|
| | | | Tariff Dividends: A Capitalist Solution to a Big Political Problem |
|
|
On August 20, 1907, President Theodore Roosevelt traveled to Provincetown, Massachusetts, at the very tip of Cape Cod, to lay the cornerstone of the new Pilgrim Monument. The event commemorated the 1620 signing of the Mayflower Compact—the first written framework for self-government in the Americas.
Building off this powerful symbolism, Roosevelt gave one of the most important speeches of his Presidency. In this pivotal moment, he conveyed a new way of thinking about economic policy.
Roosevelt would later call this approach The New Nationalism. The fundamental idea was that the state must act affirmatively to ensure that capitalism remains subordinate to democracy—to protect both capitalism and democracy.
President Donald Trump has expressed a deep admiration for Teddy Roosevelt, along with William McKinley. Roosevelt served as McKinley’s Vice President until he filled in as President after McKinley was assassinated in 1901. The two were the only former Presidents that Trump referenced in his inauguration speech.
Trump’s connection to TR seems both personal and philosophical.
As a man, Roosevelt embodied a vigorous and courageous attitude towards life. As a President, he believed government should selectively intervene in the economy to correct what he saw as severe and dangerous imbalances.
We view Trump’s latest economic policy proposal—rebates to American citizens on revenue collected from tariffs—as an idea that aligns with Roosevelt’s vision of American capitalism.
Yes, both tariffs and tariff rebates represent an intervention in the functioning of the free market. In this narrow sense, they have been described as anti-capitalist.
But policies like tariff rebates can help address wealth disparities—a pressing structural problem that has real potential to evolve into a major political threat.
Saddled with student loan and credit card debt, a high cost of living, unsustainable federal entitlement programs, and a labor market in which entry-level workers are getting replaced by AI, younger Americans are feeling economically disenfranchised.
Meanwhile, decades of rising asset prices have accrued to the benefit of a relatively small sliver of the voting public—especially within the Baby Boomer population cohort.
True socialist politicians like Zohran Mamdani, the New York City mayoral candidate, are on the rise and taking advantage of this disaffection. If practical solutions to this socio-economic problem are not found, we could see many more Mamdanis in the future… and not just in local elections. |
|
| |
| Trish breaks down the tariff dividend |
|
| |
Teddy’s fears
The big structural problem facing the American economy when Roosevelt was President was immense industrial consolidation. With the help of powerful bankers like J.P. Morgan, corporate interests in the late 19th century started getting organized under trusts and holding companies.
Historians estimate that by the start of the 20th century, nearly 50% of U.S. manufacturing output was produced by 1% of the firms. Standard Oil Trust, founded by John D. Rockefeller, was the poster child, controlling 90% of the oil refining market. |
|
| | Certain socialistic leaders propose to redistribute the world’s goods by refusing to thrift and energy and industry their proper superiority over folly and idleness and sullen envy…. We should all of us work heart and soul for the real and permanent betterment which will lift our democratic civilization to a higher level of safety and usefulness. - Teddy Roosevelt (8/20/1907) |
|
|
| Roosevelt in Provincetown - 1907 |
|
|
While consolidation likely led to scale efficiencies, it also led to price coordination and enormous profits for the “malefactors of great wealth”—a phrase Roosevelt used to describe the players behind the trust schemes.
His administration began to aggressively enforce the Sherman Antitrust Act of 1890 through landmark litigation against large companies in the railroad, oil and tobacco industries.
Wall Street did not like what he was doing and condemned him as a reckless reformer. But Roosevelt rejected the notion that government’s role was merely to stand aside and watch, no matter what was happening in the economy.
Instead, he insisted that democratic institutions had both the authority and the duty to regulate concentrated power and ensure that private enterprise remained a servant of the public good.
Parallels to today
Roosevelt was only 42 year old when he became the youngest President in history after McKinley was assassinated. He was later elected in 1904 after running a campaign based on the Square Deal platform, which was premised on fairness for workers, consumers and businesses.
The Square Deal—like the MAGA movement—emphasized balance. As Treasury Secretary Scott Bessent has discussed, the Trump administration wants both Main Street and Wall Street to succeed. |
|
| | For the last four decades, Wall Street has grown wealthier than ever before. And it can continue to grow and do well. But for the next four years, it’s Main Street’s turn. It’s Main Street’s turn to hire workers. It’s Main Street’s turn to drive investment. And it’s Main Street’s turn to restore the American Dream. - Scott Bessent (4/9/2025) |
|
| | Just as Roosevelt faced serious opposition as a result of his strong stance on antitrust enforcement, Wall Street and Corporate America have pushed back hard on Trump’s interventionism.
