Douglas Holtz-Eakin Warns Trump Dividend Plan Risks Inflation

Former Congressional Budget Office Director Douglas Holtz-Eakin criticized a proposal by President Donald Trump to issue $5,000 dividend checks to U.S. citizens. Holtz-Eakin described the estimated $1.2 trillion stimulus as a "huge policy error" that would likely trigger inflation and force the Federal Reserve System to raise interest rates to prevent the economy from overheating.

Holtz-Eakin argued that failing to hike rates in response to such spending would undercut the credibility of the Federal Reserve. This warning comes amid significant fiscal pressure, with 10-year Treasury yields exceeding 5% and the U.S. government borrowing $2 trillion annually, half of which is used to cover interest on existing debt.

Beyond the dividend proposal, Holtz-Eakin questioned the transparency and effectiveness of strategies employed by Treasury Secretary Scott Bessent. These include Treasury buybacks and currency interventions involving the euro and the yen.