…Finally, the above examples assume no recession in the next 10 years (alternatively net revenue does not drop and deficit spending does not rise).…
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The answer to the first question is obvious. So let’s discuss what’s reasonable. I created the lead chart from Budget of the U.S. Government Fiscal Year 2025 from the Office of Management and Budget. Without giving any details, DOGE says it can cut $2 trillion in spending. Assume Miracles Team Doge wants to eliminate the Department of Education. Let’s assume that happens. Heck, let’s temporarily assume DOGE is so successful that it cuts the entire $1.001 trillion of discretionary non-defense spending by eliminating 100% of every department, not just the Department of Education. Wow. Well done DOGE! But where does DOGE find another $1 trillion to achieve its goal of $2 trillion? Defense Spending Defense spending is $884 billion, and Trump wants to raise that. Please note the Republican Platform says Keeping the American People safe requires a strong America. The Republican Plan is to return Peace through Strength, rebuilding our Military and Alliances, countering China, defeating terrorism, building an Iron Dome Missile Defense Shield , promoting American Values, securing our Homeland and Borders, and reviving our Defense Industrial Base. We will build a Military bigger, better, and stronger than ever before. We will invest in cutting-edge research and advanced technologies, including an Iron Dome Missile Defense Shield, support our Troops with higher pay , and get woke Leftwing Democrats fired as soon as possible. How much would that cost? For now, let’s believe in more miracles. Assume cost of of the iron dome and higher pay for troops is precisely $0. Belief in Miracles As long as we are believing in miracles, let’s believe DOGE cuts another $1 trillion from mandatory spending. Wow. That’s another well done, DOGE! TCJA and Other Promises However, we do need to address Trump’s promises and priorities. His highest priority is renewing his 2017 Tax Cuts and Jobs Act (TCJA). The Congressional Budget Office (CBO) projects that extending the TCJA would increase deficits by $4.6 trillion over 10 years , $0.6 trillion of which would result from additional interest payments. That is roughly $460 billion per year. Trump also proposes to reinstate State and Local Tax deductions. He needs to do that to buy vote from New York Democrats as an enticement for them to approve the renewal of the TCJA. The Penn Wharton Budget Model estimates that to eliminate the SALT cap entirely beginning in 2025, would cost an additional $1,169 billion on top of the TCJA extension. That is an extra $170 billion annually. What about three other campaign promises including no tax on tips, no tax on overtime, and no tax on Social Security. The Tax Foundation estimates No Tax on Social Security would cost $1.6 trillion over 10 years, an extra $160 billion annually. The Tax Foundation estimates No Tax on Overtime would cost $680.4 billion over 10 years, $68 billion annually. No Tax on Tips The no tax on tips idea is interesting because bastions of alleged fiscal conservatives have latched onto the idea . The Senate bill, introduced by Sen. Ted Cruz (R-TX) and titled the “No Tax on Tips Act,” would create a 100 percent above-the-line deduction for cash tip income, with cash in this context referring to payments in physical currency, debit or credit card payment, or checks. Non-cash tips (like a ticket, a coupon, or some other item of value) would presumably remain taxable. Additionally, both cash and non-cash tips would remain taxable under the payroll tax . Rep. Byron Donalds (R-FL) has introduced a companion bill in the House. However, a different House bill , introduced by Rep. Thomas Massie (R-KY) and Matt Gaetz (R-FL) and titled the “Tax-Free Tips Act of 2024,” would exempt tips from both income and payroll taxes. The Committee for a Responsible Federal Budget estimates the cost of exempting tips from federal income tax would be $100 to $200 billion over a decade. If tips are also exempted from payroll taxes, the total could run to $250 billion. That’s only $25 billion a year. But the results are hugely distortionary. The biggest beneficiaries would be those who work in casinos and high-end restaurants, not the short-order cooks and servers, and not the hotel maids who don’t report tips anyway. The bill would also create huge fraud incentives to label some income as “voluntary tips”. The idea is fiscally irresponsible, and it would create moral hazards while encouraging fraud. Nonetheless, alleged fiscal conservatives are for it. Reflections on Discretionary Spending Cuts The U.S. Immigration and Customs Enforcement (ICE) budget for fiscal year (FY) 2025 is $9.7 billion, the budget for Homeland Security is $64.8 billion, the budget for the FBI is $11.3 billion, the budget for the justice department is $37.8 billion and the budget for national intelligence is $73.4 billion. Those items total $197 billion. Trump also wants more for the wall and mass deportations. Trump may need another 10,000 ICE agents even if his goal is a modest one to two million deportations. Q: Wait a second Mish, didn’t you cut those expenses totally? A: Yes. I cut 100% of discretionary spending. But those are areas where Trump wants to increase discretionary spending. Wonderland Thinking “One can’t believe impossible things,” said Alice to the Red Queen. “I daresay you haven’t had much practice,” said the Queen. “When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.” Trump nominated Tulsi Gabbard for Director of National Intelligence. She would be gone too (or gone and not gone simultaneously in Wonderland thinking). I eliminated the National Intelligence, the FBI, drug enforcement, NASA, justice department expenses, and agricultural department expenses. Q:How realistic is that? A: It’s not. Nor is it realistic to assume DOGE can come up with $1 trillion