One conservative expert warns that sending out these checks could mean inflation would 'come back with a vengeance'

President Donald Trump and top adviser Elon Musk have signaled interest in a proposed payout to taxpayers that would be funded by savings from their controversial streamlining effort known as the Department of Government Efficiency.

Musk, the billionaire Tesla (TSLA) chief executive, promised on Tuesday to talk with Trump about the "DOGE dividend," and in a speech on Wednesday Trump said his administration is looking into it and touted the savings that could be achieved.

"There's even under consideration a new concept where we give 20% of the DOGE savings to American citizens, and 20% goes to paying down debt, because the numbers are incredible, Elon, so many billions of dollars - billions, hundreds of billions," Trump said at an event in Miami, with Musk and other corporate leaders in attendance. "We're thinking about giving 20% back to the American citizens and 20% down to pay back debt."

The DOGE dividend could amount to about $5,000 per taxpaying household, according to James Fishback, chief executive of hedge fund Azoria and a former employee of Greenlight Capital.

Fishback has proposed the payout in social-media posts and has drawn a response from Musk, who wrote: "Will check with the President."

DOGE's proponents have said they are aiming to save $2 trillion over 10 years - although Musk has walked back that goal - and Fishback has suggested taking 20% of that amount, which would be $400 billion, and paying it out as a tax refund to the roughly 79 million U.S. households that are expected to pay federal income taxes for this year.

There are multiple challenges to making the payout a reality, however.

For starters, the U.S. House of Representatives and the Senate - both narrowly controlled by Republicans - are facing a lengthy and contentious process for delivering on the GOP promise to extend their party's 2017 tax cuts before they expire at the end of this year.

There are expectations that Congress will manage to extend the cuts in some way before January, but the effort will be complicated by fiscal conservatives in the House, as well as by Trump's campaign promises of new tax breaks. Those included no longer taxing tipped wages, Social Security benefits or overtime pay, as well as establishing new tax deductions for families with newborn babies, for home generators and for interest on car loans.

From MarketWatch's archives (October 2024): All of Donald Trump's and Kamala Harris's proposed tax breaks - in two charts

The total 10-year cost of Trump's tax priorities is between $5 trillion and $11 trillion, according to one watchdog group, the Committee for a Responsible Federal Budget. That's as the national debt has topped $36 trillion, according to a tracker from the Peter G. Peterson Foundation.

Given the fiscal picture of the U.S. federal government, experts are criticizing the idea of a DOGE dividend, which is reminiscent of the COVID-19 stimulus checks that went out during the first Trump administration and under President Joe Biden.

"Love what DOGE is doing, but this is a bad idea," Preston Brashers, a research fellow for tax policy at the Heritage Foundation, a conservative think tank, said in a social-media post. "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."

In a similar vein, Matt Glassman, a senior fellow at Georgetown University's Government Affairs Institute, said: "If the plan here is to take hypothetical savings over a 10-year period and cut checks for 20% of it up-front, that sounds both inflationary and likely pretty fiscally reckless."

Fishback has pushed back on the inflation concerns around his proposal.

"Tax-paying households are more likely to save (not spend) a transfer payment like the DOGE Dividend as consumption is a lower share of theirincome," wrote Fishback, who is known in part for clashing with Greenlight Capital, his former employer, over whether his role had been "head of macro" or not.

Now read: Inside the fight to stop Elon Musk and 'DOGE' from accessing your personal financial information

And see: Five things we learned last week about inflation - and why it's so hard to kill the beast

-Victor Reklaitis

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