DOGE Won't Help the US Dodge a National Debt Problem

Its government efficiency department can snip spending but can't really ease America's indebtedness

- NARAYAN RAMACHANDRAN

The United States Federal budget for 2025 will be about $7 trillion. That makes it roughly 12 times the size of the Indian government's annual budget and about 75% more than the Chinese one. The top five spending categories in order of size are: Social Security (21%), Medicare (15%), defence (13%), interest payments (13%) and health (13%). On the revenue side, individual income taxes, social security and Medicare taxes and corporate income taxes make up over 90% of the federal revenue.

The US operates on a fiscal year that goes from 1 October to 30 September. Its budget for fiscal year 2024-25 is likely to run a deficit of about $2 trillion on revenues of roughly $5 trillion (with outlays of above $7 trillion).

To fund an ever-increasing deficit, which got materially worse after the covid pandemic, US federal debt has now touched 125% of gross domestic product (GDP), breaching its post-World War II high of 106%. The US national debt in 2025 will exceed $36 trillion at an average interest rate of about 3.3%, resulting in an annual debt-service requirement of about $1 trillion.

Alarmingly, this debt is growing at a faster rate than the US economy, implying that it is unlikely to shrink in relative terms anytime soon.

Enter the Department of Government Efficiency (DOGE). The stated goal of this extra-constitutional entity is to eliminate waste and fraud in the way the US government operates and in so doing cut the deficit in half (i.e., identify and eliminate $1 trillion of expenditure).