cuts to mandatory spending. But we need so come up with $2 trillion in savings, so I did. Voila! I’m a believer. TCJA and Other Promises Annual Subtotals TCJA: $460 Billion SALT: $170 Billion No Tax on SS: $160 Billion No Tax on Overtime: $68 Billion No Tax on Tips: $25 billion That’s $883 billion per year. So, even if we assume DOGE can cut $500 billion from somewhere (that Congress approves), Trump would increase the deficit by $383 billion per year if his key proposals pass. How Realistic is $500 Billion in DOGE Savings? Yesterday, I asked Elon Musk a question. The deal to avert the government shutdown added $110 billion in disaster and farm aid. I was OK with that as long as the deal cut $110 billion elsewhere, but that didn’t happen. Although DOGE prevented a bigger disaster it also approved the above compromise. Thus DOGE officially starts fiscal year 2025 $110 billion in the hole. Q: What do we call this? A: Winning, obviously. Fortunately, that’s only a one-time win (until it happens again) which is guaranteed to happen when Trump carries through with his threat of 200 Percent Tariffs on John Deere , driving up the cost of most farm equipment. Also, please factor something in for the iron dome and whatever else Trump concocts for defense spending. That’s more winning. Fiscal Year 2025 Revenue Total revenue is $5.485 trillion. Total spending is $6,942 trillion. That would be an annual deficit of $1.457 trillion. But revenue won’t be as stated because of TCJA and SALT. We already addressed those shortfalls to which Trump added $383 billion annually. That would make the annual deficit $1.840 trillion. And this assumes the cost of the iron dome defense system is zero (or doesn’t pass). Trump Proposes Eliminating Individual Income Taxes In October, Trump Proposed Abolishing Individual Income Taxes . “When we were a smart country, in the 1890s … this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax,” Trump said after a barber asked whether it would be possible to jettison the federal income tax. “Now we have income taxes, and we have people that are dying. They’re paying tax, and they don’t have the money to pay the tax.” A few days later, podcaster Joe Rogan asked Trump whether he was serious about replacing federal income taxes with tariffs. “Yeah, sure, why not?” Trump said during his interview Friday on “The Joe Rogan Experience.” Eliminating income taxes would cost $2.679 trillion annually. Outlays would remain the same as shown in the lead chart (plus another $383 billion net difference between DOGE gains and Trump proposals), but revenue would shrink to $2.806 trillion. The new net would then be: $2.806 trillion in Other Revenue – ($6.942 trillion FY 2025 Total Outlays + 0.383 trillion in Net Additions) = -4.519 trillion per year. To balance the budget with tariffs as Trump proposes, he would need to increase tariffs ( a tax on consumers ) by $4.519 trillion annually. Impossible? Not if you are the Red Queen. And please note Trump promises to bring manufacturing back to the US. This implies another miracle. So once again, I am a believer. We will simultaneously collect $4.519 trillion annually in tariffs and bring the jobs back home while increasing exports too. Wow! Sobering Balance of Trade Math Total US goods imports from the entire world in 2023 was $3.226 trillion. So, even if we magically assume Trump can collect 100% tariffs on 100% of imports, Trump would still be $1.293 trillion short. Returning from Wonderland with 60 percent tariffs on China, trade with China would stop completely. Trump would not collect a cent from China. With more modest tariffs Trump might be able to collect $300 billion (from US Consumers) assuming no mass retaliation and no global economic meltdown. That would mean annual deficits of $4.219 trillion ($42 trillion over 10 years not counting interest on the national debt). My non-Wonderland conclusion is that eliminating income taxes is so ridiculous that it won’t be seriously discussed other than to explain the math to Trump who perhaps may not understand. More Realistic But Still High Assumptions Expecting $500 billion from DOGE cuts is on the high side, but let’s assume that happens anyway. If we further assume that Trump’s plan to have no tax on tips, no tax on Social Security, and no tax on overtime all fail, the cost of the iron dome is zero, the border improvements cost nothing, ICE costs nothing, and Trump does not have to increase handouts for Democrat priorities to get TCJA across the finish line, then Trump’s proposals would only increase the deficit by $150 billion per year to $1.607 trillion. Instead, if you further assume $650 billion in DOGE cuts (or other revenue increases), then annual deficit is unchanged at $1.457 trillion. Hooray? Finally, the above examples assume no recession in the next 10 years (alternatively net revenue does not drop and deficit spending does not rise). Hopefully, you are beginning to see why Trump demanded the debt ceiling be eliminated. What Would You Do to Balance the Budget? Unlike DOGE and Trump, I did balance the budget in my proposals. For discussion, please see An Interactive Exercise: What Would You Do to Balance the Budget? In my pro-growth proposal, I cut corporate taxes to zero on domestic income while keeping the tax at 15% elsewhere. I also slashed income taxes for all but the very top-end. To pay for the above, I let TCJA expire, eliminated all deductions, and decreased military spending. I assumed $630 billion in DOGE cuts (or other revenue increases wherever DOGE failed). I ended up with a surplus. Click on the link for more discussion and the economic gains of my proposals. What can you come up with?
I created the lead chart from Budget of the U.S. Government Fiscal Year 2025 from the Office of Management and Budget.
Without giving any details, DOGE says it can cut $2 trillion in spending.
Assume Miracles
Team Doge wants to eliminate the Department of Education. Let’s assume that happens.
