In reaction to President Trump’s proposal that Americans receive a $5,000 “dividend” I think an actual dividend is the last thing we should want. In general in a company dividends are paid from profits, i.e. revenue – expenses. The U. S. government is presently running at a loss, i.e. we are “borrowing” to pay our bills.
In the instances in which companies running at losses (expenses exceed revenues) pay dividends it is generally borrowed and believed to be a temporary move. Over the last century the federal government has operated at a surplus in 17 nonconsecutive of those years. Five of those were in the 1920s so that’s hardly a temporary condition.
But the bad news gets worse. For decades the government’s commonly cited consolidated deficit included Social Security’s cash flow. That mattered particularly after the 1983 reforms, when Social Security accumulated substantial surpluses: those surpluses made the government’s overall fiscal position look better even while the rest of the federal government continued to run deficits. Look instead at the government’s on-budget balance excluding Social Security and the record is considerably worse. The federal government has been financing its ordinary operations with borrowing for almost the entire modern history of Social Security.
The irony is that a $5,000 “affordability dividend” could actually make the affordability problem worse. Borrowing more than a trillion dollars and distributing it as cash does not produce another trillion dollars’ worth of houses, food, automobiles, medical care, or other goods and services. It increases the number of dollars available to bid for the same supply of them. To the extent that additional demand outruns additional production, the result is higher prices. And to the extent that the additional federal borrowing raises interest rates, financed purchases become more expensive as well.
C’mon, Dave. Nice technical treatment.
This was red meat. It will never happen.