How the US spends taxpayer money as Musk-led DOGE seeks cuts | Elon Musk News

As the Department of Government Efficiency (DOGE), headed by Elon Musk, searches through federal computer systems to cut programmes funded by taxpayers, the tech billionaire says his team is working to slash $1 trillion from the deficit.

“The overall goal is to try to get a trillion dollars out of the deficit, and if the deficit is not brought under control, America will go bankrupt,” Musk said last week during a joint interview with President Donald Trump with Fox News’s Sean Hannity.

Thousands of federal employees have been fired and several programmes and departments have been shut down as the Trump administration launched its plan to cut federal spending.

Musk said Trump was handed a $2 trillion deficit when he took office for a second time, and has claimed that fraud and waste in the government account for much of that.

Officially, the deficit for fiscal year 2024 was more than $1.8 trillion.

So does Musk have a shot at cutting $1 trillion from that deficit? Mathematically, yes. As a practical matter, it would be difficult.

As Musk and his critics toss around statistics, here are some points to know about how the government spends $6.8 trillion of taxpayer money.

What does the government spend money on?

The largest chunks of the federal budget go towards mandatory spending. These programmes do not need annual outlays approved by Congress. They include:

Social Security (about 20 percent).

Medicare (about 15 percent).

Interest on the federal debt (about 12 percent).

Medicaid and other mandatory health programmes (almost 11 percent).

Veteran, military and civilian retiree benefits (under 6 percent).

Food stamps and other safety net programmes (more than 5 percent).

A separate category of spending covers discretionary programmes that Congress approves annually.

Discretionary spending falls into two categories: defence and non-defence. Defence includes the military; non-defence includes every other federal agency, such as the Departments of Justice and Transportation and Environmental Protection Agency.

Mandatory and discretionary spending budgets are not equal in size: About three-quarters of federal spending comes from either mandatory spending or interest on the debt.

How ‘mandatory’ is mandatory spending?

Mandatory spending programmes run on autopilot until Congress passes a rule change and the president signs it into law. So they are a bit more protected than discretionary spending, which must do battle in Congress every year. But aside from interest payments – which cannot be ignored without serious harm to the nation’s creditworthiness around the world – being “mandatory” doesn’t mean being untouchable.

If Congress and the president want to slash Social Security benefits, Medicare benefits or any other mandatory programme, they can.

Trump has promised not to cut either Social Security or Medicare. Combined with interest, those categories of federal spending collectively account for nearly half of the total. If that promise holds, it narrows DOGE’s options for cutting spending by $1 trillion.

Trump said in the Hannity interview that Medicaid won’t be “touched.” If that’s off-limits, too, then the options narrow further.

What about cutting discretionary spending?

The options get trickier when it comes to discretionary spending.

Discretionary spending accounted for about $1.8 trillion in 2024, roughly half in defence and half in non-defence.

Trump promised to sign “record-breaking” military funding on the campaign, which would mean an increase on current levels.

If Trump follows through, it would mean that non-defence discretionary spending would take the brunt of the cuts. But non-defence discretionary spending totalled about $960bn last year, which doesn’t add up to the $1 trillion Musk targeted, even if it were cut by 100 percent.

What would it mean to cut non-defence discretionary spending?

If Musk were to rely on non-defence discretionary spending to reach $1 trillion in cuts, it would mean getting rid of essentially everything the federal government does other than defence, mandatory programmes and interest.

Aside from the Pentagon, no single department or agency accounts for more than 7.3 percent of discretionary spending. The biggest is Veterans Affairs, followed by Health and Human Services at 7.2 percent. Departments with shares between 3 percent and 5 percent include Homeland Security, Education, Housing and Urban Development, Transportation, and Energy.

What about raising revenue rather than making spending cuts?

Instead of cutting spending, the deficit could also be reduced by raising taxes (or by a combination of tax hikes and spending cuts). But Trump promised not to do that; he pledged to sign “a middle-class, upper-class, lower-class, business-class big tax cut.”

The practical effect of a tax cut would be to increase the deficit, if everything else remained the same. So if there’s a tax cut, Musk’s recommended spending cuts would have to work even harder to reach his $1 trillion target.

Trump does have one other revenue raiser to work with: tariffs. But when it comes to dealing with the deficit, tariffs face two challenges.

One issue is that independent estimates of prospective tariff revenue are modest. The centre-right Tax Foundation estimated that the first year of tariffs on China, Canada, Mexico and other countries would bring in $140bn.

The other issue is that the US economy could lose enough tax revenue from the tariffs’ impacts to cut into or wipe out the gains to the treasury in tariff revenue. The Tax Foundation projected that Trump’s tariffs could reduce Americans’ incomes by close to 1 percent, which risks producing less revenue from taxes.

How much can Musk save by shrinking the federal workforce?

So far, some of the highest-profile cuts under Trump have come in the federal workforce, where tens of thousands of workers have either been laid off or have taken buyouts.

The federal workforce employs roughly 3 million people, or about 2.4 million without counting workers of the US Postal Service, which has aspects of both a federal agency and a private business. The 2.4 million figure does not include roughly 1.3 million active-duty military personnel.

For civilians, the biggest employer is the Department of Defense, followed by the Department of Veterans Affairs (about three-quarters of the VA’s workers are directly employed at VA-run hospitals and health clinics). The Department of Homeland Security is a distant third, followed by the Justice Department and the Department of the Treasury.

Estimates have consistently found that federal employee compensation adds up to roughly 6 percent of total federal spending, or roughly $350bn in recent years.