Why It’s So Tough to Cut Government Spending

We’ve been told that a $1 trillion slice can be cut from U.S. spending.

But it won’t be easy.

Government Spending

These are the traditional budget categories:

Below, we move away from government program names. Instead, we humanize spending through the checks we receive for necessities like insurance assistance and medical bills:

Taking a step in another direction, we see that wages, salaries, and benefits to federal employees are, at 4.3%, a relatively tiny slice of the spending pie. Far from $1 trillion, all federal employees cost $271 billion (1,000 billion = 1 trillion):

Our Bottom Line: What “Could” Be Cut

Through transfers like Social Security, a vast amount of personal income for countless individuals comes from the federal government. According to the Economics Innovation Group, one quarter or so of the personal income of people in more than one half of all U.S. counties comes from the government.

However, the NY Times’s Upshot tells us it is possible to cut $1 trillion and fully retain Medicare and Social Security. Then though, we need 28% reductions in many of the programs that touch us personally. Including Medicaid, they relate to nondefense discretionary, defense, and health spending:

Indeed, if we can cut spending, then taxes could also decrease. So yes, always, as economists, we know it all comes back to tradeoffs. Although “choosing is refusing,” with the federal budget, it is difficult.

My sources and more: The Axios Macro Newsletter from April 24, 2015 showed us the Third Way look at spending while econlife explained even more during February. From there, we could complete the picture with the NY Times, here and here, and FT.