US President Donald Trump. — Bloomberg
WASHINGTON: President Donald Trump’s idea of mailing US$2,000 “dividend” payments from tariffs to US citizens marks a throwback to the stimulus cheques distributed during the Covid crisis, with similar economic risks.
After floating the idea of tariff dividend payouts for months, Trump on Sunday offered the specific amount of “at least US$2,000 a person.” He said the recipients wouldn’t include high-income individuals, without specifying a threshold.
While the president has repeatedly touted the billions raised in tariff revenue this year, such a plan – which would likely require congressional approval – could cost the US government double what it’s projected to take in for 2025, one estimate shows.
It would also undercut Trump’s argument that such revenue will be used to help start paying down federal debt – a claim economists say is unlikely anytime soon, with the government running near-US$2 trillion budget deficits.
Back in December 2020, Trump was pressing US lawmakers to amp up pandemic-aid cheques to US$2,000 from the US$600 that they went on to approve. His successor Joe Biden made up the US$1,400 gap in his American Rescue Plan in March 2021.
Some economists now blame excess federal payouts for contributing to the 2021-2022 inflation surge – the worst since the early 1980s.
More than four years on, consumer-price increases still haven’t returned to pre-Covid levels, raising the risk that a fresh wave of cash-drops into US households stokes inflation again.
Trump hasn’t specified how the mechanics of a US$2,000 payout would work, or whether he’s seeking legislation to approve the “dividends,” though National Economic Council director Kevin Hassett said on Fox News Monday that indeed Congress would need to approve the payout.
“It’s a terrible idea,” Paul Krugman, the Nobel laureate in economics, said on Bloomberg Television Monday. “The idea that, hey, we’re going to take one source of revenue and use it to hand out money when we’re meanwhile going ever-deeper into federal debt – that’s deeply irresponsible.”
The Committee for a Responsible Federal Budget, a centrist watchdog group, totted up a preliminary calculation of a US$600bil cost for the proposal, if the dividends were designed along Covid-payment lines. Net US tariff revenue for the fiscal year through September totalled US$195bil. — Bloomberg
