By David A. Graham
Friday, September 11, 2026
Just call it the Five-Grand Old Party. This week, at the
Republican Party’s midterm
faux-convention, President Trump announced something called (inevitably)
the “Trump Dividend.” The premise is simple. “If the Republicans win the House
of Representatives and the United States Senate, both of them,” Trump said, “I
will issue a dividend to every adult citizen in the United States of America
for $5,000.”
Problems abound. First, this is wildly inappropriate, for
obvious reasons: It’s an attempt at using taxpayer money to bribe voters into
supporting the president’s party. Because Trump is not premising the supposed
payout on individuals’ votes, it might be legal, though the White House would
presumably require congressional approval for the estimated $1.3 trillion cost.
A Republican Congress might sign off; a Democratic one might be more inclined
to start impeachment proceedings.
Second, the payments almost certainly won’t happen. (If
you disagree, I’d be happy to sell you a nice bridge in Brooklyn if you sign
your Trump Dividend over to me.) Trump has promised to cut checks to Americans
before and not followed through, and this proposal appeared to catch many of
Trump’s advisers, as well as Republican lawmakers, by surprise. Florida
Governor Ron DeSantis, Trump’s rival for the 2024 GOP nomination, quickly criticized
the pledge.
Third, injecting more than $1 trillion into the economy
wouldn’t just blow up the deficit
and national debt—it would also drive up prices. Giving every American
$5,000 to spend would create demand that couldn’t immediately be met,
encouraging sellers to raise prices. I could quote lots of economists from
left, right, and center who have already said that the payouts would be
inflationary, but you could also just take it from Trump himself, who has
repeatedly blamed inflation on high spending during the Biden
administration—including in the same speech where he floated the dividend.
A paradox of this moment is that inflation is a big
reason for Trump’s cratering approval and his party’s sinking odds in the
midterm elections, but nearly every one of his signature policy ideas is
inflationary. The basic challenge is not novel to this president—voters hate
inflation, yet most anti-inflation measures the government can take will hurt
the economy, which voters also hate. But Trump’s strategy seems to be to commit
to new proposals that would drive up costs.
In some cases, inflation is incidental to the president’s
goal. When Trump launched the war in Iran, he apparently believed that it would
end quickly—and might even result in the United States gaining control over
Iran’s huge oil reserves. Instead, the war is dragging on into its seventh
month, with
no end in sight. The de facto closure of the Strait of Hormuz, as well as
attacks in the Bab
el-Mandeb Strait, have strangled shipping of oil as well as other goods,
driving prices higher. The average price of a gallon of diesel fuel in the U.S.
topped
$6 today for the first time, and because so many goods move via diesel
trucks, the rise drives further inflation.
Trump’s efforts to crack down on immigration also have
the collateral effect of pushing prices up. The administration has not only
tried to secure borders and deport unauthorized immigrants; it has also revoked
legal status from more than 1 million people who were permitted to live and
work in the United States under Temporary Protected Status. Many of these
people were employed in industries such as construction and health care that
are difficult and low-paid; for example, more than 20,000 Haitians with TPS worked
in caregiving last year. Housing shortages plague many parts of the
country, and more building could alleviate them. Perhaps Americans will be
willing to take these difficult jobs, but with unemployment rates already low,
that will likely require higher salaries—which will mean higher costs, and
therefore higher prices.
Other Trump policy ideas are directly and explicitly
inflationary. For decades, Trump has espoused protectionism, saying that the
United States should impose tariffs in order to close trade deficits with some
partners. Regardless of the other merits of this plan (and they are dubious at
best), tariffs are by definition inflationary. The goal is to raise prices on
certain products. A tariff is a tax on goods, and someone has to pay it.
Faced with economic headwinds and voter dissatisfaction,
Trump has at many times dismissed
voter concerns, but he has also pressured the Federal Reserve to lower
interest rates. Trump attempted to oust former Fed Chair Jerome Powell and the
board member Lisa Cook, and made clear that he expects his newly appointed
chair, Kevin Warsh, to lower rates. By law, the Fed is required to promote
maximum employment and stable prices. (It aims for 2 percent inflation.) Trump
wants lower interest rates because they encourage economic growth, but they
drive inflation for the same reasons: Lower rates encourage borrowing, which
produces spending, which has a similar effect on prices as sending every
American adult a $5,000 check.
Writing off Trump’s pursuit of inflationary ideas as
cynical is tempting, if only because so much of what he does is cynical, but
years of evidence suggest that Trump actually has little idea how economics
works, as the journalist Steve
Benen recently noted. The president’s obsession with trade deficits is
nonsensical; Senator Rand Paul memorably quipped that because he gives money to
his grocer and gets food in return, he’s running a trade deficit with the
supermarket. Last week, Trump perplexingly suggested that the United States
could simply cut off commerce entirely: “We could do tremendous good for
ourselves by just not trading with countries.”
Perhaps Trump doesn’t understand that his ideas will
drive up prices. Perhaps he does, but concludes that dangling free money in
front of voters is worth the hit. Either way, new numbers released
today show that inflation rose 3.4 percent from one year ago. Trump’s
policies are working.
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