The Department of Government Efficiency has the objective of cutting government spending by $2 trillion per year out of $6.8 trillion in spending. This is nearly as large as the $2.43 trillion/year in individual income tax.
Tariffs were $80B/year last year. Increasing it to $500B combined with cuts in waste, fraud and adding tariffs would offset income tax.
Eliminating individual income tax would mean the IRS could be eliminated and replaced with another less costly agency. This would save $10 billion from a $12-13 billion annual budget. Having a blockchain financial, accounting and payments system could eliminate Ghost Beneficiaries. Blockchain can ensure that aid programs, pensions, and Social Security are received only by eligible individuals, reducing fraud. In 2022 alone, there were $13.6 BILLION of “improper” Social Security payments.
Cutting the taxes would boost economic growth.
Taxfoundation (dot org) has growth and opportunity tax plans that are pro-growth. Hyper efficient, simple rules and reduced tax levels without deficits would boost growth and lower interest rates. MASSIVE ECONOMIC BOOM means more taxes from distributed profits.
Blockchaining government spending would make audits easy and spending transparent. This could be $30B/year in benefit on just accounting and reduced waste and fraud.
No Individual Income Tax. No IRS. Big Spending Cuts Scenario
Eliminate Individual Income Tax: As before, all federal individual income taxes are abolished (representing roughly $2 trillion in lost revenue).
Spending Cuts: $2 trillion in annual spending cuts.
Interest Rate Reduction: Interest rates are reduced enough to halve the interest payments on the national debt. Current interest payments are approximately $680 billion so a reduction means savings of about $340 billion.
Strong economic growth would mean good economy for jobs. Reducing the competition for debt would reduce interest rates.
Balanced Budget: The combination of spending cuts and interest savings is assumed to be sufficient to offset the revenue loss from eliminating income taxes and balance the budget. ($2T spending + $0.34T interest = $2.34T, this is enough to balance the budget).
Reduced Severity of Spending Cuts: The interest payment savings significantly soften the blow of the spending cuts in terms of balancing the budget. While $2 trillion in programmatic cuts is still enormous, the overall reduction in required outlays is smaller than if the interest payments remained high.
Lower interest payments on debt. The interest payment is around $340 billion.
Economic Principles and Analysis
Supply-Side Effects (Still Strong):The elimination of individual income taxes remains the primary supply-side driver. The same arguments from the previous scenario apply: increased incentives to work, save, and invest, potentially leading to higher GDP growth. The counterarguments (labor supply elasticity, consumption vs. investment, inequality) also still apply.
Demand-Side Effects (Less Negative, Still a Concern):The $2 trillion in programmatic spending cuts still represent a significant reduction in aggregate demand. This is a contractionary force.
However, the $340 billion reduction in interest payments does not directly reduce aggregate demand in the same way. This is a crucial distinction. Interest payments are a transfer from taxpayers to bondholders (many of whom are domestic). While reducing these payments frees up government resources, it doesn’t directly remove money from the circular flow of the economy in the same way that cutting, say, infrastructure spending or Social Security benefits would. The bondholders receive less interest, but that money doesn’t disappear; it just isn’t being channeled through the government.
The net effect on demand is still likely negative, but significantly less so than in the previous scenario where we assumed all $2 trillion+ in balancing came from direct spending cuts.
Interest Rate Effects (Positive, and Now a Key Driver):The scenario explicitly states that interest rates are lowered. Lower interest rates are stimulative, encouraging investment and consumption.
The mechanism of the interest rate reduction matters. If it’s solely a result of lower government borrowing (due to the balanced budget), that’s a market-driven outcome, and the positive effects are more likely to be sustained. If it’s achieved through aggressive Federal Reserve intervention, there could be inflationary risks down the line. We’ll assume for this analysis that it’s primarily a result of reduced government borrowing demand.
