One of the main reasons for voting for Trump in 2024 was the promise, through DOGE, of balancing the federal budget. For whatever reason, many of the cuts were not implemented, and we are still currently running a $1.9-trillion deficit with trillion-dollar deficits projected into the future. This is not sustainable. Our federal debt is at 130 percent of GDP, and interest payments exceed $1 trillion per year. We must balance the federal budget. Here is my proposal on how we can get there.
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First, eliminate the fraud in the system, which is estimated at between $200 billion and $500 billion per year. We have started uprooting this, but let’s continue and accelerate the efforts. I estimate savings at $300 billion per year if we eliminated all the fraudulent spending.
Second, end the subsidies and government control regimes implemented to “combat climate change.” The Big Beautiful Bill addressed some but not all of these, and it left several of these payments in place through 2027. We must eliminate all the efforts to control gases that are necessary for life on earth to exist, like carbon dioxide, including the ethanol subsidy. Total spending on these programs total about $300 billion per year.
Third, moving to individual health accounts would reduce much of the middle-man expenses and regulatory expenses imbedded in the Affordable Care Act. Eliminating these unnecessary bureaucratic expense and bloated health care costs would save about $300 billion per year.
Then we need to tackle the big expense: the cost of the bloated bureaucracy. Compensation for federal government employees is more than twice the average compensation package for someone working in the private sector. We need to bring these costs more in line. A one-third reduction in staffing plus a one-third reduction in average total compensation would save about $600 billion per year, as specified below.
We currently spend $261 billion on federal salaries and an additional $160 billion on benefits. It is in this benefit package that we are most out of line, as the overhead rate for government employees average 62 percent of salaries versus 35 percent in the private sector. The largest cuts would be to those benefits, specifically retirement funding. Make full retirement age 67 across all sectors, with an early retirement at 62 with an 8-percent reduction in benefits for every year before retirement age, so 40 percent at age 62. Retirement benefits should be 70 percent of the average of the top 35 years of employment adjusted for inflation using Social Security’s wage inflator. If less than 35 years worked, a zero amount compensation would be added to all years to get to 35. Also reduce the number of paid days off, which can total as much as 50 a year, to a maximum of 21 PTO days, 8 federal holidays, and one floating holiday. That plus a 10-percent across-the-board pay reduction should get us to the 33 percent.
Most of the compensation is not paid to W-2 employees, but rather to the $751 billion we spend on contractors and consultants. The compensation amounts need to just be reduced by one third each in rate and number of people employed.
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On top of these reductions, we need to eliminate duplicate of opposing government programs, like the 18 separate agencies that work for youth employment. Proposals go back to Martin Gross’s Government Waste 2000 and many reductions outlined in Project 2025, which was really primarily a blueprint for downsizing government. While many of these points are included above, an additional $200–300 billion in savings can be squeezed out by these efforts.
Many pork-laden projects were included in the latest infrastructure bill. Infrastructure should be separated from the operating budget project, and fully funded through road use and fuel excise taxes, as well as new excise taxes on electric vehicles and batteries to cover road use. These funds should not be available to be used for anything outside infrastructure. Savings and revenue generation should provide another $50–100 billion of deficit reduction.
Finally, we need to address the elephant in the room: funding Social Security and Medicare. Benefit cuts are off the table so the only solution is tax increases. I propose increasing the Medicare tax from 1.45 percent to 2 percent and the Social Security tax from 6.2 percent to 6.5 percent. In addition, I propose tripling the FICA maximum, currently at $184,750, with a new 7.5-percent crediting rate to preserve the defined benefit nature of the payouts. Implementing these increases would generate about $300 billion per year and keep these programs solvent through the end of the century.
As we downsize the government, we should also be able to sell off many government assets and real estate holdings. In downtown Chicago, for instance, the feds have gone from operating four buildings when I was a child to thirteen today.
We ultimately want to target total federal debt at between 30–40 percent of GDP, which would allow for massive future tax relief as we retire debt.
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Image: pasja1000 via Pixabay, Pixabay License.