Trumponomics: Is More Free Money on the Horizon?

Exploring Trump's Proposal for $5,000 Cash Rebates Amid Economic Concerns / AP

Voters generally favor receiving free money from the government, yet they often overlook the potential repercussions of such policies. President Joe Biden's experience serves as a cautionary tale, and now President Donald Trump seems poised to face a similar fate with his latest proposal.

Trump's suggestion involves distributing cash rebates of $5,000 to taxpayers, derived from savings that Elon Musk's Department of Government Efficiency (DOGE) claims to have achieved. This plan proposes that 20% of these savings be returned to the public, with the remainder directed toward debt reduction or other initiatives.

However, several assumptions underpin this proposal. To provide $5,000 to every income-earning household, the government would need to generate approximately $2 trillion annually in savings. This would necessitate a significant 29% cut in federal spending, an ambitious target that poses a considerable challenge. A large portion of federal expenditures is allocated to Social Security, Medicare, Medicaid, and veterans' benefits—programs that Trump and key Republican lawmakers have pledged to protect. Additionally, defense spending, another major expenditure, is unlikely to see reductions, as congressional trends suggest an inclination toward increasing, rather than decreasing, these funds.

Musk has since revised the savings target to $500 billion per year, still an ambitious figure. The DOGE initiative reports achieving $55 billion in savings thus far, but budget analysts express skepticism regarding the feasibility of reaching such figures. Experts point out that identifying savings through measures like fraud elimination, contract negotiations, and regulatory adjustments is unlikely to yield the claimed $55 billion. As Terry Haines, founder of Pangaea Policy, noted, the anticipated savings will likely take far longer to realize and will be considerably less than projected.

If the total savings from DOGE were limited to $55 billion, the cash rebate for each household would dwindle to just $138. Nevertheless, if we entertain the possibility that Trump and the Republican-controlled Congress could successfully disburse $5,000 to each taxpayer, the implications are concerning. Most recipients would likely spend a significant portion of this money, potentially fueling inflationary pressures.

Reflecting on his presidency, Biden might reconsider the $1.9 trillion stimulus package he enacted shortly after taking office. This legislation, which included three rounds of stimulus checks for taxpayers, ultimately contributed to inflationary trends that the Democrats faced in 2024. Trump campaigned on the premise of being a remedy for Biden's inflation crisis, raising questions about why he would now risk similar inflationary consequences.

Several factors could influence Trump's decision to advocate for cash rebates. For one, his initial actions may not have resonated well with voters, necessitating a more favorable narrative. Recent polling data from Morning Consult indicates that many voters are not in favor of the DOGE initiative aimed at streamlining government agencies, suggesting a potential disconnect between Trump’s priorities and voter expectations.

Moreover, Americans have expressed growing dissatisfaction with the economy since Trump's election victory, as evidenced by a decline in consumer sentiment according to the University of Michigan's survey. Concerns about Trump's proposed tariffs on imports are further exacerbating fears of rising inflation, negatively affecting public perception of the economy.

Inflation is a significant issue, particularly in light of skyrocketing egg prices, which have surged by 53% over the past year, with many stores selling a dozen eggs for over $10. Despite his previous criticisms of Biden's handling of inflation, Trump now distances himself from inflationary pressures during his presidency, perhaps believing that the proposed DOGE rebates could alleviate some financial strains for consumers.

It's also worth noting that Trump can promise these cash rebates while conveniently placing the blame on Congress if the initiative falters. As legislative approval is necessary for any rebates to materialize, Trump may find it politically advantageous to deflect responsibility for any unmet promises.

The potential outcome of these proposals remains uncertain, as the combination of additional stimulus efforts alongside anticipated tax cuts could substantially increase the national debt, further complicating the economic landscape.