Heck, let’s temporarily assume DOGE is so successful that it cuts the entire $1.001 trillion of discretionary non-defense spending by eliminating 100% of every department, not just the Department of Education.
Wow. Well done DOGE!
But where does DOGE find another $1 trillion to achieve its goal of $2 trillion?
Defense Spending
Defense spending is $884 billion, and Trump wants to raise that.
Please note the Republican Platform says
Keeping the American People safe requires a strong America. The Republican Plan is to return Peace through Strength, rebuilding our Military and Alliances, countering China, defeating terrorism, building an Iron Dome Missile Defense Shield , promoting American Values, securing our Homeland and Borders, and reviving our Defense Industrial Base. We will build a Military bigger, better, and stronger than ever before.
We will invest in cutting-edge research and advanced technologies, including an Iron Dome Missile Defense Shield, support our Troops with higher pay , and get woke Leftwing Democrats fired as soon as possible.
How much would that cost? For now, let’s believe in more miracles.
Assume cost of of the iron dome and higher pay for troops is precisely $0.
Belief in Miracles
As long as we are believing in miracles, let’s believe DOGE cuts another $1 trillion from mandatory spending.
Wow. That’s another well done, DOGE!
TCJA and Other Promises
However, we do need to address Trump’s promises and priorities. His highest priority is renewing his 2017 Tax Cuts and Jobs Act (TCJA).
The Congressional Budget Office (CBO) projects that extending the TCJA would increase deficits by $4.6 trillion over 10 years , $0.6 trillion of which would result from additional interest payments.
That is roughly $460 billion per year.
Trump also proposes to reinstate State and Local Tax deductions. He needs to do that to buy vote from New York Democrats as an enticement for them to approve the renewal of the TCJA.
The Penn Wharton Budget Model estimates that to eliminate the SALT cap entirely beginning in 2025, would cost an additional $1,169 billion on top of the TCJA extension.
That is an extra $170 billion annually.
What about three other campaign promises including no tax on tips, no tax on overtime, and no tax on Social Security.
The Tax Foundation estimates No Tax on Social Security would cost $1.6 trillion over 10 years, an extra $160 billion annually.
The Tax Foundation estimates No Tax on Overtime would cost $680.4 billion over 10 years, $68 billion annually.
No Tax on Tips
The no tax on tips idea is interesting because bastions of alleged fiscal conservatives have latched onto the idea .
The Senate bill, introduced by Sen. Ted Cruz (R-TX) and titled the “No Tax on Tips Act,” would create a 100 percent above-the-line deduction for cash tip income, with cash in this context referring to payments in physical currency, debit or credit card payment, or checks. Non-cash tips (like a ticket, a coupon, or some other item of value) would presumably remain taxable. Additionally, both cash and non-cash tips would remain taxable under the payroll tax . Rep. Byron Donalds (R-FL) has introduced a companion bill in the House. However, a different House bill , introduced by Rep. Thomas Massie (R-KY) and Matt Gaetz (R-FL) and titled the “Tax-Free Tips Act of 2024,” would exempt tips from both income and payroll taxes.
The Committee for a Responsible Federal Budget estimates the cost of exempting tips from federal income tax would be $100 to $200 billion over a decade. If tips are also exempted from payroll taxes, the total could run to $250 billion.
That’s only $25 billion a year. But the results are hugely distortionary. The biggest beneficiaries would be those who work in casinos and high-end restaurants, not the short-order cooks and servers, and not the hotel maids who don’t report tips anyway.
The bill would also create huge fraud incentives to label some income as “voluntary tips”.
The idea is fiscally irresponsible, and it would create moral hazards while encouraging fraud. Nonetheless, alleged fiscal conservatives are for it.
Reflections on Discretionary Spending Cuts
The U.S. Immigration and Customs Enforcement (ICE) budget for fiscal year (FY) 2025 is $9.7 billion, the budget for Homeland Security is $64.8 billion, the budget for the FBI is $11.3 billion, the budget for the justice department is $37.8 billion and the budget for national intelligence is $73.4 billion.
Those items total $197 billion. Trump also wants more for the wall and mass deportations. Trump may need another 10,000 ICE agents even if his goal is a modest one to two million deportations.
Q: Wait a second Mish, didn’t you cut those expenses totally? A: Yes. I cut 100% of discretionary spending.
But those are areas where Trump wants to increase discretionary spending.
Wonderland Thinking
“One can’t believe impossible things,” said Alice to the Red Queen.
“I daresay you haven’t had much practice,” said the Queen. “When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
Trump nominated Tulsi Gabbard for Director of National Intelligence. She would be gone too (or gone and not gone simultaneously in Wonderland thinking).
I eliminated the National Intelligence, the FBI, drug enforcement, NASA, justice department expenses, and agricultural department expenses.
Q:How realistic is that? A: It’s not. Nor is it realistic to assume DOGE can come up with $1 trillion cuts to mandatory spending. But we need so come up with $2 trillion in savings, so I did. Voila! I’m a believer.
TCJA and Other Promises Annual Subtotals
That’s $883 billion per year.
So, even if we assume DOGE can cut $500 billion from somewhere (that Congress approves), Trump would increase the deficit by $383 billion per year if his key proposals pass.
How Realistic is $500 Billion in DOGE Savings?
Yesterday, I asked Elon Musk a question.
The deal to avert the government shutdown added $110 billion in disaster and farm aid. I was OK with that as long as the deal cut $110 billion elsewhere, but that didn’t happen.