The Debt and its Servicing:This is the major positive improvement. While the national debt itself isn’t being reduced (other than by not growing), the cost of servicing that debt is significantly lowered. This frees up substantial fiscal space for other priorities (or further tax cuts) in the future. It reduces the long-term drag of debt on the economy.
The “Boom” – More Plausible, Still Uncertain:
How Big? The potential for a significant increase in GDP growth is higher in this scenario than in the previous ones. The combination of a major supply-side tax cut and lower interest rates, without the full brunt of massive demand-side contraction, creates a more favorable environment for growth.
How Likely? A “massive economic boom” (sustained 4-5% real GDP growth) is plausible. The short-term impact of the spending cuts would still be negative, likely leading to a recession, but a shallower one than in the previous scenarios. The medium- and long-term outlook is more positive, provided the economy can navigate the initial shock. The distribution of the benefits would still be highly unequal, favoring high-income earners.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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Everything under 10 cents should be abolished and stop producing it. Prices set to 0.1 $ variation no more pennies or 0.02, 0.05,…
Stop producing penny is more than fine. Pennies are more hassle than good, waste of time. So if very low wage in US is 10$ per hour. 10 $ is 1000 pennies. So 3600 seconds / 1000 pennies is 3.6 second. One with 10$ hourly salary works 3.6 second for 1 penny.
There are more seconds lost with looking for that change, hassle with it and people often just put it in a jar,… Stop producing it and that is normal course of action.
He’s also getting rid of the penny:
“President Donald Trump says he has directed the Treasury Department to stop minting new pennies, citing the rising cost of producing the one-cent coin.
“For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful!” Trump wrote in a post Sunday night on his Truth Social site. “I have instructed my Secretary of the US Treasury to stop producing new pennies.””
Source:
https://apnews.com/article/trump-penny-treasury-mint-192e3b9ad9891d50e7014997653051ba
No mention here of the ongoing Constitutional violations being generated by Presidential degrees. For example without transparency, unelected individual from a federally unrecognized agency is sending unvetted kids to rummage through agencies, they have no legal right to be in. Many of these decrees have been ended by courts, whose decisions may be ignored. This sounds like the ending of Democracy. If you are cool with fascism, your hopes are becoming reality…Enjoy!
Simplistically looking only at a point-in-time outlay of expenses, like DOGE is doing, will exaggerate over-payments greatly. For example, the $13.6b in overpayments in social security could be easily explained by payments to people who die while receiving SS, which then has to be recouped later by the governemnt. This is a common practice: https://www.cnbc.com/2021/01/06/heres-what-happens-with-social-security-payments-when-someone-dies.html. But if all you look at is payments, you miss the refund. This could be true of a lot of Medicare over-payments, or even fraud that is routinely caught and later clawed back, possibly with additional fines after adjudication.
As for replacing the income tax with tariffs, this is what the oligarchs want: to transfer payments via income taxes which mainly come out of the wealthy in a progressive tax system (it’s actually regressive due to loopholes, but the rich still pay a lot more than the middle class or poor, who pay nothing), to a tariff, which mainly hits end consumers. Since the rich save more and spend proportionately less on consumption, this basically makes the middle class pay more. It also saves a lot on expensive accountants and tax sheltering mechanisms/loopholes. It should be a boon to the already bubble asset markets, but a drag on consumer spending, causing businesses to see fewer sales and even go bankrupt. Eventually, this will pop the stock & other asset markets.
BTW, I balanced the federal budget already, but in 2010, and only using the NY Times interactive survey of about 40 questions on what to cut (you can’t really cut spending significantly by the kinds of controversial but low expense programs that DOGE like to cite for click-bait). I wrote about it here:
https://www.huffpost.com/entry/honey-i-balanced-the-fede_b_806067
The link to the NY Times survey still works so you can take the survey yourself and get scored. You’ll quickly discover it’s almost impossible to create a surplus – I had a $2t surplus by 2030, says the Times – without cutting major items: Social Security (or raising the retirement age, which is an option), Medicare, defense (we were still in Afghanistan & Iraq then).
