Facing growing public pessimism about his handling of the economy, US President Donald Trump has fired off a flurry of proposals to address consumer concerns. Trump previously downplayed concerns about cost of living, insisting the outlook had improved during his nine months in office. He said affordability was a “new word”, and a “con job” by Democrats. But he has focused on the issue with some urgency since his Republican Party’s poor performance in last week’s off-year elections across a handful of states. He is again proposing an idea to give most Americans a $2,000 (£1,500) “subsidy”.
In reality the payments would operate more like a rebate for federal revenue generated by his tariffs on foreign imports. The rest of the tariff revenue, he has said, would go to reducing the federal budget deficit. According to economists, however, the tariff revenue isn’t nearly enough to cover the $2,000 rebate plan, even with the most generous assumptions and a narrow definition of those with incomes to qualify. “If we take something like a cut-off of $100,000 a year in income, the minimum cost would be about $300bn, which would absorb all of the tariff revenue that’s been taken in so far and would require some deficit financing,” says Erica York, vice-president of tax policy at the non-partisan Tax Foundation.
What’s more, according to Ms York, the tariff refunds might end up being counterproductive by driving up prices as more money is pushed into the American economy. Covid-era stimulus payments may have created a similar dynamic, albeit in a larger scale.“It would give large sums of money to households who are more likely to consume that than save it,” she said. “So we would have more dollars chasing goods in the economy.”
On Sunday, Treasury Secretary Scott Bessent seemed to downplay the possibility of such payments, saying that the revenue gains from the tariffs would be reflected in lower tax rates paid by Americas next year under the provisions of Trump’s 2025 “Big, Beautiful Bill” spending package, which Congress passed in July…
Source: bbc.com/new
