with a government redistribution transfer payment at a moment when we already face $2 trillion in annual deficits,” she explained to the Washington Examiner. “The preferable approach would be to utilize the DOGE savings to cut down the deficit and consequently reduce our national debt.”
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Boccia further highlighted that the tax cuts are not fully funded. She argued that even if DOGE were able to yield $2 trillion in savings, a claim she deems dubious, those funds should first be directed towards addressing the fiscal implications of the tax cuts.
“And if there’s anything remaining—again, that’s questionable—that should go to actual deficit reduction,” she concluded.
