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.