The Illogical Cycle of Borrowed "Savings": The DOGE Dividend Fallacy

As the U.S. federal budget deficit continues to soar—reaching $1.8 trillion in fiscal year 2024, an 8% increase from the previous year—President Donald Trump’s administration has placed a renewed focus on cutting wasteful government spending. A key player in this effort is the Department of Government Efficiency (DOGE), an initiative spearheaded with the backing of Elon Musk, which claims to have already saved taxpayers $55 billion by eliminating bureaucratic inefficiencies.

Amid these developments, an idea has emerged that sounds promising at first glance: the DOGE Dividend. Proposed by James Fishback, this plan suggests that 20% of DOGE's savings should be returned to taxpayers. If DOGE meets its ambitious target of cutting $2 trillion in federal spending, this would mean checks of approximately $5,000 per household. The proposal has gained traction, with Musk endorsing it and Trump’s administration reportedly considering its implementation.

At face value, the concept of returning savings to taxpayers sounds reasonable—after all, taxpayers fund the government in the first place. However, a closer examination exposes the fundamental flaw in this logic: the federal government is not operating with a surplus but rather with an ever-growing deficit. Simply put, there is no actual surplus to distribute—any money returned would have to be borrowed, directly contradicting the very notion of "savings."

The Flawed Logic of Borrowing to Prove Savings

The purpose of savings is to reduce borrowing, not to create an excuse to take on additional debt. If the government truly wants to save money, unspent funds should lead to lower deficit spending, reducing the need for borrowing. Instead, the DOGE Dividend proposes taking these supposed savings, borrowing a percentage of them, and then sending checks to taxpayers—thereby expanding the deficit rather than shrinking it.

This is equivalent to an individual claiming to have saved money by not buying a new car, then immediately taking out a loan to reward themselves with 20% of those "savings." In reality, no money has been saved—it has merely been shifted from one debt obligation to another.

The illusion of savings becomes even more absurd when considering the staggering cost of servicing the national debt. The U.S. debt has surpassed $36 trillion and is expected to exceed $37 trillion within months. In fiscal year 2024 alone, the federal government spent $1.2 trillion just on interest payments—more than what was spent on national defense or Medicare. This means that even before any new spending occurs, taxpayers are on the hook for an ever-growing interest burden that consumes a massive portion of federal revenue. Every dollar borrowed to fund something like the DOGE Dividend will carry additional interest costs, pushing the country further into unsustainable debt. Until the national debt itself is eliminated, every government expenditure—whether labeled as a refund, relief, or investment—is ultimately financed through more borrowing.

Are These Even Real Savings?

The biggest flaw in the DOGE Dividend narrative is the assumption that these are actual "savings." In reality, as long as the federal government continues to run a deficit, there are no savings—only reduced borrowing at best. The U.S. still operates with a $1.8 trillion annual shortfall, meaning that any money DOGE claims to have saved is merely a reduction in how much the government would have borrowed. Until the deficit is eliminated entirely, there is no surplus—just a slightly smaller hole in an ever-expanding pit of debt. Calling this a "dividend" is misleading, because dividends are paid from profits, not from a government still drowning in red ink.

The Economic Ripple Effect

Beyond the obvious fiscal contradiction, the DOGE Dividend also raises concerns about its broader economic effects. Injecting billions of borrowed dollars into the economy could have unintended consequences, including inflationary pressures similar to those experienced during past government stimulus efforts. The logic behind the plan assumes that taxpayers will benefit from direct cash infusions, but in reality, any immediate gains could be offset by long-term economic instability.

A Smarter Path to Fiscal Responsibility

If the administration is serious about cutting waste and reducing government inefficiency, then the logical next step should be using savings to lower the deficit, not redistributing borrowed funds to taxpayers. Rather than borrowing 20% of these so-called savings, the government should focus on ensuring that any budget reductions translate into actual deficit reduction. That would be the true test of fiscal responsibility.

Until then, the DOGE Dividend remains an illogical exercise in political optics rather than sound financial governance.

Bill White Says...

“Calling it 'savings' while borrowing 20% to hand out checks is like claiming you lost weight by loosening your belt—nothing actually changed, but you sure made it look good for the cameras.”