Although DOGE prevented a bigger disaster it also approved the above compromise. Thus DOGE officially starts fiscal year 2025 $110 billion in the hole.
Q: What do we call this? A: Winning, obviously.
Fortunately, that’s only a one-time win (until it happens again) which is guaranteed to happen when Trump carries through with his threat of 200 Percent Tariffs on John Deere , driving up the cost of most farm equipment.
Also, please factor something in for the iron dome and whatever else Trump concocts for defense spending. That’s more winning.
Fiscal Year 2025 Revenue
Total revenue is $5.485 trillion. Total spending is $6,942 trillion. That would be an annual deficit of $1.457 trillion.
But revenue won’t be as stated because of TCJA and SALT. We already addressed those shortfalls to which Trump added $383 billion annually.
That would make the annual deficit $1.840 trillion. And this assumes the cost of the iron dome defense system is zero (or doesn’t pass).
Trump Proposes Eliminating Individual Income Taxes
In October, Trump Proposed Abolishing Individual Income Taxes .
“When we were a smart country, in the 1890s … this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax,” Trump said after a barber asked whether it would be possible to jettison the federal income tax. “Now we have income taxes, and we have people that are dying. They’re paying tax, and they don’t have the money to pay the tax.”
A few days later, podcaster Joe Rogan asked Trump whether he was serious about replacing federal income taxes with tariffs.
“Yeah, sure, why not?” Trump said during his interview Friday on “The Joe Rogan Experience.”
Eliminating income taxes would cost $2.679 trillion annually.
Outlays would remain the same as shown in the lead chart (plus another $383 billion net difference between DOGE gains and Trump proposals), but revenue would shrink to $2.806 trillion.
The new net would then be: $2.806 trillion in Other Revenue – ($6.942 trillion FY 2025 Total Outlays + 0.383 trillion in Net Additions) = -4.519 trillion per year.
To balance the budget with tariffs as Trump proposes, he would need to increase tariffs ( a tax on consumers ) by $4.519 trillion annually.
Impossible? Not if you are the Red Queen. And please note Trump promises to bring manufacturing back to the US.
This implies another miracle. So once again, I am a believer. We will simultaneously collect $4.519 trillion annually in tariffs and bring the jobs back home while increasing exports too. Wow!
Sobering Balance of Trade Math
Total US goods imports from the entire world in 2023 was $3.226 trillion.
So, even if we magically assume Trump can collect 100% tariffs on 100% of imports, Trump would still be $1.293 trillion short.
Returning from Wonderland with 60 percent tariffs on China, trade with China would stop completely. Trump would not collect a cent from China.
With more modest tariffs Trump might be able to collect $300 billion (from US Consumers) assuming no mass retaliation and no global economic meltdown.
That would mean annual deficits of $4.219 trillion ($42 trillion over 10 years not counting interest on the national debt).
My non-Wonderland conclusion is that eliminating income taxes is so ridiculous that it won’t be seriously discussed other than to explain the math to Trump who perhaps may not understand.
More Realistic But Still High Assumptions
Expecting $500 billion from DOGE cuts is on the high side, but let’s assume that happens anyway.
If we further assume that Trump’s plan to have no tax on tips, no tax on Social Security, and no tax on overtime all fail, the cost of the iron dome is zero, the border improvements cost nothing, ICE costs nothing, and Trump does not have to increase handouts for Democrat priorities to get TCJA across the finish line, then Trump’s proposals would only increase the deficit by $150 billion per year to $1.607 trillion.
Instead, if you further assume $650 billion in DOGE cuts (or other revenue increases), then annual deficit is unchanged at $1.457 trillion. Hooray?
Finally, the above examples assume no recession in the next 10 years (alternatively net revenue does not drop and deficit spending does not rise).
Hopefully, you are beginning to see why Trump demanded the debt ceiling be eliminated.
What Would You Do to Balance the Budget?
Unlike DOGE and Trump, I did balance the budget in my proposals.
For discussion, please see An Interactive Exercise: What Would You Do to Balance the Budget?
In my pro-growth proposal, I cut corporate taxes to zero on domestic income while keeping the tax at 15% elsewhere.
I also slashed income taxes for all but the very top-end.
To pay for the above, I let TCJA expire, eliminated all deductions, and decreased military spending.
I assumed $630 billion in DOGE cuts (or other revenue increases wherever DOGE failed).
I ended up with a surplus. Click on the link for more discussion and the economic gains of my proposals.
What can you come up with?
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Mike Shedlock
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This ignores tariffs, which would increase revenues, with a short-term (1-5 years) increase in price inflation. Trump will vigorously work to bring manufactures back to the US, which will provide jobs and raise income taxes. Trump can eliminate income taxes later. The biggest place to cut gov expenses is Medicare and Medicaid. We can easily shed the second trillion there by making clear to the American people that Big pHarma promotes expensive “patent” medicine to make money–but the most effective and curative remedies are the ones God, the gods, or Evolution made. You cannot patent those. Evolution’s keynote is “survive.” Creatures which need rare or unavailable remedies do not survive. A loving God would have made people and other living things suited to what exists in abundance. There is a theory that lots of gods participated in Creation. One made deer, another made wolves to eat the deer, and a third made mosquitoes to torment them both. Okay, these creations still need to survive, and that means their needs are present in abundance. What is abundant is cheap.
