FREE NEWSLETTER
A $5,000 payment for every adult citizen. Talk about feeling jealous from the other side of the pond. So I thought I’d create a thought experiment to make myself feel better.
On a purely personal level, it’s easy to imagine how that cash might be useful. Perhaps to pay down high-interest debt, top up an emergency fund, or buy a low-cost index tracker. But what happens if we step back and think about the economy as a whole?
To explore the idea, consider the numbers on a national scale. Writing a $5,000 check to roughly 270 million adult Americans would inject around $1.3 trillion of immediate cash into thankful hands.
Economists often debate how such massive cash infusions behave in the real world. One line of thought suggests that if production, supply chains, and consumer goods remain static, flooding the system with new money risks creating a classic “demand shock.” That’s too many dollars competing for the exact same amount of goods and services.
What might that look like for an individual household budget? Imagine a family spending $65,000 a year on basic necessities. Suppose a $1.3 trillion surge nudged baseline inflation up by just 2.5 percentage points above normal over the following two years. Suddenly the dividend doesn’t look quite as sweet.
Year One: elevated prices might add roughly $1,500 in additional household expenses.
Year Two: compound price increases could add another $2,000 to that same budget.
After two years, the family would have spent nearly $3,500 to maintain their existing standard of living. By year three, the initial $5,000 check would be largely absorbed. Meanwhile, the elevated price floor on daily expenses would probably be permanently baked in, thanks to the sticky nature of price increases.
Of course, macroeconomics is rarely neat, and economic outcomes are never guaranteed.
And the biggest flaw in my thought experiment is this: I’m just a slightly envious Irish savage looking on from the far side of the Atlantic, who probably doesn’t have a clue what he’s talking about. For all I know the Fed steps in, half the money gets saved not spent, and this whole scenario never happens. But at least it makes me feel better 😉
Let’s talk about finances. $40 trillion on the credit card with annual interest payment of $1 trillion. No matter though as we are adding $1.7 trillion on that card this year. Then when we receive a tax refund we spend it.
A model for every American household to follow-and many do. Yeah, and they aren’t putting enough in their retirement fund along the way. Here’s more good news, the 30 year mortgage rate just hit 7% again.
This household needs a good financial advisor.
Dick, good analogy! Makes me wonder what our fictional households would do if they had a personal money-printing press to inflate away the debt.
“Economists often debate how such massive cash infusions behave in the real world.” Is there really any debate after seeing the effect of the federal give aways during COVID? The only debate that I see by economists is whether it was a good idea. We are still experiencing the inflation costs of that massive infusion with a Federal Reserve which is afraid of raising interest rates to get inflation back to THEIR target.
Too bad the person who came up with this scheme is not as intellectually curious as you. Mark Crothers for president. OOPS, there’s that constitution getting in the way again. 😁
David, I honestly wonder about anyone — left, right, or center — who wants a high-pressure political job like that. Herding cats has to be easier than trying to please the majority. I’ll stick to what I do best: complaining about whoever’s in charge 😂
I think they do it for the “fringe benefits” if you know what I mean.
Without being political and just trying to inject some humor, I plan to deposit this $5000 check in a phantom account that has my DOGE check and my tariff refund.
I plan to fill out deposit slips for my $5000 DOGE check, my $2000 tariff refund check, and my $5000 inflation stimulus check. Winner, winner, chicken dinner.
Nick, that’s a great, non-political idea. Money does intersect with politics sometimes, and it’s hard to comment without sounding partisan — my finger hovered over “post” for a while there. But it’s worth exploring the possible economic implications without straying into political territory.
While I agree with much of what you say, here, Mark, I would add that not all the goods that people might purchase have a fixed supply, and wages would likely increase year to year in the face of the inflation you describe. And in the case, particularly, of low income families, the $5K kicker would certainly be better to receive than not.
All that said, not a proposal I can get behind – the costs would exceed the benefits.
John, you’re probably right — the devil’s always in the economic detail. My post was more a quick, knee-jerk thought experiment over my first morning coffee after reading the financial news. By my second coffee, I’d have realised wages would likely rise to compensate.
Good job, Mark. I’m not a smart man, but it seems to me that adding over a trillion bucks to an economy not in recession will indeed cause inflation. Still, if we’re going to blow the budget up even worse than we’ve already accomplished, could they just give us a little bit more so I could buy that Triumph BONNEVILLE T120 ELVIS PRESLEY LIMITED EDITION motorcycle that I’ve been lusting for?
Dan, there’s actually a nicely discounted 2025 Triumph Bonneville T120 Elvis Presley Limited Edition at Frontline Eurosports in Salem Virginia right now. I was in there last week lusting over it. https://www.frontlineeurosports.com/inventory/display/new/2025/Triumph/Bonneville-T120/SMTD40HL4STCB3085/
John, my wife is laughing at your and Mark’s encouragement to help me buy that bike. And make no mistake, that Bonneville or one similar to it would be my dream bike. I know some people won’t agree with me here, but at age 74, and with all the distracted drivers on the road, my riding days are behind me. I’m too old to recover from falling off a bike.
Thanks for commenting, and thanks for that link. That’s a decent price for a beautiful motorcycle.
Dan, I suspect you only commented to get me looking at a cool bike… and what a bike it is. Definitely worth taking on some debt for. Though it does raise the question: should that purchase be financed by private or public debt?
Thanks, Mark. You gave me something to think about. And since this is a politics-free forum, you carefully avoided stating an opinion. I am grateful for that too. I’m heading out to a politics-free meeting. Hope I don’t have to stand up to say “No politics here, please!” 😉
Linda, my friends would tell you I find it nearly impossible to keep an opinion to myself. But needs must 😉
I don’t know, Mark…. I think everyone deserves your opinion😁
Difficult to think ultra logically about it given the obvious insanity (and many other things) of the proposition. I guess you could look at behaviour in states that have had resident “dividend” checks like Alaska or the Colorado weed dividend.
Alternately some wise people pay down debt shocking the banking industry or put it into funds generating further growth for all.
BB, of all the unlikely outcomes here — including the actual odds of a payment ever happening — investing the funds would still be the best course of action.
Free Newsletter
Arrives weekly.