There’s a lot of options, but I also wrote about some big changes that are NOT included in the survey that could save or create large surpluses or decrease the debt, such as sovereign money in the form of Treasury-issued U.S. Notes, like Lincoln enabled to fight the Civil War, doubling the federal budget without incurring interest payments.
There’s a lot of stuff DOGE is missing. I tried to summarize this in my DOGE application, but they only seem interested in simplistic, and often wrong, ways to supposedly cut expenses & taxes. This is what happens when you put naive under-25 year olds led by a self-serving centi-billionaire in charge of budget-cutting.
The simple answer is no as Federal Government spending is broken down into two categories, discretionary spending and mandatory spending. Discretionary spending is easy to comprehend its defense, education, environment, foreign aid, roads, bridges, highways, VA healthcare, etc. In other words, big government. And last year it accounted for 28% of all Federal spending or 6.3% of the GDP. In 1929 it accounted for 5.9% of GDP so basically it’s the same today as it was before FDR took office.
The real money however is in mandatory spending which is 72% of all Federal spending, no one votes on it and it’s written into law so DOGE and Trump have almost no ability to touch it. Mandatory spending is just three things 1) healthcare and 2) payments to individuals such as Social Security, SSI, pensions, and a few other things and 3) interest on the debt. In the early 1900s the Federal government was 3-4% of GDP and it could fund itself with tariffs and liquor taxes, and you could easily fund the current discretionary government budget with the modern equivalents. But there is no way you can fund the mandatory spending requirement which are about 17% of GDP without the income tax. So unless DOGE can think of a way to declare Social Security, Medicare and Medicaid unconstitutional the income tax will be with us for a very long time.
$50 billion/year in social security fraud and waste. $100 billion of the social security payments were made last year without a social security number in the processing record.
$100 billion per year in medicare and medicaid waste.
30% of the military budget is unaccounted.
Almost half of the money for the Ukraine war disappeared.
Ukraine-Russia war can be ended or the US can stop funding Ukraine. Saves $100 billion/year either way.
$150 billion/year for CIA, military intelligence and USAID.
Treasury and DOGE are forcing all payments and expenses for government to have categorization and stated reason. All fields entered so it is auditable. Just like any corporation. No expenses are claimed without the proper filing and documentation.
Waste and abuse if throughout the discretionary and mandatory spending. Some agencies 80%-100%, but even 10-30% for the large areas.
If this is only what Musk and DOGE are saying, we need an audit of the auditors. It’s hard to believe it’s that bad, though with the military & CIA, black box spending is common and expected.
I still believe there are clawbacks and fraud recalls that aren’t captured by DOGE’s narrow focus on one-way outgoing payments at a single point in the Bureau of Fiscal Services system. These have to be deducted from the waste, fraud and abuse columns ultimately.
No actually, its not hard to believe its that bad. Look at the horrific spending of USAID that has been uncovered. A cement factory for Hamas in 2016 totaling 310 million USD? 1.5 million to DEI in Serbia? Funding Soros activities with hundreds of millions? Left wing news outlets in the US and abroad? The list goes on and on..
And don’t get me started on the military procurement system… The waste could be all Elon states and more. And the only way to find out is to let him do his job.
Tax cuts for the last century have generally proved worse for economic growth than other alternatives Keynesian approaches. Instead they end up causing growing debt and an increased concentration of wealth, with the money not being spent in taxes ending up in tax haven offshore accounts of the already superlatively wealthy.
This is more of that. Only on toxic quantities of anabolic steroids.
Media going after Musk at full speed. Man this is nasty. Agree with him or not politically I can
say something. He knows how to do business, run large companies and with little to no debt. In contrast to others, he would run the country way better. So that he would wreck gov is total nonsense, he has too many experience running large companies.
While few things are as delightful as seeing a fraction of the civil service horde dispersed, I can’t help but wonder if tax cuts associated with pairing down the state would have unintended, negative growth, consequences – a sort of nullification like we’d see with universal basic income. Example: If you give everybody $1,000/mo UBI, then everybody’s rent will instantaneously jump $1000/mo. Ubi is unquestionably inflationary.