I assumed $300 billion in tariffs which is about all Trump can realistically get without crashing the global economy and the US too If Trump does 60% tariffs on China – Trade would halt and tariffs are zero
Usonians always vote for Lucy van Pelt as their president.
The FY2025 estimated interest payment seems low. Isn’t interest on the debt anlready > $1T/year?
And it will increase in 2026 and beyond as more national debt (Treasuries) roll over at higher interest rates.
When reality finally intervenes, both spending cuts and tax increases will be required.
For spending cuts, “mandatory” has to be renegotiated. Medicaid and SS Disability are not constitutional Federal responsibilities and perhaps should be devolved to the states. Medicare and the entire US “HealthCare” (SIC) system need a complete overhaul which should cut Federal costs 50%. Realigning incentive structures and forcing transparent prior-to-service bids on standard procedures (as done in most other service industries) will help everyone.
Social Security with its dedicated tax can be taken entirely off the Federal books: drain the trust fund gracefully leading to no trust fund, no deficit or surplus, retirement age indexed to life expectancy data, tax rates vary each year as needed to maintain solvency.
Defense needs a Peace Dividend akin to Clinton 1 approach. First we need peace though.
In DC land, a cut is a non-increase in funding, i.e., flat or status quo.
I’d end all current taxes and fund the federal government with a 20% corporate revenue, not income, tax. The government is primarily designed to maintain a sound environment for corporations to do business. Let them pay for it.
One solution is to let Congress continue in its profligate ways until the nation is bankrupt and the people revolt. At that point, we can line up past and present politicians and shoot them if they ever voted for a bill that created/contributed to a deficit/National debt.
It won’t fix the deficit/debt problem. but we’ll feel better, and the next politicians might learn by example.
The other solution would require a benign dictator to make the difficult decisions needed because Congress is incapable.
However, for the exercise, let’s assume government employees are rational decision makers. Create an environment that rewards effectiveness that requires fewer resources, and punishes ineffectiveness. Begin with a %-across the board cut. Those units that take the cut and increase effectiveness get a bonus. Those who maintain effectiveness get a smaller budget cut the next year. Those who decline in effectiveness get a higher budget cut the next year.
Let the units hack out lazy ineffective employees/overpriced contracts/etc. Don’t micro-manage. Judge the results.
Apply it to every government depart/military, etc.If competent leaders emerge, great. If not, bye bye.
We’re the ones who keep voting for this, though. We want our social security and nice roads and medicare and we’ll vote for people who tell us they can fund those things and cut taxes, because we’re stupid.
Social Security, Medicare, and Highway Funding are supposed to be Trust Funds, neither taking from nor contributing to the General Revenue. They have their own problems and should be dealt with outside of the regular budget. Social Security and Medicare will be forcibly cut in a few years just by staying within the Trust Funds. Social Security was folded into ‘the budget’ long ago so the surplus in social security revenue would make the overall budget deficit look to be less, even creating the chimera of balance and surplus. If Social Security outlay is cut sooner then it would be tough to have the social security payroll tax revenue the same.
See solutions, one and two.
Trump is a big spender there is no evidence he is any sort of conservative.
Yellen: Treasury currently expects to reach the new [debt] limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures
There should be no limit to my spending!
This Mish piece shows once again that Trump’s words mean nothing and cement Trump’s reputation as the “Grifter-in-Chief”…..Mostly Trump is addicted to attention and the bigger the lie, the more attention he gets. But the problem of debt is a real one and there is no solution without tax increases, and tax increases will cause a recession or worse. We’re in a very deep hole, and Congress and Trump are still digging. We will go deeper into debt, regardless of what Musk’s plans are. Musk has no authority to impose any of his ideas on the country….that’s mostly Congress’s job, and they haven’t done it in decades. Nixon took us off the gold standard around 1971 and back then we had maybe $300 billion in federal debt; Now it’s over 100 times that and growing fast. There is no solution except default on the debt, and ZIRP along with QE is de-facto money printing and default, but that’s where we’re headed. America is a debt Ponzi and we’ll borrow until nobody will lend us another dime. At that point we become Japan and we’ll go to zero rates and print trillions more to keep the Ponzi going until it ultimately collapses, along with the value of the dollar. The higher prices we’ve experienced over the last 4 years are directly related to massive money creation, and when that happens, we get higher prices and the dollar buys a lot less. I’m so old, I remember when I could buy a new small car for $1800. Things have changed a lot since then.
I’m the one you should be listening to. My little immigrant friend and I think Americans are morons, and need to be replaced by foreign labor. That’s the agenda.
Mish, is that you wanting to entertain us?
If so, we’ll done.
The Dept of Defense should have to pass an audit, balance sheet and make the necessary cuts in useless projects like f-35. The military doesn’t have to lose ability we just need to stop letting billions disappear in shady contracts and graft. Remember Don Rumsfeld admitted we lost 2 trillion in the Pentagon. He was forced to admit it and then 9-11 saved his bacon
Spoken like an accountant. Audit and thee shall find.
How about instilling an attitude change in the public sector–one of responsibility to the People. Reward contract managers for savings on contracts, more competitive bidding, control of projects/overruns etc. Do the same throughout the military. If we can do it better and cheaper, there’s a bonus. Apply the same approach to Medicare, Medicaid, social security etc. In other words, activate people to be come cost cutters.
