Trump’s Wild Promise of $5,000 Payouts Would Be Wildly Expensive

Good evening. Did you know that August was declared the hottest month ever? Here's what else is happening.

Trump's Wild - and Wildly Expensive - Promise of $5,000 Payouts

President Trump's surprise pledge Wednesday night to pay a $5,000 "dividend" to every American if and only if Republicans maintain control of both chambers of Congress in November's elections may be a cunning bit of populist politics, an outlandish vote-buying scheme of questionable legality or a practical impossibility. It could be all three. Or maybe it's just a sign of Trump's utter desperation as the midterms approach and his approval ratings hover at historic lows.

Since he returned to the White House, Trump has made clear how important it is to him that Democrats don't win control of one or both chambers of Congress in November's midterm elections - and with it, gain the power to challenge his agenda, launch new investigations and otherwise push back on the legacy he wants to leave. He's essentially betting now that his best shot at avoiding that outcome, despite historically low approval ratings, is to boost turnout among his loyal MAGA base, especially the low-propensity voters who might not show up if he's not on the ballot.

Trump offered his pledge on the first night of the Republican midterm convention in Dallas. But first he asked his voters to pretend that he is on the ballot. "Just one more time," he said, "because if we lose, you're going to lose your border, you're going to lose your tax cuts, you're going to lose your safety and security, you're going to lose your wealth. Our country is going through hell."

In case that entreaty doesn't work, Trump must have figured that cold, hard cash will. He framed his $5,000 offer as a sign of the riches he claims to have generated for the country through tariffs and said it was an offer only he could make.

"If the Republicans win the House of Representatives and the United States Senate, both of them, because of our economic - tremendous economic success, like in, in history, we've never had anything like what's happening, but because of our tremendous strength and success economically, I will issue a dividend to every adult citizen in the United States of America for $5,000."

Trump added that the only condition he would impose is that the money must be spent in the United States. "We don't want you going to Canada to spend the money. We don't want you going to China, to Germany. You got to spend the money in the United States of America."

The cost question: The U.S. Census Bureau says that there are just over 245 million citizens aged 18 and over. Sending each of them $5,000 would cost more than $1.2 trillion - more than the government has spent over the first nine months of this fiscal year on Medicare ($955 billion) or defense ($804 billion) and nearly matching the spending on Social Security ($1.38 trillion). The cost of Trump's proposed dividend would far exceed the total cost of all three Covid-era stimulus payments combined.

Vice President JD Vance told Fox News last night that the plan is meant to help the middle class, which might indicate that a smaller group of people would get checks. Even so, the total cost would be huge.

Where would the money come from? Vance told Fox it would come from Trump's tariffs. The projected annual revenue from Trump's latest tariffs falls well short of the cost.

"This 'dividend' would spend, on a one-time payment, almost all the revenue that the new tariffs are projected to bring in over a decade. There has been no paying down of the debt with tariff revenue, and there certainly won't be if you spend it all before you even collect it," Erica York, senior economist at the conservative-leaning Tax Foundation, wrote Wednesday in a post on X Wednesday night.

Would Congress approve such payments? Any Trump dividend checks likely would have to be enacted by Congress and while some Republicans have indicated they support the idea, lawmakers in both parties have already pushed back hard against it.

Republican Sen. Bernie Moreno of Ohio quickly wrote on X that he will get a bill ready for Republicans to pass "immediately after the November 3rd election."

That's highly unlikely, given the makeup of Congress during the lame-duck session - and probably wouldn't be possible in the next Congress given the bipartisan backlash that has greeted Trump's idea.

"Trump's presidency is so failed and broken, he is resorting to trying to bribe the American people for their votes," Senate Democratic Leader Chuck Schumer wrote on X.

Democratic opposition comes as no surprise, but some Republicans also raised concerns. "Some of us think dependency is evil & soul-sucking in all its forms," Republican Rep. Chip Roy of Texas wrote.

Fiscally fraught: Fiscal conservatives are already complaining about how Trump's dividend plan would raise the deficit, which is already projected to top $2 trillion this year.

A $5,000 dividend payment "would more than double next year's projected $780 billion primary deficit to $2 trillion and increase total projected deficits to $3.1 trillion," the Committee for a Responsible Federal Budget said Thursday.

And the payments would also be expected to boost inflation, which has continued to run hot, adding an economic drawback to the fiscal concerns. "The policy would also likely boost interest rates, as the Federal Reserve responded to higher inflation and the markets to higher debt," CRFB said. "The result would be significantly more debt and a higher cost of living for ordinary households."