Tariffs have arguably been the most controversial policy, but there are other examples as well.
When the Trump administration recently negotiated a non-voting 10% stake in Intel (INTC) in return for federal aid, free market purists, like Senator Rand Paul, compared it to “socialism.”
Similar criticisms were leveled when Japan’s Nippon Steel acquired U.S. Steel. The Trump administration negotiated a “golden share” for the U.S. government that gave it veto power over key decisions like plant closures, technology transfers and future changes of control.
In August 2025, Trump conditioned semiconductor export licenses to China on the U.S. government receiving 15% of those revenues. Free market conservatives at the American Enterprise Institute called the deal “unconstitutional,” arguing it is an export tax.
Is Trump a socialist?
The charge that Trump is a socialist is rather absurd on its face. He is on a mission to shrink the federal government and cut regulations. He proudly made billions as an entrepreneur. His top economic priority is to drive private sector growth.
It is true, however, that Trump’s brand of economic populism conflicts with unfettered free market capitalism. But the opposite of unfettered capitalism (sometimes referred to as anarcho-capitalism, where the state is totally uninvolved in the economy) is not necessarily socialism.
Socialism is fundamentally based on belief in a large and powerful public sector with immense regulatory control over the private sector. It often involves extensive government ownership of enterprise.
Communism is an even more extreme form of socialism, where private property is forbidden entirely.
Don’t get us wrong. We have the utmost respect for the power of free markets and Adam Smith’s “invisible hand.” We believe the Trump administration does as well, as it is repeatedly looking for market-based solutions to problems.
We also believe that if government is going to intervene in the private sector, it should do so carefully, with an acute awareness of potentially unintended consequences.
But being pro-capitalist does not require a dogmatic commitment to laissez faire economics in all matters.
The inequality problem
When we shared our tribute to Charlie Kirk in September (Remembering and Honoring Charlie Kirk), we drew attention to specific comments he made about the very real economic challenges facing his generation and those even younger.
In a podcast that took place a few weeks before his death, Charlie described the economic crisis facing young people as a subject that was rapidly becoming his top priority. As he toured the country, he was coming to realize through his interactions with young people that economic anxiety was their biggest issue. |
|
| | We have spent too much money, borrowed too much money, we have deteriorated our currency, and the purchasing power every generation is getting weaker…. So you have a generation that is renting a lot more than it’s owning. So when you do not own something, why would you defend it? And so you find then political radicalization start to seep in because an entire generation is getting routinely cynical year over year as their net worth either stays at zero or goes into negative. - Charlie Kirk (7/21/2025) |
|
| |
Many of us know in a direct or at least anecdotal way how difficult it has become for younger Americans to get started in life and form families.
The cost of a four-year college degree in some cases is now approaching $400,000. Rents are high, mortgage rates are high, and house prices often are out of reach. The cost of child care is through the roof.
This is not just young people whining. Data support these claims.
Approximately 25 years ago, Americans under the age of 55 owned about 44% of the nation’s wealth. Today, that figure has fallen below 27%. |
|
|
| Wealth distribution by age cohort(2000 - 2025) |
|
| After the Global Financial Crisis, the Barack Obama administration dramatically expanded federal lending for student loans. Student loan debt skyrocketed.
Meanwhile, tuition hikes have outpaced inflation, validating the Bennett Hypothesis of former Reagan Education Secretary William Bennett, who predicted that lavish subsidies would simply drive up prices.
Federal government backed student loans went from $230 billion at the end of 2009 to $1.5 trillion by the end of 2024, a 550% increase in just 15 years. |
|
|
| Federal student loans(2000 - 2025) |
|
| House prices dipped in the immediate aftermath of the Global Financial Crisis, which was initially caused by a bubble in the housing market, but have surged again in recent years.
After the pandemic, the Federal Reserve flooded the economy with money, leading to unprecedented inflation and real estate price appreciation.
The House Price Index, which tracks the average price of an American home, has moved up more than 50% in just the past five years. This is good news for homeowners (including much of the Baby Boomer population), but bad news for young Americans looking to purchase their first home. |
|
|
| U.S. House Prices(2000 - 2025) |
|
| How the tariff dividend helps
Since Trump took office, tariff rates have gone up significantly. The Treasury is now collecting substantial tariff revenue.
Tariffs generated approximately $30 billion in August 2025, which translates to some $360 billion per year. According to the independent Committee for a Responsible Federal Budget, this figure could soon rise to $40 billion per month, almost $500 billion per year. |
|
| | We're going to do something, we're looking at something. No. 1, we're paying down debt. Because people have allowed the debt to go crazy. We'll pay back debt, but we also might make a distribution to the people, almost like a dividend to the people of America. - Donald Trump (10/2/2025) |
|
| | How much revenue the federal government actually raises through tariffs depends on the trajectory of tariff policy and other factors.