Those who resist are the first people fired.
“Unlike DOGE and Trump, I did balance the budget in my proposals.”
I vote for your “return to Capitalism” solution you mention in the link that jettisons Crony Capitalism.
Now that Biden is stepping down soon and apparently Musk will be the new president, I changed my avatar from pinch-faced Biden to spheroid Musk.
A lovely likeness!
So if you don’t pay taxes on tips, does that include Social Security tax also? Because if so, that is going to impact people seriously when their SS benefits are calculated when they retire.
Do they also not pay Medicare tax on tips? How about state income taxes?
There is an old saying about unintended consequences that these fools should ponder.
You have to factor in Canada, Greenland, and Panama. All should be cash flow positive in six months.
Liberation of Canada (freeing it from liberals) will take some effort, but doable within a couple months.
It will take some effort to close entire agencies but it is doable. So, On top of that assumed $1 Trillion, I would initiate the contents of Rand Pauls’ annual report “Festivus” and get rid of spending within the remaining agencies. He came up with another Trillion. Then there’s the already released examples from the preliminary DOGE list: $1.7 billion to maintain 77,000 empty federal buildings
The above is just the low hanging fruit, I’m certain there’s a fortune in hidden or obscured handouts and waste to be discovered. The toughest part will be overriding the objections of the Congress & vested interests who will set up a howl when one of their vote purchase arrangements is kicked out.
Please re-read my post. 100% of non-discretionary, non-military is only $1 trillion. You bring up piss ant stuff of a million here or there and in some cases meaningless thousands. Cutting everything including the wall, ICE, intelligence, energy, education, everything is only $1 trillion. What about my math do you fail to understand?
And the majority of empty Federally-owned buildings are in locations that no one wants to operate in — in empty places where no one lives or works. A bunch of them were built for the military during WW2 — they cant be sold for any money. Nice to see Mish understands the reality of cutting “a trillion here and a trillion there.” The spending isnt going down no matter what Vijay and Ebert say. Its the revenue that has withered on the vine.
A line item veto would fix most of this, or expose the President to ridicule.
However, the real problem is an ingrained culture of spend, spend, spend. BTW, this will get worse with more DEI. THen, you get the morons who say we can ‘grow our way out.’ You can inflate your way out, for sure, but the People suffer. You can tax your way our, with the same result.
What is needed is real sustained economic growth and a ban of deficit spending, no matter the cause. Impossible with the fools we elect to Congress. My advice, buy gold in at least two other countries, and get a non-US passport.
So what if we reach for $2T and only get $1T. $1T would be huge victory for the American taxpayer.
That is 1 trillion that isn’t coming out of the taxpayers pocket today. But is being borrowed and put into the taxpayers pocket. Not a win for everyone.
There is so much waste and fraud in government spending that $2T might be a low bar.
A 9th telecoms firm has been hit by a massive Chinese espionage campaign, the White House saysand Trump with regard to this(and to numerous other breaches) will do?? https://apnews.com/article/united-states-china-hacking-espionage-c5351ef7c2207785b76c8c62cde6c513
Biden’s China appeasement in action.
I feel a lot more threatened by many of the residents of our inner cities than by Russia or China so I try to avoid such neighborhoods. The US made a big mistake meddling in the politics of Eastern Europe and launching a costly war against Iraq in 2003.
And now they want to fight China over their own island province – which the UN and U.S. have long agreed is part of China. Anyone joining the U.S. military now is making a big mistake.
I really wanted a government shutdown for all those non essential employees Giving DOGE something to focus on.
The U.S. saw an 18.1% increase in homelessness this year, with nearly a million American citizens counted as homeless, per HUD
Just a terrible time for America. Will take a herculean effort to turn it around.
We’re not going to turn it around. What prosperity we have now is based on a mountain of debt which will get much worse. Politically it’s impossible to make the massive cuts and/or impose new taxes to control deficits, debt and interest costs. The America we knew 50 years ago is dying and there’s no way out.
Positive thinking–YES!!!
I agree it will take real leadership to stop the tide, and likely a disaster. That said, the outcome will likely be Idiocracy
States need to push the legal envelope on forcing drug-addicted and mentally ill street people into confined treatment. Letting them continue to take over parts of cities with their encampments is destroying neighborhoods, causing crime to rise and endangering other people.
A big cause of of that is the terrible govt policy of interest rate suppression, supported by both parties, including Trump and Musk, which fueled a speculative frenzy in real estate with people hoarding housing, driving up prices and rents to unaffordable for people.
Representative Ro Khanna has called on banning stock trading by members of Congress
Great idea
It’s so obvious so it will never get done
Another moron who bans and does not understand how markets work.
The simple solution, a member of Congress must post buy and sell orders on a public website 3 business days before going into effect. And cannot retract the order after posting.
Regarding ‘no tax on tips,’ let’s start by looking at all perks. For starters, there MUST be a companion bill that eliminates the deduction of tips and meals as a business expense. This might extend to include all travel expenses above the minimum fare charged for that mode of travel. Frequent flyer miles could also be taxed.etc
Only 50% of meals and entertainment are deductible now. You take a client out and spend $100 on a meal, write off $50 and save maybe $18 on your taxes.
Why is there a ‘freebie’ from the government for the lucky diners? Or the lucky flyers. or….waiters etc.Should an employees lunch be tax free? The tax code is screwed by exceptions.