Marc Goldwein, senior policy director at CRFB, told the Associated Press that Trump missed an important point in comparing his promised dividend to corporate dividend payouts, noting that companies pay shareholders out of surplus profits. The U.S., meanwhile, continues to run large deficits. "The idea that we've had fiscal success is backwards and bordering on laughable," Goldwein said. "We don't have surpluses to give away."

A history of unfulfilled promises: This isn't the first time Trump has proposed to send Americans cash. He floated $5,000 "DOGE dividend checks" that were supposed to come from the savings generated by Elon Musk's cuts to the federal government and promised $2,000 tariff dividend checks from the money generated by his import fees. What did you do with that money? Oh, right, the money never matched Trump's promises and those checks never went out.

Trump also promises Obamacare rebates: The White House today announced that the administration will send out $500 rebate checks to nearly 1 million Affordable Care Act enrollees across 30 states, alleging that they had been overcharged by the Biden administration. "The relief begins with refunding everyone who was overcharged and the rebates are going out in just a few weeks," Trump said in a video posted to social media.

Democrats called it another election-year stunt, and Bobby Kogan, the senior director of federal budget policy at the left-leaning Center for American Progress think tank, criticized Trump's announcement. "First, no one was 'overcharged,'" he wrote on X. "Second, Trump's decision to give surplus fees to only people who don't get subsidies means he's giving money to the richest people on the exchanges at the expense of lowering premiums for the poor and working class next year. Bad policy choice."

The bottom line: Trump may have succeeded in generating headlines and changing the political conversation, at least briefly, but voters shouldn't expect the $5,000 dividend payments to materialize. "Not gonna happen," the Tax Foundation's York wrote on X.

US Debt Costs Hit Highest Level in Nearly 20 Years as Oil Prices Soar

Crude oil prices pushed well past $100 on Thursday as investors mulled the possibility of a longer war with Iran, with benchmark Brent crude rising above $107 a barrel. The spike in oil prices helped drive down bond prices, lifting the cost of U.S. long-term borrowing to highs not seen since 2007 as the 30-year touched 5.37%, up as much as 8 basis points.

Adding fuel to the fire, wholesale inflation rose 0.4% in August, contributing to an annual reading of 5.4%, the Bureau of Labor Statistics reported Thursday. Although the monthly reading of the producer price index was as expected, the level remains high, and the annual reading, which came in a tenth of a percentage point above expectations, sits well above the Federal Reserve's 2% target rate.

Investor disappointment over the relatively small size of the Treasury Department's bond buyback plan announced this week also played a role in the bond selloff. The buyback operation fell short of its target Thursday, when the Treasury purchased $5.2 billion in 10- and 20-year bonds as part of its effort to rein in interest rates, less than the relatively modest goal of $6 billion.

Separately, Treasury auctioned $22 billion worth of 30-year bonds at 5.308% - the highest rate since 2001. The high rate helped draw investor interest and demand was strong. In the markets, the 10-year Treasury - a key benchmark for auto and credit card rates - rose above 4.9%, the highest level since late 2023.

President Trump's vow to provide a $5,000 payment to all adult Americans if Republicans maintain control of the House and Senate in the midterms didn't help, either, as investors weighed the likelihood of the scheme, which would add more than $1 trillion to a national debt that recently surpassed $40 trillion.

"Bonds are facing a double whammy - oil prices are creeping higher, while US buybacks and growing credibility risks are pushing term premia higher," said Pooja Kumra, a rates strategist at TD Securities, per the Financial Times.

Costs are moving higher: Some analysts think oil prices may be settling in at a higher level - bad news for inflation and Americans squeezed by an affordability crisis. A leading energy research firm said Thursday that it no longer thinks that oil production in the Middle East will return to pre-war levels before the end of 2027.

"The market is not returning to calm, it is adjusting to the new normal defined by unresolved conflict and persistent maritime risk - one where oil flows stay below prewar levels and the path forward remains uneven," said Jim Burkhard, vice-president and global head of crude oil research at S&P Global Energy, per the FT.

The rise in oil prices and the latest inflation data have raised the odds of an interest rate hike by Federal Reserve rate-setters, who meet next week. As reflected in futures contracts, traders now assign a 70% probability to a rate hike in September, a roughly 20 percentage-point jump in a week, according to CME's FedWatch tool.