My incompletely formed thought is:
Knowing my rate is inflated so take home pay affords me and my family a comfortable lifestyle, while simultaneously feeding the state pig and financing the occasional Maidan regime change, wouldn’t I be instantaneously greatly overpaid if income tax was suspended? Wouldn’t my employer seek to eliminate that imbalance by reducing my rate or suspending raises for a decade to allow continued inflation to eliminate the numerical imbalance in the compensation for my productivity, which is likely decreasing as I approach 50 years old?
Or is it more likely that they will just shell game the taxes and collect the same with some other mechanism (e g. sales tax)?
I do believe government waste is inflating the currency. I don’t expect to benefit financially from any kind of tax cuts. I do expect inflation to slow drastically, and I think that’s the point.
I want to shrink the federal government not because it will increase my take-home pay but because it is the moral thing to do if you consider the Constitution to define what is ethical within the existing system.
The most powerful union in the state of New Jersey is NJEA – the teacher’s union. I fully support disbanding the Federal Department of Education since it’s function is [likely] fully duplicated by the New Jersey department of education. In most places where federal oversight overlaps individual state agency oversight, the Federal should cede authority. Under this idea the Department of Education, environmental protection agency, and many others can be shrunken to minimal staffing/budget or eliminated. Elimination is better, while possible, before statists inevitably regain control. If certain States like Oklahoma feel they don’t need any more than a eunuch of an environmental protection agency, so be it. That’s what the people want in that locale. Get California edicts out of Oklahoma.
The solution is to cut spending AND raise taxes, which is why Musk and Trump are working so hard to do just the first.
Yep.
You can find some waste and fraud but nowhere near 2 trillion, its 30% of he budget.
If you want nice things, you have to pay for them.
The demographics and educational requirements have changed so a smaller fraction of the population are doing actual productive work, therefore taxes must rise.
No payroll taxes are a good idea, especially with AGI on the door step, but replacing them with tarif it not going to work.
Some countries have a transaction tax or revenue tax. Maybe that will work.
If the spending were not being done by a troop of drunken sailors, then your point would hold. Given the realities of politics and the profligacy of the blob, I am happy just to see spending cuts. We have had over a century of raising taxes which never seems to work.
Clinton raised taxes on the wealthy and the economy boomed. He also generated budgets with surpluses and there was talk of eliminating the national debt. Then Bush 2 came into office and claimed deficits don’t matter.
Misses the Point.
The issue is what kind of country do we want? A system of merit, individualism, ambition, self-reliance, work-identity, admiration for personal property and achievement, an efficient centralized system that ‘effectively’ undertakes those common projects that enables common greatness as well as unlimited opportunity for the individual (and to a lesser degree the company)… and on, and on.
Cutting taxes and waste does somewhat enable this, but it doesn’t directly and exclusively lead to personal and communal success. It is just as likely to enable the cheapskate skin-flint to live easier. Easier isn’t the same as better. The answer to ‘we need more money’ is not solely or even primarily tame inflation and lower taxes, it also includes getting a better job, have career ambition, don’t take the first opportunity to retire and spend your day twittering and blogging… and on, and on. A public pension is more a source of shame than reward for a partial-life of duty. Do better.
Work hard and long. Play hard and long. Earn, buy, adventure, live. Realize personal and family goals. Pursue wealth, family greatness, and work/ hobby milestones. And pay fair and reasonable taxes that activate the infrastructure growth that serves ALL. I personally feel that a consumption tax and significant tariffs can best enable an Us First success story, as long as the ‘Us’ has worthwhile potential anyway – though I have never had any interest in the principels of economics.
