As the new Trump administration takes a proactive approach towards cost-cutting through Elon Musk’s Department of Government Efficiency (DOGE), it is worth noting that the majority of the spending, namely entitlements (45-50%) and defence (13%), is likely to remain untouched, but this does not mean a significant restructuring of the economy is not underway.US federal government spending consists mainly of entitlements and defence.
In the fiscal year of 2024, the government spent $6.9 trillion—some 24% of GDP—according to the Congressional Budget Office (CBO) and the U.S. Treasury. Entitlements like Social Security, Medicare, and Medicaid, alongside military outlays, took the lion’s share. CBO data peg 2024’s spending for these programs at $4.9 trillion. Social Security led the pack at $1.461 trillion, or 21% of the total budget. Medicare followed with about $1 trillion (14-15%), and Medicaid chipped in $0.6 trillion (9%). These three alone total roughly $3.1 trillion—45-50% of federal spending. If we add in smaller programmes like unemployment benefits, mandatory spending hits 71%. This is known as “mandatory spending” because it’s locked in by eligibility rules rather than annual votes, so that Congress cannot simply come in and make cuts. It is, therefore, outside the purview of DOGE. Turning to Defence, which does consist of discretionary spending which could in theory be cut more easily, this represented $872 billion, or 13% of the budget, per CBO and Treasury figures. This funds the Pentagon’s vast machinery—troops, weapons, and so on. While Trump has suggested cutting the military if Moscow and Beijing agree to do the same, this seems unlikely. We can, however, imagine that if a some agreement for joint Arctic administration with Russia is reached and Ukraine peace is accomplished, some reduction could be accomplished. However, the prospect of Middle East escalation looms.
But even this would drive deficit down and make an impact on markets, driving interest rates down and, very likely, liberating liquidity for large speculative investments in new, burgeoning technologies such as AI applications. This, we may suggest, is the true purpose of the DOGE cost-cutting.
