Back on the campaign trail in November, Elon Musk and Donald Trump presented the Department of Government Efficiency as the next big solution to wasteful government spending and bureaucracy. For many Americans this makes for a compelling pitch — the U.S. debt today is so high that interest payments alone cost the government almost $1 trillion per year.
In theory, reining in the national debt is a bipartisan slam dunk. In practice, the process of picking where to cut expenses or raise taxes invariably leads to some degree of political blowback.
After a month of action, how has DOGE actually managed to cut back on spending, and more importantly, how does it stack up with America’s looming debt crisis? (Hint: The numbers aren’t even close.)
The U.S. debt today stands at more than $36 trillion. But rather than ogle at the things one could buy with that money (Such as all of the gold that has ever been mined on Earth four times over), we must understand how to reduce the debt. To do that, we need to understand where that debt comes from.
Over the past 10 years, the U.S. government spent a total of $61 trillion and brought in $45 trillion in revenue. That means in the average year, the government spent $6.1 trillion, and $1.6 trillion of that was deficit spending.
Conventional wisdom would tell us government spending looks very different under Democrats and Republicans, but it isn’t so. In fact, deficits (and approvals of long-term debt) under Trump have been higher than the averages under Presidents Joe Biden and President Barack Obama.
Regardless of the party in charge, federal spending is mostly composed of four familiar categories, which we can call “The Big Four.”
- Medicare and Medicaid: Makes up approximately 23 percent of annual spending, or about $1.4 trillion.
- Social Security: Makes up approximately 21 percent of annual spending, or $1.3 trillion.
- Defense: Makes up approximately 12 percent of annual spending, or approximately $750 billion.
- Interest Payments: Make up approximately 11 percent of annual spending or approximately $700 billion (Note: $700 billion is a historical average, the current value is $1 trillion).
Collectively, these four expenditures make up 67 percent of annual spending or $4.1 trillion out of the total $6.1 trillion dollars on average.
Thus, with $6.1 trillion in total spending, $4.1 trillion on the “The Big Four,” and a $1.6 trillion average deficit, it’s clear that any serious plan by DOGE to tackle the deficit must either substantially reduce spending on Medicare, Medicaid, Social Security or Defense, substantially increase government revenues, or completely dismantle almost every other government program for savings of roughly 80 percent of current spending.
So far, DOGE has not come close to that.
To be sure, it’s hard to say for sure. Trump has protected DOGE records from public inquiry until at least 2034, preventing any verification of the cuts identified by DOGE or the methodology with which those decisions are being made. Thus, DOGE’s self-reporting is the best metric we have of its activity so far.
Here is the complete list of budget cuts made by DOGE as of the writing of this article (in order of magnitude):
- Federal employee buyout program: DOGE claims to have saved $37.5 billion in employment-related expenses. But savings from this program are certainly overstated, if not flat-out wrong. The attrition rate in the federal government far outpaces the number of successful buyouts under this program. Which is to say, many if not most of the employees who took the buyout offer were likely planning to leave their jobs regardless of the DOGE buyout.
- Unspecified National Institute of Health Overhead Reduction: $4 billion.
- Cancellation of DEI-related initiatives and contracts: $2.6 billion. The largest affected entities are the Office of Personnel Management, USAID and the Department of Education.
- Allegedly misplaced HUD funding: totaling $1.9 billion.
- Department of Education contracts cancelled: $900 million.
Finally, all remaining cuts recommended by DOGE make up about $2 billion.
As of this writing, these cuts come to $49 billion. However, if we assume that some or all of the $37.5 billion in federal employee buyouts can be attributed to attrition, that places the real impact of the DOGE cuts on the federal spending between $21.5 billion to $49 billion.
That puts the grand total of DOGE cuts at 1.25 percent to 3 percent of the budget deficit. Even with more than a year left until DOGE’s scheduled termination date (America’s 250th anniversary), the current rate of spending cuts are nowhere close to balancing the federal budget and may even fall further behind for a number of reasons.
First, the lack of legal grounding for many DOGE cuts means Congress or courts should shut many of them down, perhaps even causing a net negative effect of the budget cuts. Second, the fact that DOGE’s current cuts are heavily weighted toward personnel reduction, they might hurt public confidence in government and affect financial markets, causing a reduction in tax revenue.
But even if DOGE took these realities to heart and dramatically tried to tackle the U.S. deficit in our “Big Four,” it wouldn’t work.
Medicare, Medicaid and Social Security are all mandatory government spending programs — meaning that Trump and Musk would have to go through Congress to cut them meaningfully. And DOGE can’t touch an additional trillion dollars in the budget due to similar mandatory spending reasons and an additional trillion dollars that is paid out just in interest.
That leaves just one major spending category: defense. Even if DOGE did the unthinkable and found a way to reach their target of 8 percent defense spending cuts, it will still fall well over $1 trillion short of its goal.
Without major reforms to Social Security, health care, defense or tax laws, DOGE’s cuts will remain little more than a political stunt. The only way to truly tackle the deficit is through legislative action — something both sides of the aisle have been struggling to agree upon for too long.
Ryan Chapman is an applied microeconomics researcher.