NEWS FLASH. Average people don’t matter. You can’t have a country without them, but you are very unlikely to have peace, growth, opportunity, and stimulating objectives with them in charge and running things (per the early 2020s). If you want tight family and community with people ‘left alone’ to their mediocrity and daily routine, Please Move to such low-trust, capitalist-ish, democracy-ish areas such as eastern Europe -and- see what a pointless, mediocre ‘people first’ society looks like. Very little potential or ambition or individualistic tendancies. One might as well ask why can’t the sheep just abandon the shepherd; pursuing their own direction – because experience shows that the vast majority are eaten, starved, run-over, lost, and wasted before days, if not hours have passed. The majority of the world’s people are sheep; hardly independent, hardly self-reliant. Not pointless but barely useful of their own reconnaisance.
THE POINT: Is that the current new administration is enabling the ‘runway’ by giving everyone who deserves the opportunity to Achieve, that opportunity. The follow-up will be the programs enabled, the regulations reduced and optimized, and the new Vision realized — the 80s ‘new and improved; into the late 2020s and beyond. The ‘Me 2’ generation as we embrace healthy life past 100, significant access to the iner solar system, above 3% average GDP for the next decade, home-shoring 80%+ of the ‘vital aspects’ of all ‘needed’ industries and the majority of the ‘vital aspects’ of all luxury/ want industry/ services — not anti-trade, just not supply-line enslaved.
The future is bright and that does not come from villifying rich people, the current administration, or the core 80s type values that are re-emerging of ‘we can have it ALL’.
[testing to see what gets past censor-bot]
Make a useful and well thought out comment that adds value and I will approve it.
I am letting this comment through despite it not being useful, so I can educate people to put in useful comments.
One line hot takes have to be very clever.
I don’t want pointless arguments.
I am testing to see if the quality and effort in comments can increase.
President Trump says 98% of USAID payments were fraudulent. Hopefully Treasury, Medicare, Social Security, EBT, HEW (HHS), and DOD are less. First reports are only ~40% fraudulent.
“President Trump says 98% of USAID payments were fraudulent.”
I do not recall him saying that. Cite?
The top 1% of Americans own more than 1/3 of the nation’s total wealth and pay lower taxes than the rest of the nation.
Billionaires (and trillionaires) want to weaken the government because it is the only thing that could limit their power. They are trying to persuade everyone else that this is in the nation’s best interest.
My very personal opinion is that with all the possible defects, a strong government (not only a strong executive branch) is better than a weaker one.
When people who own hospitals tell you that public health is a problem, when people who have security details constituted by squads of ex-marines tell you that you should hang a sign on your door ” I do not call 911 because I can defend myself”, when people that took hundreds of billions in government subsidies (and did not deliver any results, or are focused on absurdly narrow results catered for their top 1% friends) tells you that food stamps are a waste and encourage laziness when all this happen, I wonder if we should talk more about taxing these people and limiting their power, instead then giving them the keys of the government, of your health databases, and so on…
A balanced budget amendment can’t just be implied. As Milton Freidman once said,
“I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing. Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or it they try, they will shortly be out of office.”
So long as it’s constitutional to borrow money to buy votes, politicians who refuse to do so end up on the outside looking in, and money WILL be borrowed to buy votes. This is a classic failure mode for democracies.
A balanced budget amendment is really the only way, at this point, to change the political climate, by taking that borrowing to buy votes dynamic out of action. Without it, every other effort will in the end prove futile, sooner or later.
Fortunately, a balanced budget amendment is highly popular with the electorate. The problem is originating it, not getting it ratified.
So, we need a constitutional convention. The need for one is inescapable.
Agree. But… What happens if you really have an emergency where you need to borrow? Say, war?
“The distribution of the benefits would still be highly unequal, favoring high-income earners.”
The system already seems stacked so that the rich get richer and the poor get left behind.
IMHO this is why a lot of people voted for Trump, dissatisfaction getting left behind (there were other reasons but this is an economic discussion).
Seemingly some want it even more stacked.
If the replacement system continues or enhances the dichotomy between the richest and the poorest, will this work, or will voter dissatisfaction just get worse?