During the 2024 US Presidential campaign, and in its immediate aftermath, a lot of words were expended both by Trump himself, and especially by Trump’s newest billionaire ally, Elon Musk, on the subject of the federal budget deficit and how this could, or, more stridently, would, be remedied. The anti-China tariffs, for example, were supposed to shore up the government’s revenues, while Musk has repeatedly, including in print, referenced a figure of $2 trillion in savings that could be achieved without congressional action, by executive fiat alone. For example, the federal workforce could be significantly reduced through voluntary attrition brought on by ending remote working arrangements. As well, noises have been made, including by Musk, regarding the concept of “impoundment”, whereby the President can elect not to spend money appropriated by Congress for particular programs or purposes. This, apparently, has been made mostly illegal by Congress in 1974, setting up a Supreme Court showdown between the executive and legislative branches, and it is anyone’s guess how that could go, or how long that would last1.
Regardless of the “impoundment” issue, major budget cuts without any related congressional action have been promised by the incoming administration, however the specifics have thus far been kept fairly vague, other than the obligatory red-meat-to-the-base items such as cutting the federal subsidy for Planned Parenthood. As such, I wanted to familiarize myself with at least a general outline of the current federal budget, so that I could properly contextualize and evaluate these promises. Fortuitously, the Congressional Budget Office maintains a veritable trove of budgetary data on its website2, and I specifically zeroed in on actual historical budget data, specifically the iteration compiled in February of 2024, which runs through the fiscal year ended September 30, 2023.
First, here are the revenue figures for fiscal 2023:
- Total revenues = $4,439.3 billion
- Individual income taxes = $2,176.5 billion
- Payroll taxes = $1,614.5 billion
- Corporate income taxes = $419.6 billion
- Excise taxes = $75.8 billion
- Estate and gift taxes = $33.7 billion
- Customs duties = $80.3 billion
- Miscellaneous receipts = $39.0 billion
Straight off, it must be noted and underscored that 85.4% of federal revenues in fiscal 2023 was derived from taxing individual incomes and salaries. Salaries, in fact, rather than dividends or capital gains, should make up the majority of this figure, especially if one includes that portion of payroll taxes actually paid by employers. By contrast, corporate income taxes are rather a token contribution to total federal revenues, particularly as the effective corporate tax rate seems to fall somewhere in the 11%-12% range3 compared with individual income tax brackets in the mid-30s percent area. Clearly, the situation calls for additional corporate tax cuts.
As well, tariffs and comparable imports-related taxes are a veritable drop in the revenue bucket at present, and it is difficult to imagine how they could come to play a truly meaningful role in reducing the budget deficit. For example, the most recent Census Bureau data shows that through all of calendar 2023, total US imports from China amounted to $426.9 billion4, while total calendar 2023 imports from all countries reached $3,080.2 billion5. A 10% across the board tariff on Chinese goods would, for example, yield something like an extra $40 billion in revenues, and this is assuming foreign manufacturers do not simply shift their production from China to, say, Vietnam. Meanwhile, a 10% tariff on all imports, from everyplace, might theoretically produce upwards of $300 billion in revenues, but in reality would very likely tilt the US economy towards at least a moderate recession, adversely impacting the tax base as a whole.
Before moving on to the expense side of the equation, it is important to point out that these consist of three broad categories: mandatory or non-discretionary spending such as pensions, which must be paid to qualifying recipients per conditions set out in congressional legislation; discretionary spending, which is actually used to fund the government, including cabinet departments, intelligence and law enforcement agencies, and national defense, as well as any grants or federal programs not covered under mandatory spending; and interest on federal debt, which, of course, is itself a form of mandatory spending insofar as the government wishes to avoid a default. As such, any and all attempts to trim the budget without congressional action must necessarily concern discretionary spending items.
