I’ll try to keep this one short. I was starting a post on another topic when Donald Trump distracted me… again. This time it was the $2,000 per person “tariff dividend” he’s proposed. This would be paid to all low- and middle-income Americans starting in mid-2026. As if the federal government was a profitable enterprise. Obviously that’s the wrong model! This is either sheer stupidity or willful government failure. Sure, the Fed can just print money, so why not? Who knew Trump was a closet modern monetary theorist?

It’s such a bad idea…. Tariffs themselves are bad enough. They are taxes, of course, a truth about which Trump and his central trade planners have denied since the beginning of the escapade. Tariffs hurt consumers and businesses who import inputs. Tariffs retard growth by increasing input costs, disrupting supply chains, and raising the prices of not only imports, but also domestically-produced goods that compete with imports. Surely Trump knows all this and the implications for his political capital: he’s already backtracking on tariffs for certain food items.

The tariff dividend is a transparent attempt to compensate consumers for the harms of taxation. It’s also a transparent attempt to buy or keep votes, much as he’s already sought to buy-off farmers harmed by tariffs. The income limit for the dividend hasn’t been announced, but make no mistake: this represents another form of redistribution.

It’s also striking that the tariffs won’t generate nearly as much revenue as will be required to begin paying the dividend by mid-2026. In fact, it could be short by as much as $300 million! Will the Treasury borrow the rest? More pressure on the bond market and interest rates.

Furthermore, the so-called dividend would be inflationary if the Federal Reserve fails to neutralize it. It would amount to another “helicopter drop” of cash, similar to the cash dump from Covid relief payments: money printing under the guise of fiscal policy.

To the extent that tariff revenue flows, it should be used to reduce the federal deficit or to pay down the gigantic government debt already outstanding ($38 trillion today not including the impending cost of funding entitlement programs). Instead, Trump is proudly following in the footsteps of generations of spendthrift politicians.

Keep in mind that the dividend is a promise Trump might not be able to keep. The Supreme Court will soon announce its decision on presidential power to impose tariffs. This decision will bear on the president’s authority under the International Emergency Economic Powers Act (IEEPA) — if and when an actual emergency is at hand, which it clearly is not. More broadly, the decision hinges on whether a “foreign facing” tax falls within the president’s Article II powers under the Constitution.

The proposed tariff dividend undermines the Administration’s argument before the Court that tariffs are primarily regulatory tools, and that any revenue from tariffs is merely incidental. Thank God the dividend would have to be authorized by Congress! I truly hope there are enough sensible legislators on the Hill to beat back this idiocy.