Q&A of the Day – How the ‘DOGE Dividend’ Would Work & How Big Checks Would Be
Each day I feature a listener question sent by one of these methods.
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Today’s Entry: Hi Brian for your Q&A- How would the DOGE dividend work? I understand that the concept is that half of the savings DOGE finds would go towards paying down debt and half would be sent back to taxpayers. What I’m not clear on is how this would work and whether the numbers actually work. With huge federal deficits how would there be a surplus of savings to be sent out?
Bottom Line: The questions you’ve asked are great questions and actually the recently floated idea of a “DOGE Dividend” wasn’t one that started with Elon Musk or anyone working within his Department of Government Efficiency. The idea was first advanced in a research paper called “The Case for a DOGE Dividend” that was advanced by James Fishback, the CEO of investment firm Azoria Partners. He then posted the paper to X and tagged Elon Musk – who responded to it by saying that he’d check with the president. Musk did, Trump liked it and then committed on it while in Miami on Wednesday. Quoting the president, a DOGE dividend would allow taxpayers to: “Participate in the process of saving us money”. “I love it”. And with that level of public support, what was a only a concept floated online a day earlier, became a potential policy position of the administration.
Before diving into the details of what would take place with a potential DOGE dividend, what’s especially instructive is how democratized policy has quickly become. Consider that the person who put the research paper together was simply hoping to catch Elon Musk’s attention with it by getting a conversation started online. Instead, it was instantly read and acted upon by Musk. Have you ever heard of a congressional representative who’s been so responsive to you? And they’re the ones who are literally tasked with representing your interests. That dynamic in this story shouldn’t be overlooked. The Trump administration is truly acting as though it’s your federal government as opposed to theirs (which, of course, it actually is). As for the details of how this would work...
According to the summation of the research paper, the DOGE Dividend works like this:
- DOGE is targeting $2 trillion in total savings
- Take 20% of DOGE’s total savings ($400 billion) and return it to the 79 million U.S. households that will be net payers of federal income tax in CY 2025 as a tax-refund check called the DOGE Dividend
- $400 billion in DOGE-driven savings divided by 79 million tax-paying households= $5,000 “DOGE Dividend” check per tax-paying household
That breakout should address most of the questions posed in today’s Q&A. As proposed, it’s not actually the case that half of the savings would go back to taxpayers with half towards paying down the debt. The actual breakout of DOGE savings as proposed would look like this:
- 60% net savings
- 20% debt reduction
- 20% DOGE dividend
Now, there’s also another dynamic in play. It’s only possible to use 20% of the savings towards debt reduction if there are significant revenue surpluses. A quick analysis of the situation shows that’s highly unlikely to be the case. The federal deficit over the past year was $1.83 trillion. Even if DOGE achieved $2 trillion in savings, which is what Elon Musk called the “best-case scenario”, there wouldn’t be a $400 billion surplus to be able to use to pay down the debt. In reality, even under the most optimistic cost savings objective, 80% would go towards cost savings with the ‘DOGE dividend’ likely to tip the country into deficit territory for the year.
With the federal debt now exceeding $36.5 trillion, the third largest expense is paying interest on the federal debt – which accounts for 13% of total federal spending. That immovable object significantly limits what we’re able to do fiscally without further adding to the deficit. The idea is straight forward. The political and fiscal reality of getting to those numbers isn’t. Now with that said, regardless of what other budget numbers end up being, there’s still the possibility of Congress authorizing 20% of DOGE’s savings through a refund to taxpayers.