President Trump said last night that if Republicans prevail in the midterm elections, the government will send $5,000 payments to each adult citizen. That would come with serious economic risks.

The big picture: The federal deficit is already running around $2 trillion a year, bond markets are starting to demand higher rates to finance government borrowing, the economy is at full employment, and inflation has been high for nearly six years.

• Borrowing an extra trillion dollars or so and sending it to households would risk overheating the economy and making debt, interest rates and inflation worse.
• It would have echoes of the $1.9 trillion stimulus that President Biden pushed through in early 2021, which included $1,400 payments to individuals — except that then unemployment was higher, inflation had not yet taken off, and the national debt was lower.
• Even against that macroeconomic backdrop that made fiscal stimulus more justifiable, the American Rescue Plan contributed to the inflation surge in 2021 and 2022 that undermined the Biden presidency.

By the numbers: There are around 260 million adult U.S. citizens, so $5,000 payments would amount to around $1.3 trillion, plus administrative costs, minus any reductions if high earners are excluded from the program.

• Vice President Vance said last night that tariffs would pay for the "Trump dividends," but tariff revenue has been tracking something on the order of $300 billion per year, with high uncertainty given volatile policy and legal challenges.
• It all comes as the Treasury Department has been intervening to try to suppress longer-term interest rates.
• This morning, the yield on the 10-year U.S. Treasury note — the benchmark for mortgages and other loans — has been a hair's width away from a 19-year high. At 11:15am ET, it was at 4.92%.

What they're saying: "President Trump is talking about stimulating an economy with an existing inflation problem and without a lot of slack," Michael Strain of the American Enterprise Institute tells Axios. "I think there's a real risk that we would have an acceleration of inflation if the president's proposal became law."

• "Financial markets are registering concern about the structural deficit, the Treasury secretary is engaged in increasingly aggressive efforts to put downward pressure on long-term yields, and the Fed chairman has made very clear the economy has an inflation problem."
• "Now is a strange time to be stimulating the economy," said Strain, AEI's director of economic policy studies.

Reality check: The president's proposal seems more like a rhetorical get-out-the-vote device than a buttoned-down policy proposal. He has previously spoken of offering a "tariff dividend" and a "DOGE dividend" that have not materialized.

• If Republicans maintain control of Congress, it will likely be with narrow margins, and lawmakers will face continued bond market pressure to restrain deficits.
• Still, at least some Republicans are taking the idea literally. Sen. Bernie Moreno (R-Ohio) said he will craft legislation to authorize the payments.

Renewed inflation risks are complicating the economic outlook on both sides of the Atlantic.

• In the U.S., wholesale prices accelerated in August, boosting expectations for a Fed rate hike next week.
• In Europe, the European Central Bank raised rates for the second time since June as the Iran war keeps inflation risks tilted to the upside.

Why it matters: Inflation pressures were already building in August, and the latest surge in oil prices suggests there may be more to come. Brent crude blew past $105 a barrel, while the U.S. benchmark, West Texas Intermediate, topped $100 a barrel for the first time since May.

What they're saying: "The longer energy prices stay high, the more likely they are to drive up broader inflation through indirect and second-round effects," ECB president Christine Lagarde told reporters this morning.

• Lagarde said eurozone growth has held up better than expected, helped by AI-related activity that the ECB expects will contribute to slightly higher core inflation.

By the numbers: U.S. wholesale prices rose 0.4% in August and 5.4% from a year earlier, largely reflecting higher energy costs.

• Goods prices jumped 1.1%, reversing two months of declines.
• Diesel surged 24% in a single month, accounting for more than a third of the goods increase and raising costs for moving goods.
• Transportation and warehousing costs gained 2.3%, a sign higher fuel costs may be bleeding into shipping.

Perhaps more troubling for the Fed is that some components that feed into its preferred inflation gauge, the Personal Consumption Expenditures Price Index, including airfares and hospital care, were firmer than expected.

• As we told you yesterday, next week's Fed decision could hinge on a few hundredths of a percentage point in August core PCE inflation.

What to watch: After this morning's Producer Price Index data, Bank of America now estimates that core PCE could rise by 0.26% — enough in its view to green-light a rate increase, though tomorrow's Consumer Price Index data could shift that estimate.

• CME's FedWatch tool puts the odds of a rate hike at the meeting concluding on Sept. 16 at about 70%, up from 60% before the PPI data.