How Much Does America Spend?

Discussing federal spending can be challenging due to the large numbers involved, making it hard for ordinary folks to grasp the magnitude. For instance, $1 billion is a thousand million, which is just a rounding error (0.01 percent of spending) compared to the nearly $7 trillion federal budget.

This sets the stage for President Trump and Elon Musk’s Department of Government Efficiency to lead federal spending cuts. Recently, the administration announced the dismissal of 10,000 employees from the Department of Health and Human Services, a small number considering the three million civilian workers in the government.

Despite efforts by DOGE, federal spending is higher this year than at the same point in 2024, as reported by the Hamilton Project. This newsletter aims to shed light on where the federal government allocates its funds to demystify these significant numbers and illustrate the real impact of Trump’s initiatives.

Growing debt

Since the early 2000s, the federal government has been spending more money than it collects in taxes, leading to a growing debt reminiscent of levels seen during World War II.

For years, concerns about the debt were downplayed by many economists due to low interest rates and inflation. However, with rising interest rates and inflation, the federal government now spends more on servicing its debt than on critical programs like Medicare or the military. Economists warn that the federal debt is accumulating too rapidly.

Politicians are reluctant to cut popular programs like Social Security, Medicare, Medicaid, and the military, which account for about 70 percent of government spending. This has led to the perception that the U.S. government is primarily an insurance company with a standing army.

The federal budget consists of various programs such as schools, welfare payments, foreign aid, and medical research, making up roughly 30 percent of total spending. To balance the budget without touching the untouchable programs, Trump would need to eliminate all these components.

DOGE’s cuts

Trump and Musk believe they can reduce the deficit significantly by downsizing the federal workforce and eliminating waste and fraud. However, historical initiatives to tackle waste and fraud have not yielded substantial savings, and reducing the workforce may have limited impact on the deficit.

Some layoffs may even worsen the deficit, as seen in the case of the Biden administration’s plan to hire more IRS workers to increase tax revenue. Despite DOGE’s claims of slashing $130 billion in spending, errors in their ledger have been reported, indicating challenges in achieving significant savings.

N.B.A.: A brawl during Minnesota’s win over Detroit ended with five players and two coaches ejected. See the video.

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