Investor Stanley Druckenmiller, who mentored Treasury Secretary Scott Bessent and has called Federal Reserve Chair Kevin Warsh one of his "closest friends," said Thursday that, in his view, the Fed's monetary policy is not restrictive and that bond yields need to move higher.

"Committee members on the Fed who keep saying fed funds rates are restrictive are just ridiculous," he told a gathering of investors in New York, the FT reported. "I believe in common sense, and all you have to do is look at asset prices around the world ... Given what's going on in the economy and the capital spending boom and the war for capital, if anything, [bond yields seem] a little low."

Quote of the Day

"The U.S. naval blockade is unlikely to produce a decisive outcome in the near or even medium term, so the only realistic use of this tool would have to be predicated on plans for a long-term siege. Even then its prospects for success are dubious, mainly because of the unintended consequences."

− Suzanne Maloney, an Iran expert and vice president for foreign policy at the Brookings Institution, quoted in a Wall Street Journal article published Wednesday evening.

The Journal reports that some of President Trump's advisors are now discussing the possibility that the war against Iran could last through the rest of his term. Trump has publicly maintained otherwise, saying this week that the war "will end immediately after our election" and that gasoline prices would plummet as soon as the war is over.

Fiscal News Roundup

• Trump, Hoping to Salvage Midterms, Makes a Dubious Pledge to Give Every US Adult $5,000 if GOP Wins – Associated Press
• Trump's Pledge for $5K Checks Catches Officials and Allies Off Guard, Sparks GOP Blowback – CNN
• Trump's $1 Trillion-Plus 'Dividend' Plan Meets Immediate Bipartisan Pushback – CNB
• Trump Wants to Send Americans Money. Congress and Economists Don't Seem Thrilled With the Idea – Associated Press
• Trump Defends Timing of $5,000 Dividend Announcement – The Hill
• DeSantis Rebukes Trump's $5K Checks: 'More Debt and More Inflation' – Politico
• Trump Promises $500 Obamacare Rebate Checks for 1M Enrollees in 30 States – Associated Press
• Trump's Top Advisers Confront Possibility That Iran War Lasts Through End of Term – Wall Street Journal
• The Unrelenting Bond Selloff Puts the 10-Year Yield on the Cusp of 5% – Wall Street Journal
• Trump Says the Iran War Is Worth the Price. The Bill Keeps Growing – Politico
• Carney, at a Cabinet Retreat, Considers Further Trade Strikes Against the US – New York Times
• From Pony Fur to Bamboo Furniture, Trump's Trade War With Canada Is Getting Even Weirder – CNN
• US Wholesale Prices Rise in Latest Sign of Stubborn Inflation as Oil Prices Continue to Climb – Associated Press
• Lawmakers Are at a Loss for How to Regulate AI as Insiders Warn of Impending Doom – Politico
• Oz's Medicaid Fraud War Room Is Prompting 'Aggressive' State Crackdowns – Politico

Views and Analysis

• $5,000 Checks for Every American? What to Know About Trump's Latest Promise – Richard Rubin and Matt Grossman, Wall Street Journal
• Trump Wants to Give Out $5,000 Checks. It Would Cost More Than $1 Trillion – John Yoon, New York Times
• Why You Shouldn't Bank on Trump's $5,000 Dividends Happening – Kathryn Watson, CBS News
• 5 Things to Know About Trump's $5K Dividend Pledge – Ryan Mancini, The Hill
• Trump Promised $5,000 Checks if Republicans Win the Midterms. How Would That Work? – Maria Ramirez Uribe, PBS Newshour
• "Election Dividends" Would Explode Deficit and Worsen Inflation – Committee for a Responsible Federal Budget
• Republicans Showcase Their 'Big Beautiful Bill' to Voters, but the Law's Impact Has Been Mixed – Lisa Mascaro, Associated Press
• Government Bonds Are Safe Assets, Right? – Washington Post Editorial Board
• America Is Losing Its Captive Creditors – Benn Steil, Financial Times
• The Department Created to Stop Another 9/11 May No Longer Be Equipped for Counterterrorism Work – Eric Bazail-Eimil, Politico
• After 9/11, the U.S. Built an Anti-Terror Apparatus. Trump Is Using It at Home – Warren P. Strobel, Washington Post
• How Decades of Privatization Unleashed Trump's Warmongering – Andrew Lanham, New Republic
• The Destination-Based Cash Flow Tax Remains a Strong Option for US Business Tax Reform – Richard DiSalvo and Guy Cardwell, Tax Foundation