Trump’s $2,000 Tariff Dividend Doesn’t Add Up — Here’s Why
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What are the latest market movements and how do they set the stage for the episode?
Today's number twenty three. That's how many kilograms of pasta the average Italian eats every year, more than any other nationality. We try to come up with a good joke about Italians, but we can only do so much. Money market mess. If money is evil, then that building is hell.
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Welcome to Prof G Markets. I'm Ed Elson. It is November 12th. Let's check in on yesterday's market vitals. The Dow closed at a record high on continued optimism for an end to the shutdown. The SP also rose, however, the NASDAQ declined as NVIDIA dragged down the index. Nvidia shares fell 3% after SoftBank sold its entire stake in the company to fund their other AI efforts. Meanwhile, the dollar slid after new ADP data indicated a slowing labor market and Finally, AI infrastructure company Coreweave dropped 16% after issuing weaker than expected guidance for the year. Okay, what else is happening? A new twist in the tariff story emerged this week, and that is the tariff dividend. Over the weekend, President Trump proposed a $2,000 tariff dividend for all Americans except for high income earners.
He says the dividend will be funded by the revenues that the tariffs bring in. He also wrote on Truth Social: quote: People who are against tariffs are fools. We are now the richest, most responsible. Country in the world. However, the White House has not released any plans on what this dividend will actually look like. So the tariff dividend, essentially the stimulus check of 2025. Perhaps it'll happen, perhaps it won't happen. It isn't clear how serious this proposal actually is. But if it does happen, well, it will have pretty significant impacts on our economy and also our nation. So to help us make sense of this proposal, we are speaking with Justin Wolfers, Professor of Economics and Public Policy at the University of Michigan.
Professor Wolfers, thank you very much for joining us again on ProfT Markets.
Wait, if you call me Professor Wolfers, do I have to call you Mr. Ed?
You do, that's the rule. Okay, a horse to horse. Of course. No one can
talk to a horse, of course. That is, of course, unless the horse is the famous Mr. Ed. Yep.
Well, it's good to see you again. We want to get your reactions to this $2,000 tariff dividend. Uh what do you make of this? What are your thoughts? Does this make sense?
Is this a swearing show or a no swearing show?
This is a
swearing
show.
Is swearing good for the soul or bad for the soul? So I'm gonna give you a hot take. Dumbest idea I've heard. In my head, there was an expletive in between. Um, okay. Here's how this looks like on average. Take money from Americans through tariffs, pull it in through the IRS, send it over to the check printing department, and send it out to Americans. In the best possible scenario, we come out even. The best thing we can do is not harm people. Okay. In reality. Is it a good idea for the government to take money with one hand and then just send it straight back out? Remember on average, because there's going to be differences across people. Uh no. I am so old, Ed. So very old. I remember when Republicans didn't like taxes.
Their argument was if you tax my income then I'll work less hard. Every extra hour means less take home pay, less stuff. The same thing, by the way, applies to a consumption tax. If I work a certain number of hours get the same amount of money, but now I can't afford as much stuff.
How does President Trump’s proposed $2,000 tariff dividend work and why is it controversial?
That's less of an incentive to work. A tariff is a form of a consumption tax. And so exactly the same logic that Republicans use to say we shouldn't tax income also applies to taxing consumption and also applies to tariffs. And so then the idea of pulling money in Bearing all those economic costs that Republicans think we shouldn't bear unless absolutely necessary. And then the only necessary thing that happens is we send the money straight back out and on average people come out exactly the same. Is absurd on its face. Yeah. So here's the thing. If you want to reduce how much tariffs are hurting Americans I have this whole much simpler plan. Don't levy the tariffs.
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Chapters
4 chapters
1
What are the latest market movements and how do they set the stage for the episode?
0:00–4:02
2
How does President Trump’s proposed $2,000 tariff dividend work and why is it controversial?
4:02–9:30
3
What does Professor Justin Wolfers say about the economic feasibility of the tariff dividend?
9:30–22:24
4
Why does the host argue the tariff dividend is unrealistic and what alternatives are suggested?
22:24–28:18
Speakers
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