.jpg)
The Business Edge
The Business Edge
Will DOGE Really Send a $5,000 Check to Taxpayers?
The federal budget has become a hot-button topic with the emergence of the Department of Government Efficiency (DOGE) led by Elon Musk. Feliciano School of Business Economics professor Todd Federman breaks down exactly why the promised "DOGE dividend" faces serious mathematical obstacles.
Federman starts with a clear analysis of federal finances: the government collects approximately $5 trillion annually, with half coming from income taxes and 36% from Social Security taxes. Meanwhile, government spending reaches around $7 trillion, creating a $2 trillion deficit. Of that $7 trillion, about $5 trillion goes to mandatory spending like Social Security, Medicare, Medicaid, and interest payments, leaving just $2 trillion in discretionary spending, half of which funds defense.
The reality is stark: DOGE's budget-cutting efforts target only about $1 trillion in spending. While they claim to have identified $100-150 billion in potential cuts over six weeks, these figures require careful scrutiny, as government budgets typically reference savings over ten-year periods. Even if DOGE achieves an ambitious $500 billion in annual cuts, returning $100 billion to taxpayers presents a logical paradox – the government would need to borrow that money to distribute it, potentially worsening the deficit and creating inflationary pressure.
Want to understand more about federal budgeting and economic policy? Subscribe to hear future episodes on tariffs, fiscal policy, and other pressing economic issues that affect your financial future. Share your thoughts on whether budget cuts should prioritize deficit reduction or taxpayer dividends in the comments below!
Hello, my name is Todd Federman. I teach economics at the Feliciano School of Business at Montclair State University. Well, everybody's talking about Doge and Elon Musk and budget cutting, and I'd like to talk for a few minutes about what's going on and is there a real possibility for something known as a Doge dividend To get started. We have to take a short look at the federal budget. In 2025, the federal government is going to take in approximately $5 trillion in revenue. Half of that comes from income taxes. That's on your 1040. About 36% comes from Social Security taxes. Some of that's paid by you, some of that's paid by your employer. There's a small amount that comes from corporate taxes. It's a small relative to income taxes. And then there's an even tinier slice that comes from corporate taxes and say, small relative to income taxes. And then there's an even tinier slice that comes from tariffs and that may be changing because that's all in the news, but that's for a separate podcast.
Speaker 1:So the government this year is going to take in approximately $5 trillion. Where's the money go? Well, unfortunately, we take in five, but this year we're going to spend about seven. Out of that seven trillion that we're spending, approximately five trillion of it is mandatory or required. That money goes to Social Security and it goes to Medicare, also goes to Medicaid and to pay interest on the debt. Those four items alone push in the ballpark of $5 trillion and it's basically untouchable. There's very little cutting to be done there, so what's left is about $2 trillion worth of discretionary. The discretionary money is split into two different pieces. Congress sets a budget every year for themselves, for all the three-letter agencies the FDA, the CIA, the NSA, the Supreme Court budget, the congressional budget and then there's another trillion roughly that goes to defense, which might be subject to cutting, but probably not, because that's fairly protective money. So when we get down to it, out of the $7 trillion that we're spending, there's really only about a trillion dollars of discretionary items that are available for cutting, and that's what Doge has been working on Since they got started. Six weeks ago they claim they've cut a little over $100 to $150 billion.
Speaker 1:Now you have to have a big question mark in your mind, because when you talk about government budgeting, when the CBO, the Congressional Budget Office, when they talk about budgets, they talk about a 10-year period. So if you're going to save $25 billion a year, they might say they're saving $250 billion over 10 years. So when the Doge people say they're saving $150 billion, is that one-time expenses? Is that expenses over five years or ten years? We're not even sure. Wall Street Journal, new York Times have done analysis of what they say they've cut. There's lots of question marks and it's still very much brand new.
Speaker 1:Let's make an assumption. Let's assume that Doge is successful in cutting $500 billion annually out of the budget. That sounds like a very aggressive number to me. I don't even know where you can find that $500 billion annually out of the budget. That sounds like a very aggressive number to me. I don't even know where you can find that amount of money. But let's assume they could.
Speaker 1:So there's been talk of taking 20% of that, or $100 billion, and returning that to American taxpayers. Forget about the details about how it would go. Who gets what per household. Could they really send $100 billion back to people? Well, it'd be very popular. But here's the problem. We're currently spending two trillion more than we're taking in. Let's assume Doge is successful and they can take 500 billion and chop it out. So now we're only going to spend a trillion and a half more than we're taking in If we're going to take $100 billion and send it back to people.
Speaker 1:We're already borrowing $1.5 trillion this year.
Speaker 1:To send $100 billion back means we're going to have to borrow another $100 billion. We're going to basically be borrowing money to send ourselves money and, in addition, if we send that money out to households, they've made some claims that say they think people will pay off debt etc. But with the current conditions and the recent inflation over the last couple of years, there are so many households having difficulty making ends meet that if you give them money back whether it's $5,000 per household or more most of that's going to be going to paying bills. And if you increase spending by $100 billion it's 5,000 per household or more most of that's going to be going to paying bills. And if you increase spending by a hundred billion, it's probably going to be somewhat inflationary.
Speaker 1:So I'm a little bit skeptical of the numbers. It's too soon to tell, even if they're successful in chopping out five hundred billion dollars of expenses, whether you're laying people off or you're eliminating contracts. The concept to me of sending a check back to people basically is going to require borrowing money to give money to people, and I don't understand how that would work. Anyway, that's my little recap over here what's going on with Doge right now. There's a lot more to discuss. Maybe next time we'll go back over tariffs as we discuss what's going to go on in the next couple of weeks. This is Todd Federman from Montclair State University, the Feliciano School of