That said, here are the expenses incurred during fiscal 2023:
- Total outlays = $6,134.5 billion
- Total budget deficit = $1,695.2 billion
- Mandatory outlays net of receipts = $3,752.9 billion
- Social Security = $1,348.2 billion
- Medicare = $1,016.0 billion
- Medicaid = $615.8 billion
- Food stamps, disability and other such programs = $448.1 billion
- Federal civilian and military retirement = $197.1 billion
- Veterans’ programs = $170.5 billion
- Other programs = $300.8 billion
- Offsetting receipts = $343.5 billion – for example, Medicare premiums paid by seniors
- Discretionary outlays = $1,722.3 billion
- Defense budget = $805.3 billion
- Non-defense discretionary spending = $917.0 billion
- Interest on debt = $659.3 billion
Two things are immediately apparent. One, Elon Musk must either be lying, or does not know or understand anything about the federal budget, because basic arithmetic suggests that there is simply no way to extract $2 trillion of savings from $917.0 billion of non-defense discretionary spending, or even from $1.7 trillion in total discretionary spending. To belabor the point, virtually all of what is termed as “the government”, or “the federal bureaucracy”, is funded through discretionary spending, and at no point in US history had this ever reached $2 trillion in nominal dollars. As such, it is possible to speak of, say, a 10% or 20% cut to non-defense discretionary items – $91.7 to $183.4 billion in annual savings – or even of somehow returning these to pre-COVID levels of around $650 billion, representing a cut on the order of 30%. But there is simply no mathematical way of achieving the $2 trillion savings figure without touching mandatory spending – Social Security, Medicare, Medicaid, food stamps, and so on.
Two, attempting to eliminate the deficit through spending cuts alone is not realistic. Or, rather, doing so would necessitate a drastic reduction in many or all of the social programs enacted between the 1930s and the 1960s, effectively rolling back the clock to before the New Deal6. To wit, even a 50% cut to non-defense discretionary spending and a 25% across the board cut to every mandatory spending program would only generate $1,396.7 billion in savings – still not $2 trillion, by the way, and still not enough to cover a $1,695.2 billion deficit – while basically destroying the government’s functionality in most areas and inflicting untold misery on tens of millions of Americans, especially seniors.
In effect, there either needs to be a great boost to economic growth, which at present seems highly unlikely, especially with the end of the unipolar US dominance of global politics; or, as in the old British Empire days, the US needs to find its own Raj to loot and plunder, though the EU makes rather a poor substitute; or, most practically…the tax code needs to be thoroughly re-evaluated, and not in the direction of imposing even more taxes on the working people. From a certain angle, the current US budget deficit is basically a giant subsidy to US corporations and the capitalist class that owns them, and it is not a coincidence that tax cuts for these two groups have formed a cornerstone of Republican policies since at least the 1980s. Reversing these and restoring something of the American social democracy of old, well, that would surely be something.
Of course, instead we are likely to get more pseudo-populists like Trump, and more pseudo-budget experts like Musk, insisting that the way forward is through budgetary austerity. It hasn’t worked anywhere in Europe, and it will not work here, but one does wonder, exactly at what point will Musk and his ilk pivot from trying to find a nonexistent $2 trillion in non-defense discretionary spending to exhorting Congress to start cutting “entitlements” – gods, how I loathe the term – such as Medicaid or food stamps…
Footnotes:- For further details, see Redden, M., “How Trump Plans to Seize Power of the Purse from Congress”, ProPublica, November 26, 2024, retrieved November 29, 2024.[↩]
- https://www.cbo.gov/data/budget-economic-data, retrieved November 29, 2024[↩]
- See Statista, “Corporate profits in the United States from 2000 to 2023”, https://www.statista.com/statistics/222130/annual-corporate-profits-in-the-us/, retrieved November 29, 2024.[↩]
- US Census Bureau, “2023: U.S. trade in goods with China”, https://www.census.gov/foreign-trade/balance/c5700.html, retrieved November 29, 2024.[↩]
- US Census Bureau, “2023: U.S. trade in goods with World, Seasonally Adjusted”, https://www.census.gov/foreign-trade/balance/c0004.html, retrieved November 29, 2024.[↩]
- Granted, conservatives in the US would like nothing more.[↩]