There are approximately 340 million U.S. citizens, but only about 150 million households. If $1,000 tariff rebate checks were sent to every U.S. citizen, it would cost the Treasury $340 billion (approximately the full amount of current run-rate tariff collections).
If tariff checks were sent to taxpaying households instead (it seems unlikely, for example, that children would receive the checks), the amount that could be sent would be much larger.
Taking into account Trump’s apparent desire to direct most of the tariff revenue towards deficit reduction, an annual payment of $1,000 per household (approximately $150 billion per year) seems plausible.
Inflation offset
A major criticism of tariffs in general is that they are a tax on consumers. Because importers operate on thin margins, they cannot simply absorb the required payment to the government. So the additional cost gets priced into the product.
To the extent tariffs are invisibly priced into goods, this can be interpreted as a regressive form of taxation, because lower income consumers spend a larger percentage of their income on things like clothing, food and vehicles.
But lower income consumers also spend less overall than more affluent consumers.
For illustration purposes, if a lower income household spends $5,000 per year on goods affected by tariffs, assuming a 15% average tariff rate, it would be funding $750 of tariff collections (assuming 100% pass-through).
If a high income household spends $50,000 per year on goods affected by tariffs, it may be funding $7,500 per year of tariff collections, applying the same assumptions.
So a level tariff rebate can have the effect of negating the inflationary impact of tariffs on lower income consumers. The important thing to consider is that these rebates would presumably be set at equal amounts, regardless of income level.
The main point of tariffs, of course, is not to impose hidden taxes on any consumers, rich or poor. It is to redirect demand to domestic producers, who will therefore have more need to hire American workers.
With a tariff rebate mechanism in place, the administration has the potential to achieve its industrial policy goals—making American manufacturers more competitive, for the benefit of workers in those industries—while offsetting the indirect costs to those workers and other middle class consumers.
In essence, affluent consumers will be bearing the brunt of the cost of tariffs, after rebate checks are netted out.
Other avenues
We have not heard Trump mention it specifically, but there are other potential ways to use tariff revenue to address the wealth inequality problem.
Perhaps, instead of direct payments, they can be used to fund investment accounts, along the lines of Trump Accounts, which were created by the One Big Beautiful Bill Act. These are “tax deferred investment accounts for all new-born American children.” |
|
| | Trump Accounts for newborns will be seeded with a one-time government contribution of $1,000. The accounts will track a stock index and allow for additional private contributions of up to $5,000 per year. This will afford a generation of children the chance to experience the miracle of compounded growth and set them on a course for prosperity from the very beginning. - The White House (6/9/2025) |
|
| | Trump Accounts will not only help young Americans accumulate capital, but they will also teach them how capital accumulation works. In our experience, once an individual starts seeing real gains in his or her investment accounts, the socialist impulses tend to dissipate.
There is no better way to promote capitalism than to set someone on the path to owning capital. Charlie Kirk understood this as well. |
|
| | Let’s coin the Rooseveltian energy, or aura to use a Gen Z term… What do we want? We want an ownership economy with people that feel invested, that have real equity. - Charlie Kirk (7/21/2025) |
|
| | Creating opportunity
Tariff checks won’t solve everything, but they strike us as a step in the right direction and a creative solution to what is becoming a real problem… a younger generation of Americans that is finding the American Dream more and more inaccessible.
Younger and lower income Americans will benefit disproportionately from tariff dividends. If the dividends are perhaps connected with an investment account that gets preferential tax treatment, it would only reinforce both the economic and psychological attachment to the capitalist approach.
Radicals like Mamdani understand the economic pressures on young Americans. They are dangling “free” bus rides and subsidized, state-owned grocery stores as a sort of gateway drug to full-blown socialism. It is a clever approach, backed by savvy social media marketing.
Just as Teddy Roosevelt saw the dangers of corporate consolidation, Trump has identified distortions in the economy that could over time lend support to socialist policies.
These distortions did not occur naturally. Older Americans have benefited from decades of fiscal and monetary policies that have fueled tremendous asset price appreciation.
Trump’s economic populism, as embodied in ideas like tariff dividends, is not a rejection of capitalism and the power of market-based systems. Rather, it is an effort to steer American capitalism in a direction that truly serves the interests of the public as a whole and preserves voters’ faith in the system. |
|
| | Click HERE to learn more about our Model Portfolio subscription plans. |
|
|
| | | FOR SUBSCRIBER USE ONLY. DO NOT FORWARD OR SHARE. |
|
| | | |
|
|
|
|
| |
|