The IRS code says ‘income from all sources derived.’
Better no federal income tax on personal incomes let corporation’s fund the waste and mismanagement.
The U.S. provided more than $60 billion in military aid to Ukraine under the Biden administration, per the Kyiv Independent.
Total aid is over $100 billion so far, and that’s just what they are officially saying. Not counting additional aid from the usual black budget sources.
Flushed down the toilet. Epic failure
As always, follow the money –
Announcing the U.S. Special Representative for Ukraine’s Economic Recovery – United States Department of State
President Biden today announced the appointment of Penny Pritzker as the U.S. Special Representative for Ukraine’s Economic Recovery. In this role, she will work with the Ukrainian government, the G7, the EU, international financial institutions, international partners, and one of our great assets – the American private sector – to help forge Ukraine’s future as a prosperous, secure, European democracy. Special Representative Pritzker will drive efforts to shape donor priorities through the Multi-Agency Donor Coordination Platform to align them with Ukraine’s needs and to galvanize international partners to increase their support for Ukraine. She will also work closely with the government of Ukraine as it intensifies reforms needed to win the future, open export markets, mobilize foreign direct investment, and catalyze economic recovery.
My sock puppet promised to end the war day one, and he shall!
If one goes back to the Maidan Revolution in 2014, US aid to Ukraine may be as high as $200 billion.
I litked your tax scale but would raise the corp tax a couple percent and drop the low income tax the same. Also think maybe we might need a sliding scale to adjust for cost of living in some states but only at the lower taxing levels.
Enough with the g’damned subsidies. We need a simple tax code. NOT thousands of pages.
Unleash AI combined with 5-10 RN/NPs judgement overseen by an MD for a multifold productivity increase.
AMA doesn’t like of course….only MD’s can have AI.
DOGE will need to massively change sick-care to have an impact. Ozempic at $25K/year won’t be handed out like candy.
https://www.ama-assn.org/practice-management/scope-practice/ama-successfully-fights-scope-practice-expansions-threaten
End all wealth transfers to the States. Dump Medicare Medicaid on the States. Means test Social Security. Substitute drones for tanks, warships, and fighter aircraft. Leave NATO and all foreign occupations. Dissolve NASA, and Health Education Welfare.
That is going to *crush* red state budgets, though. Probably hard to get the votes.
They’ll still vote for me though. Cults are nice that way.
The red states are not obliged to pay for personal medical expenses, unemployment, welfare, and student loans. Low tax states will attract wealthy people, businesses, and hard working achievers. Welfare states will attract the dross.
Erm, you may want to go look up where Federal transfer payments mostly end up.
Republicans have a 2-3 seat majority in the House and about 30 limp dick republicans (of 53) in the senate. There’s no way in hell any of this Doge stuff gets done. I like Mish’s general approach.
Trump isn’t serious about anything he says. The next 4 years will see National debt rise by $12 Trillion minimum. He will get his tax cuts and maybe 2 rounds of them. I don’t take his comments seriously but if I had a choice I’d rather see him eliminating property taxes instead of income taxes.
I don’t really care about the debt. We should have an efficiency task force for all government and at some point eliminate the tax cuts from Trump, Bush, et al and debt will come way down quickly.
The deficit grew over 50+ years because of tax avoidance by the rich and super rich. Aint no budget cuts gonna do anything, and especially not in 1,2,3,4,5 years. This is a multi-decade revenue loss. It will take 50+ years to fix, and there is no signs of the rich putting in their fair share … ever.
It’s always a revenue problem for you, never a spending one. Think on that
Midnight cannot find one thing that you want to cut that isnt WILDLY popular by the population that is a meaningful amount. Yes, cut foreign aid. Cut the National Endowment for the Arts. Thats .3% of the whole budget. Now what? Social Security? Medicare? Never happen. Cut, baby, cut!
Exactly. This is why we need that debt ceiling gone.
I think Mish’s math demonstrates that fiscal sanity will require Democrats (and Republicans) to reduce spending and Republicans (and democrats) to raise taxes. The politics of getting elected don’t currently support fiscal restraint so until the voting Americans get our heads rapped around that concept we will continue to elect people from both parties who want to spend. Growing out of the deficit can occur in modest amounts, but historically, politicians dreams of growing out of deficit have not reduced the deficit enough to matter if at all.
We’re not going to reduce spending because they can’t get serious spending reductions through Congress. Nor will we impose new taxes to shutter deficits and debt. We spend and borrow, which gives us the illusion of growth, and at some point, America will collapse. That’s the future. If you think homelessness is bad now, give it another 10 years.
As Mises said, the reality of a debt fueled boom is that the debt collapses or the currency does. That’s the way the math works. It’s ground hog day over and over again. In Biblical times they had something called a year of jubilee, every 50 years. Nothing has really changed since then.
Cutting 2 trillion out of 1 trillion sounds like getting 10 pounds out of a 5 pound bag.
If you read what Elon and Vivek tweet, it is mostly focused on efficiencies.
Identify the core function of each department and program, staff and budget to do that job and nothing else, delete functions that aren’t necessary. Add new functions that are necessary.
Similar to how Twitter was remade. It turns out, they had a huge amount of highly paid dead weight.
Whether anything like this is possible or desirable in a government is a different question.
