Why Rebates Are a Trap That Would Destroy Our Financial Future

Economic populism is not conservative; it’s inflationary.

This week, President Donald Trump floated two insanely bad ideas. The first was once again suggesting the idea of using tariff revenue to issue rebate checks of $2,000. The second was the idea of a 50-year home mortgage.

Our president likes to spitball ideas into open mics. I have always disliked that. As the old saying goes, a president’s words can move markets and mobilize armies. Spitballing puts actual lives in jeopardy. And when it comes to economic policy, it necessarily gives pause to the Fed as they work to control interest rates and liquidity. That same Fed that the president then criticizes ad nauseam for not moving quickly enough.

Rebate checks are an insanely bad idea. As I have said in this space on countless occasions, the national debt is the greatest threat facing our nation. And rebate checks ignore that our current national debt as I type this sentence is $38,177,980,067,868.

The last eight digits of the debt clock were moving so fast that I had to take a screen shot to be able to report them to you. Eight digits is tens of millions of dollars!

But let’s say for the sake of argument that we didn’t have a national debt or that we were so callous that we didn’t care if our kids and grandkids were saddled with paying the debt for us. Even then, rebate checks are an insanely bad idea. That is because the idea assumes there is actually going to be revenue available to give back.

Tariffs are but one component of the monies that the federal government collects. In fact, last year they made up only two percent of that revenue. Over 90% of federal government revenue comes from taxes – individual, payroll, and corporate. And we don’t yet know what those revenues will be for this tax year or any moving forward. The Big Beautiful Law locked in the Trump tax rates, removed taxes on tips and overtime, and increased several deductions. What will that do to federal income tax revenue? The job market is slowing with signs that more and more entry level jobs will be replaced by AI. What effect will that have on payroll tax revenue? And of course, corporations have had to shoulder the lion’s share of the cost increases from tariffs, unable to pass all increases on to the consumer. How will this impact corporate tax revenue?

Beyond that, the President’s projections of tariff revenue are just that, projections.

They assume the current rates will stay in place, which is a stretch given his penchant for shooting from the hip, his transactional form of negotiating, and his apparent susceptibility to flattery. But even if the rates stayed the same, even if the tariffs stayed in place, and even if they are not struck down by the Supreme Court, the projections also assume no contraction in the economy. They assume consumer spending doesn’t slow, and with it imports that are subject to tariff.

I guess what I am saying is that giving rebates on projected increases in one of the smallest pieces of federal revenue at a time when our debt load is out of control is asinine. But of course, we have a President that worries more about how it plays than the end results. And giving people money plays very well. But what we need now is not some ill-advised Robin Hood doling our own money back out to us and wanting to be celebrated for it.

We already give people more than we have to give. In fiscal 2025, the federal government brought in $5.23 trillion and spent $7.01 trillion. On what planet do those rebate checks not bounce.

We needn’t look too far back for an example of what unnecessary or excessive government refunds can do. In 2020 – the last year of President Trump’s first term in office and the first year of the Covid pandemic – the federal government issued two rounds of stimulus checks. The first was for $1,200 and the second for $600. This second-round check, in December 2020, would have been $2,000 had President Trump gotten his way. In addition, for several months the federal government paid $600 per week in unemployment benefits over and above the regular state benefits. Further, it allowed penalty-free withdrawals from retirement accounts, froze repayments and interest accruals on student loans, and created loan programs for businesses, even those businesses in no danger. The result of this excess government spending was severe inflation. Inflation, in its simplest terms, is too much money chasing too few goods. The government put excess money into the economy and, because the supply chain had come to halt, that money was chasing fewer goods.

It is fascinating to me that what many refer to as Biden inflation actually started before the man even took the oath of office! To be sure he is not blameless in the matter of inflation, or on countless other issues. But one of his first decisions contributing to that inflation, was the third round of stimulus checks, the $1,400 in March 2021. But that $1,400 was the additional $1,400 that President Trump wanted to go out in December 2020.

To be fair, governing during the pandemic was hard. Mistakes were made, many with nothing but good intentions. But we need to learn from the past.

Whether the too few goods come from the Covid supply chain issues or a tariff-inspired slowdown in business production, the last thing the government should be doing is ensuring there is too much money chasing those goods.

And of course, when you have created an inflationary environment already through excessive government spending, there is only one thing left to do to compound the problem. You give people a longer term to pay for something that inflation has put out of their reach. We have already seen an increase in people borrowing on credit cards for daily necessities. We’ve already seen car payment terms stretch out to an average of 69 months, with a staggering 22% of loans at an 84 month term. We have seen a huge increase in pay over time purchases on everything from airplane tickets to furniture. So, right on cue…the 50-year mortgage.

We have decimated the ability to buy a starter home. So instead of controlling government spending so we can bring down rates, instead of investment in housing supply to bring down prices, let's just lower payments by letting people make those payments over a longer term. The end result…more people would enter the housing market than our current supply could support. So housing prices would rise even further, making housing even less affordable. Spitballing into open mics.

The debt clock now that I am done writing and proofing this post now stands at $38,193,777,916,711, an increase of almost $16 billion with a "B" since I started writing this post.