Amid widespread pressure from the cost of living in the United States, President Trump has made a significant election promise: if the Republicans control both the Senate and the House of Representatives, the government will issue a $5,000 election bonus check to every adult American citizen. This statement was announced on Wednesday, just weeks before the November midterm elections, and public sentiment regarding personal finances is generally pessimistic. However, economists say the proposal is highly unlikely to be implemented. Even if it does, a one-time cash subsidy is unlikely to alleviate the pressure on people's lives; instead, it could push up prices and exacerbate inflation in the future.

Voters are under pressure to deliver dividend promises, and consumer confidence continues to weaken.

Data research from PNC Financial Services Group shows that persistently high prices are dragging down voter sentiment and are a core factor in the long-term decline in consumer confidence. The Conference Board released a report stating that the consumer short-term economic outlook fell further into negative territory in August. The latest consumer survey from the University of Michigan also shows that market concerns about persistently high inflation are causing consumer sentiment to continue to deteriorate. Against this backdrop, directly distributing cash subsidies to the public could superficially increase household income. However, economists point out that directly distributing cash to consumers inherently carries inflationary properties, further pushing up prices and ultimately offsetting the benefits of the subsidies. Brian Bethune, an economics professor at Boston College, commented on the proposal, saying that the plan is completely untenable from an economic perspective.

In a supply-constrained environment, fiscal stimulus may exacerbate inflationary pressures.

Brian Bethune stated that the international oil price exceeded $100 per barrel due to the US-Iran conflict, coupled with escalating trade frictions between the US and countries like Canada, leading to continued supply-side problems that pushed up prices. Continuing to increase household consumption expenditure in the context of insufficient supply will only worsen the inflation problem. He used the analogy of simultaneously bailing water out of a ship and drilling a hole in its hull. He cited the pandemic as a prime example, noting that large-scale fiscal stimulus directly accelerated inflation. A 2023 study by the St. Louis Federal Reserve showed that fiscal stimulus during the pandemic pushed up US inflation by approximately 2.6 percentage points. The 2021 US Relief Plan indirectly boosted prices by increasing cash income for residents, with the US CPI reaching 9.1% in June 2022, a high since 1981, before currently falling back to 3.4%. Heather Long, chief economist at the Navy Federal Credit Union, said in an email that Americans welcomed stimulus checks during the pandemic, and many families facing tight budgets today would similarly expect a $5,000 subsidy. However, she stated that this would only bring short-term benefits, followed by long-term pain, as the policy would exacerbate inflation and push up borrowing costs for housing, automobiles, credit cards, and businesses. White House spokesman Davis Ingle responded to the inflationary risks of the proposal, saying that the president has repeatedly proven skeptics wrong, contrasting sharply with the Democrats' record of high inflation during their administration.

Trillions in spending widen the fiscal deficit, potentially forcing the Federal Reserve to raise interest rates.

With inflation currently exceeding the Federal Reserve's 2% target, the market anticipates a rising probability of a rate hike at the September meeting. Heather Lang stated that the risk of persistently high inflation is increasing, and the Fed should raise rates in September, citing the continued rise in prices as a key factor. High borrowing costs coupled with rising prices of necessities like food and gasoline have become the primary economic pain point for American households. Brian Bethune argued that distributing this estimated $1 trillion cash subsidy in this environment is a mistake. He believes the policy will widen the fiscal deficit, and with the Federal Open Market Committee facing inflation above target, this policy could push the economy towards crisis. Data released by the U.S. Treasury Department in August showed the federal fiscal deficit approaching $1.8 trillion. Brett House, an economics professor at Columbia Business School, stated that direct subsidies will further increase the already high federal deficit, raise inflation and interest rates, and weaken the overall U.S. economy. He also believes this promise of benefits is unlikely to materialize. While the president has repeatedly proposed the idea of directly distributing funds to the public, such universal welfare programs require congressional legislation to be implemented. Trump had previously proposed a $5,000 "DOGE bonus" and a $2,000 "tariff rebate," both of which ultimately failed to materialize. He added that even if the president fulfilled his promise of a new bonus, this politically charged policy could be halted by the courts or the subsidies could be subsequently recovered through taxes.

Conclusion

A $5,000 universal benefit check is an attractive campaign promise on the eve of the midterm elections, but economists see the plan as harboring significant fiscal and inflationary risks. A one-time subsidy of trillions of dollars would widen the US fiscal deficit, stimulate consumption in a supply-constrained environment, push up price levels, and force the Federal Reserve to further tighten monetary policy. Given these multiple constraints, the proposal faces extremely high barriers to implementation. Even if it is implemented, the benefits to the public from the subsidy are likely to be swallowed up by rising prices and higher borrowing costs. This campaign proposal has also kept global markets focused on US fiscal discipline and the Federal Reserve's subsequent monetary policy moves.