Krugman: "Tariff Dividend Payout Is a Terrible Idea"
"$2 Trillion Fiscal Deficit... Completely Irresponsible Fiscal Management"
As President Donald Trump announced a plan to distribute dividends of $2,000 (approximately 2.9 million KRW) to all citizens except for some high-income earners using tariff revenues, Paul Krugman, Nobel Laureate in Economics and professor at the City University of New York, strongly criticized the proposal as a "terrible idea" and a "dangerous populism" that undermines fiscal soundness. He also diagnosed that, amid ongoing job losses and persistent inflationary pressures, Americans' perception of the economy has sharply deteriorated.
When U.S. President Trump announced that he would distribute dividends of $2,000 (approximately 2.9 million KRW) to all citizens using tariff revenues, Paul Krugman, Nobel Laureate in Economics and professor at the City University of New York, criticized the move. Photo by Getty Images
"The Economy Is Not on the Brink of Collapse, but..."
In an interview with Bloomberg TV on the 10th (local time), Professor Krugman stated, "President Trump claims the economy is doing well, but the reality people are experiencing is the exact opposite," adding, "Consumer sentiment is at a very serious level."
He explained, "The Consumer Price Index (CPI) is still hovering around 3% annually, which is well above the Federal Reserve's target of 2%. Real wage growth has slowed, and the labor market has frozen due to the impact of large-scale layoffs." He continued, "The current consumer confidence index is even lower than during the 2022 inflation period, the 2008 financial crisis, and the stagflation of the 1980s," pointing out that "people have a very negative outlook on the economy."
He added, "While the economy is not on the verge of collapse, there are clear warning signs everywhere. This is an extremely difficult time for young job seekers and those who have been laid off." This diagnosis, combined with the recent prolonged federal government shutdown, is said to be further fueling public anxiety. Krugman commented, "The shutdown is an event that directly impacts the vast majority of people outside the stock market. As economic slowdown and political instability combine, public discontent is exploding."
"Trump's $2,000 Tariff Dividend? It's a Fiscal Time Bomb"
Previously, President Trump proposed a plan to use tariff revenues to provide $2,000 (about 2.9 million KRW) per person to American citizens. However, Professor Krugman criticized this as "a completely fiscally irresponsible measure."
Professor Krugman said, "This is truly a terrible idea. While revenues are falling and deficits are ballooning, returning tariff revenues to the people is a completely fiscally irresponsible move." He warned, "The U.S. fiscal deficit is now approaching $2 trillion, even though we are not in an emergency or at war. Implementing a cash dividend in this situation would cause fiscal soundness to deteriorate uncontrollably."
"The Public Has Already Begun to 'Feel the Economic Downturn'"
Krugman stated, "While it is not as severe as the 2008 financial crisis when everything fell off a cliff, people are now beginning to feel the worsening economic situation firsthand." He emphasized, "The current situation is a combination of structural instability and political uncertainty, which is amplifying signals of a recession. What is needed now is not populist spending, but a restoration of long-term balance."
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