Twitter was special case … it’s old mission was curated (censored) social media; it is now a simple bulletin-board of postings.
The censors, their rules, judgement and govt connections were eliminated.
Try criticizing Musk on Twitter… and get back to us on that suspension of censorship theory… if you can:
“Laura Loomer accused Elon Musk of ‘totalitarian’ behavior after she and other critics of the X owner were stripped of their verification badges after criticizing Musk’s comments on American workers and foreign H-1B visa holders.
Quote from Laura Loomer Lashes Out At ‘Totalitarian’ Elon Musk
I just kicked Laura Loomer off personally. She hurt my feelings.
Yeah, but even if you eliminate basically everyone, the problem is transfer payments, not gov’t employee salaries. Our problem is a demographic one.
I cant believe Mish is spending even five minutes trying to figure out how Trump and his henchmen are gonna cut the budget, yet at the same time borrow trillions for Donald’s spending priorities. Even Hitler couldnt do it unless he robbed the Jews of their wealth. Is Mike actually gonna try to shove the round peg in this square hole? Budget cuts of this magnitude will anger not only the democrats but repubs as well. Please dont waste any more time on this. Elon and Vijay will be gone in six months.
Omg a Hitler reference. That worked so well in the election.
Without the “collection” of Jewish wealth there was no way Adolph would have afforded all the weapons and public works projects that were paid for in the 1930s. Germany has nothing to sell except engineering.
My God, it’s brilliant. Mach es noch einmal.
The Nazi government also defaulted on various bond issues issued by successive Weimar governments prior to 1933. Until the defaulted bonds were finally paid off in 2010, there was a secondary market for defaulted German government bonds.
If there’s no tax on tips, I’m going to get my contract modified so it is 90% tips.
Sorry, Tips are voluntary, not contractually enforced … maybe a risk worth taking and splitting the savings with long-time clients.
Patience. The season of cuts will be upon us soon.
And my season of handouts will continue.
Maybe one way to fix this total fiscal mess would be to take the social insurance programs (health, social security (SS) out of the Federal budget and run them as insurance programs that need to be balanced ex ante year-on-year (forget about prefunding SS; it doesn’t work). That would take roughly 3 trillion out of the Federal budget, which is also the fastest growing part of the budget. Many countries do exactly that to prevent politicians from using those popular programs as cover for their natural inclination to run unsustainable fiscal deficits. That leaves about 3-4 trillion non-interest spending, and let Congress have its annual dogfight over something where trade-offs are much clearer than in the present fiscal setup.
Keeping on that theme, Veterans Admin expenses should all be accounted for under Defense so we can see the true cost of playing Globo-Cop.
DOGE? These guys are already infighting and it is only 23 days before Trump takes office when Trump/GOP will control all branches of government and we are already seeing MAGA on MAGA hate.
Evidently, President Musk wants to double H1B visas and bring FOREIGN workers in to replace Americans….lol. What’s the point of border controls if everyone gets a visa and green card. How is that going to impact the federal budget?
https://timesofindia.indiatimes.com/world/us/maga-civil-war-why-elon-musk-is-clashing-with-laura-loomer/articleshow/116713456.cms
Lol! You get what you voted for?
We didn’t vote for anyone. We voted against someone.
… and got me!
The horns of our society’s dilemma are getting sharpened. On one side I see continuing to drift in this massively credit-bubbling, feather-bedding welfare state economy. On the other, I see one of the biggest rug-pulls every done, the too-rapid receding of that debt-welfare economy, with a tremendous asset grab by the elites, a tremendous eviction of (what remains of) the former middle class. I am hoping for some sort of third way, around or between these two paths. Happy day.
If Trump makes Canada a state, we can move up there.
Only if the Trudeau voters get deported back to France, England-schmengland and Arabia.
One state? Multiple states!
This is much akin to the US Congress saving 3% by cutting the annual GROWTH in spending from 9% to 6%. For one year only.
Cutting $2 trillion from $1 trillion is easy when you schedule it for the future when these folks are no longer responsible.
I will gladly pay you Tuesday for a hamburger Today.
If I get you fries with that, can I get paid Monday?
I think there is lots of opportunity to save on “defense” if we just close all the overseas bases, bring all the troops back home, and cut the MICC down to whatever is needed for defense of our borders. Of course, that won’t happen until we have our Soviet Union moment.
You arent much of a Repub, Lisa. Cutting $2 trill is easy when you arent interested in facts. You simply go to the bottom of the budget and cross out the number that is real and just write in whatever number you want. Simple.
If it were that easy, it would have been done already. They can’t even let tax cuts expire as scheduled.
Would somehow forcing the dollar to decline against other currencies also be an advantage that could be utilized?
Cant think of a faster way to $10 a gallon gasoline.
…making my cars a bargain
The other countries would out-whore us and drop faster than us.
The dog will be feeding on your income the rest is just wishful thinking get over it.!
You laid it out very well, Mish. The question then becomes; How long on the current road before it all comes tumbling down? According to a few forecasts, such as Howe’s “Fourth Turning” and Ray Dalio, it’s coming at the end of the decade.
I’m a Trump voter because I just can’t stomach the crazies runnning the Democrat party, but he’s never managed anything successfully other than borrowing money and campaigning. Elon and Vivek are going to hit the wall soon. All they’re going to get from Congress is hand clapping and lip service, and the Dems will be back in control of the
