Stimulus Checks and Partisan Dishonesty

There’s so much crazy happening on a weekly daily hourly minute-by-minute basis that it’s basically impossible to keep up, much less decide which bit of insanity to respond to.

One of the classes I’m teaching this semester is a graduate course on Public Budgeting and Finance. You can imagine what it’s like to teach the nuts and bolts of the federal budgeting process while trying to wrap your arms around the daily barrage of tax proposals and spending commentary coming out of Washington, D.C.

Take a recent example. One minute some guy¹ on the internet is tossing out ideas about what to do with all of the money DOGE is going to save the American “taxpayer” and then next minute the president is telling reporters on Air Force One that he loves the idea of sending $5,000 “dividend checks” to millions of American families.

The president’s remarks set off a "serious" debate about whether DOGE can actually deliver enough “savings” to allow the president “refund” that much money to taxpayers and whether it would be inflationary to do so. Here’s Yahoo! News:

DOGE's proponents, were skeptical. “Love what DOGE is doing, but this is a bad idea. There’s no need to send 'dividend checks.' The dividend we get from slashing spending is that it brings inflation into check. But if the government sends out stimmy checks, inflation will come back with a vengeance," wrote Preston Brashers, a tax policy researcher for the Heritage Foundation…

The real life numbers aren't making it clear if that could even happen. So far, DOGE has reported that it's already uncovered and cut back $16 billion in federal contracts. It's supporters, including Fishback, claim the agency has slashed $1 billion in spending per day. Those numbers are widely disputed…

Of course, if it’s something the president wants, then all the president’s men will line up to defend it. That includes Kevin Hassett, the chair of Trump’s Council of Economic Advisors (CEA), who is dutifully reassuring everyone that sending out $5,000 payments won’t re-agitate inflation.

“If we don’t spend government money and we give it back to people, then if they spend it all, you’re even,” National Economic Council Director Kevin Hassett said during the afternoon press briefing. “But they’re probably going to save a lot of it, in which case you’re reducing inflation.

Partisan Dishonesty

I’m not going to speculate on the inflationary impacts of the proposed checks. There’s zero evidence that this is a remotely serious plan, and it would depend on too many other variables where there just isn’t enough clarity. What bothers me is how utterly partisan and dishonest many economists have become when it comes to attacking or defending things like this.

Hassett was advising the White House in 2020, when Trump signed the multi-trillion dollar COVID-relief packages that sent the first two rounds of stimulus checks to most Americans. Those were apparently innocuous, but Trump and his economists blamed the third round of stimulus checks, those distributed by democrats in the spring of 2021, for helping to fuel the worst spike in inflation in four decades.

I’m not here to argue that the third round of payments didn’t contribute to inflationary pressures. There is ample evidence that they played a relatively modest role.

What everyone seems to have forgotten is that Trump didn’t want to sign a bill that included $600 stimulus checks in December 2020. He demanded $2,000:

I am asking Congress to amend this bill and increase the ridiculously low $600 to $2,000, or $4,000 for a couple.

Trump had to settle for $600 and then—three months later—witness Biden signing the remaining $1,400 into law. Raise your hand if you think Hassett (and other republicans) would have spun a different inflation tale if that same $2,000 had arrived in one big beautiful red envelope.

1. His name is James Fishback, and founded an investment firm while hanging out at Trump’s Mar-a-Lago estate in Florida.