The concept of a “DOGE dividend” has been making the rounds lately. This specific proposal to return such government savings back to taxpayers has recently received the endorsement of President Trump himself. DOGE is shorthand for the Department of Government Efficiency. Its mission is to identify where the federal government is mismanaging taxpayer dollars and is inept. The proposal calls for using a small part of DOGE’s savings to pay a dividend to taxpayers. That could work out to as much as $5,000 per individual. The total value of this dividend is not known yet. That’s a steep hill to climb, especially when you consider the nation’s mind-boggling $36.22 trillion national debt. The overall plan calls for directing the largest share of DOGE’s cost savings to debt reduction. The other 20 percent reserved for taxpayer dividends has caused a huge controversy and raised serious doubts about its overall economic impact.
The DOGE initiative’s main objective is to make government more efficient and create substantial savings to taxpayers. These savings would then be thoughtfully repurposed, with the greater share focused on debt reduction.
Only a tiny fraction—roughly 20 percent—would actually be used to fund the revenue-neutral dividend payments that McCarthy proposes to pay to taxpayers. Unlike many other restorative benefit proposals, this would only be a one-time dividend and not an ongoing benefit.
As is often the case, President Trump has already endorsed the DOGE dividend concept.
I love it. A 20% dividend, so to speak, for the money we're saving by going after the waste, fraud, abuse, and other things happening. - Donald Trump
So, the proposed economic effects of such a dividend are questionable at best. This has many economists worried that it will work similarly to a stimulus payment. That would put upward pressure on prices and make the Federal Reserve’s job of fighting inflation even more difficult.
In an unusual departure from standard economic rhetoric, Federal Reserve Chair Jerome Powell has recognized that tariffs can be inflationary. He believed a slowdown in economic growth could offset the impact. The new administration seems to be proposing a focus on stimulating growth through investment and tax credits as opposed to cash payments.
One major consideration will be how households plan to use the dividend. The intention is that those with a greater tendency to save would save the funds, offsetting any inflationary effects.
The stated plan is for the dividends to only go to net payers of income taxes. The hope is that it does not act as a stimulus (like stimulus checks during the pandemic, which were geared to help maintain consumption) and instead is saved by these households with a greater propensity to save. - Alice Kassens
There’s no assurance that this would be true.
Critics claim DOGE dividend is misguided. They think that all of these savings should go to paying down the national debt instead. They argue that giving money back to taxpayers, as widely popular as that would be, would instead shift the burden to generations not yet born.
I can't get behind the DOGE dividend, it doesn't make sense to cut spending to reduce the deficit and then turn around and send it back to taxpayers. - John W. Diamond
I think 100 percent should go to deficit reduction, there is no reason to return money to current taxpayers when we would just be imposing a bill on future taxpayer. - John W. Diamond
Some experts question whether a one-time dividend would provide lasting economic benefits, suggesting it might be a short-term fix without addressing underlying economic challenges.
Typically, when we think of these things, we are in an economic slump, and we want to do a little bit of stimulating demand by putting more money in people's pockets so they can prop up the economy. - Ernest
Stimulus would be a confusing strategy because we are running deficits, and instead of using savings to pay off the deficit, we would be returning it to consumers. - Ernest
A stimulus now is not quite going hand in hand with current monetary policy, which has guided the soft landing up until this point. - Jonathan Ernest
The debate surrounding the DOGE dividend highlights the tension between providing immediate relief to taxpayers and addressing the long-term fiscal health of the nation.
Whether enough savings can be created through DOGE to pay a significant dividend is another matter of debate.
Now look, for folks who want to criticize this plan and say, well, DOGE would never deliver $2 trillion in total savings, we disagree, but let's just assume that they're right on that. - James Fishback
Yet despite the optimism from proponents over DOGE’s growing potential, critics are doubtful about its ability to reach such lofty heights.
Everybody says it's inflationary, if we mail these checks to these people. Well, think about if the government spends the money, they spend a dollar and you get whatever multiplier effect you think of that if they don't spend the money, and say give it back to people. Then if they spend a dollar, then it's a wash. If they save some of it, inflation goes down. It's the idea that it's inflationary is just again, people should study their economics textbooks a little bit before they make partisan points. - Kevin Hassett
