The boss of Tesla and the social network American government by eradicating “waste”.

Musk is now appointed co-lead a new Department of Government Effectiveness by the new US president, giving him the opportunity to try to put his plans into action.

In the most recent fiscal year (October 2023 to September 2024), the US federal government spent $6.75 trillion (£5.3 trillion) according to the US Treasury.

That means Musk’s proposed $2 trillion in cuts would represent about a 30% reduction in total federal government spending — also called national spending in other countries.

How realistic is this proposal?

To answer this question, it is helpful to break down the total amount of expenses.

About $880 billion (13% of total U.S. government spending) goes toward paying interest on the national debt, meaning this line of spending cannot be reduced without putting the U.S. government into default.

About $1.46 trillion (22%) is spent on Social Security, which is mostly the pensions of Americans past retirement age. This is a “mandatory” spending line, meaning it must be spent by law for eligible individuals.

Other mandatory government spending items include Medicare, a government-funded health insurance program aimed primarily at Americans over age 65.

So-called “discretionary” spending by the US government – ​​spending that is not permanently enshrined in law but must be voted on each year by US lawmakers – includes defense ($874 billion, 13%), transportation ( $137 billion, 2%) and education. training, employment and social services ($305 billion, 5%).

In total, discretionary spending represented approximately 25% of the FY2023 total. according to the Congressional Budget Officeof which more than half is intended for defense.

In theory, it would be easier for the new Trump administration to cut discretionary spending than mandatory spending.

Donald Trump has said that Musk – and his co-head of the new Department of Government Effectiveness, Vivek Ramaswamy – will realize the savings resulting from dismantling government bureaucracy, reducing excessive regulations and restructuring government agencies. In an interview with the BBC in April 2023, Musk claimed having reduced the workforce of Twitter (now X) from 8,000 to 1,500 after the acquisition of the social network in 2022.

Yet if all of the $2 trillion in U.S. government spending savings currently targeted by Musk came from discretionary spending, analysts say entire agencies — from transportation to agriculture to homeland security — would have to be completely closed. Discretionary spending taken into account only $1.7 trillion in 2023.

Musk has not said whether he would aim to achieve $2 trillion in savings in a single year or over a longer period, but many U.S. public finance experts, including those who favor a reduction in American public spending, are of the opinion that skeptical savings of this magnitude can be achieved in the short term without leading to a collapse in the performance of important government functions or generating major public resistance.

After taking control of Congress in 2022, Republican lawmakers struggled to pass legislation with significantly smaller cuts in government spending. 130 billion dollars in discretionary government spending after encountering opposition from other Republicans.

It’s also important to note that Donald Trump campaigned on a platform to make Social Security more financially generous, not less, in eliminate income tax payable above. And, in defense, Trump said he would build an “iron dome missile shield” around America, which would involve greater spending in this area, not cuts.

Total U.S. federal government spending as a share of the U.S. economy in 2024 was approximately 23% according to the US Treasury.

This represents a considerably lower share than national government spending in other developed countries.

However, a large portion of public spending in the United States, notably almost all school expensesis done at the state level rather than the federal level, and states are finance through local sales and property taxes.

The International Monetary Fund has projected that total U.S. “general government spending,” which includes spending by individual states, will reach about 37.5 percent of its GDP in 2024.

This compares to 43% in the UK, 48% in Germany and 57% in France.

The U.S. government currently runs an annual deficit – a gap between its spending and tax revenues – equal to about 6% of its economy. And the US national debt held by the public is currently equal to about 97% of the size of the economy.

The nonpartisan think tank Committee for a Responsible Federal Budget (CRFB) has projected that this figure is currently expected to reach 125% by 2035.

The CRFB projects that, absent major spending cuts, Donald Trump’s planned tax cuts would significantly widen the U.S. deficit over the coming decade and raise the U.S. national debt to 143% by the middle of the next decade.

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