Elon Musk and the Department of Government Efficiency (DOGE) are slashing government spending, which could put more money in your pocket. The Tesla CEO has proposed distributing $5,000 dividend checks to Americans, based on his original goal of cutting government spending by $2 trillion.
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Despite massive budget cuts, DOGE still has a long way to go to reach its goal — which has been reduced twice, first to $1 trillion and more recently to $150 billion in its first year. As of May 2, 2025, the agency claims to have reduced government spending by $160 billion — $993.79 per taxpayer — according to its website. However, the “Wall of Receipts” on the site verifies less than $65 billion in savings.
It’s unclear if DOGE checks will actually happen, and if they do, they’re unlikely to be as much as $5,000. Here are five things you need to know about their potential impact on inflation.
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Where the Money Comes From Matters
“The government can only spend money through one of two ways — by taxing the public or borrowing the money,” said Ben S. Lies, MBA, RSSA, president and chief investment officer at Delphi Advisers. “If they tax the public in order to spend, it causes inflation indirectly by redirecting the money from what consumers want to what the government wants.”
On the other hand, if the government borrows the money, he said this will directly cause inflation.
“They are literally injecting new money into the economy and focusing it on a particular set of goods [and/or] services, which will increase in price due to increased demand,” he said. “Which will then flow through to the rest of the economy, because it is money that was not in the system prior.”
If the DOGE stimulus check comes directly from a decrease in government spending, inflation might slightly increase in the short-term, he said. However, it will have a deflationary effect in the long-term.
Conversely, if the stimulus check doesn’t stem directly from a decrease in government spending, it will cause inflation, he said. This is due to the borrowed funds being directly injected into the economy.
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Any Potential Inflation Won’t Be Realized Immediately
“Inflation can take a very long time to work its way through the system, so the inflationary effect of the stimulus will not likely be known for at least a year or two or maybe even longer,” Lies said. “You may see some very specific products or services increase in price, but on the whole, it won’t be noticeable for a while.”
He said the government returning money to citizens is deflationary, but only when a reduction in government spending is matched dollar-for-dollar. Any other moves will cause at least some level of inflation.
It Matters Who Gets the Checks
Previous stimulus checked were mostly distributed to lower-income Americans, but DOGE checks will likely be given to higher earners, said Sarah Maitre, CFA, CFP, founder and financial planner at Camriel Advisors.
“While a $5,000 check could make a meaningful difference for someone earning $50,000, it’s much less impactful for someone earning $500,000,” she added.
How the Money Is Spent Makes a Difference
Since high-earners don’t need a DOGE check to afford major purchases like a car or vacation, Maitre said many may opt to invest the money or put it in savings. This would minimize the impact on consumer demand, which leads to inflation.
Ultimately, she said how people use the money would be a key factor in its economic impact.
Timing Is Important
Uncertainty surrounding tariffs has brought the economy to a fragile state, Maitre said.
“If inflation is already a concern, these checks could add fuel to the fire,” she explained. “But if we enter a recession, they could help stabilize demand without driving prices higher.”
Timing is everything in life — including the impact a DOGE check could have on inflation.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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Sources
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Ben S. Lies, Delphi Advisers
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Sarah Maitre, Camriel Advisors
This article originally appeared on GOBankingRates.com: Could a DOGE Stimulus Check Spike Inflation Even More — or Lower It? 5 Things You Need To Know
