Where to Cut Federal Spending – An Economic Plan for the U.S. – Part 3

This is the final part in our series on the Federal Budget.

Part 1 discussed the severity of our budget problem. It’s pretty bad.

Part 2 outlined the broad options available to affect our budget deficit. We’ll need all the tools we can get.

Part 3, this part, is my attempt to probe more deeply into cost cutting opportunities to answer the very practical question,

Where EXACTLY should we cut our spending within the 2025 Budget?

It turns out, this is a difficult assignment, not just because of the enormity and complexity of the Budget (and the lack of transparency to the average citizen – an important point), but also because of the real life-altering effects on individual and families and the significant implications for broader macroeconomics, which affects us all, globally.¹

Regardless, I wanted to get out of economic theory and beyond throw-away expressions like, “We need to cut wasteful spending.”

I expect many people will disagree fervently with some of my proposed cuts. If that is the case, I will take it as a compliment, as it probably means I am on the right track. If you wholeheartedly agree with all my suggested spending cuts, I have probably missed at least one. A caveat, however, is there’s a fair chance I have misunderstood or mischaracterized the nature of a particular program. While I did my best to research each line item, I’m open to the criticism that I misunderstood certain programs or their efficacy. This is an outcome of having very little transparency on actual spending programs encompassed within the Budget.

But let’s remember this,

If we don’t cut enough now, it ALL gets cut later.

Quick Background

While I am not an expert on U.S. spending and the Budget, I have spent considerable time in research on this topic, both for this series as well as my November 2023 post titled: My Key Takeaways from Reading the Federal Budget. The following two points from that previous post summarize why this topic is so important:

• There’s a lot of unnecessary spending and questionable allocations in the U.S. Budget.
• The Budget isn’t constructed to operate the U.S. Government efficiently and effectively. There’s a misalignment between the allocation of capital and the effective governance of spending, as measured by desirable outcomes. We could easily cut excess spending from the Budget without adversely affecting the central operations of the U.S. Government and the services it provides (or should provide).

The Process

I downloaded an Excel file from Govinfo.gov – Budget of the United States Government that included 5,000 line items from the 2025 Federal Budget. Of course, there are considerably more detailed sub-budgets below each of these 5,000 line items. That said, this was the most comprehensive budget I could find. So, that’s what we have to work with.

I sorted these 5,000 budgetary items from the largest funded item (Social Security at $1.4 trillion) to the smallest items. I truncated the list at items less than $1 million. This left 1,340 rows of Budget data. I then painstakingly reviewed each funded item, row-by-row, starting at the top, and made individual judgements on what budget reductions, if any, I might suggest for the program or service. I did this down to items of $200 million. Although there’s still a lot to cut, at that point, there’s very little impact on the overall budget (items below $200 million collectively represent 0.4% of the total Budget for 2025… so even cutting them all to zero makes little difference in cost savings… and my time is finite). Nevertheless, I hope the government task forces will review with even more granularity and pick up smaller items as well. I believe it’s worth the time.

As I reviewed each budget line item, I researched specifics about each funded program that I did not initially understand. Some items are more obvious, like the “Department of Health and Human Services – Departmental Management – National Hepatitis C Elimination Program”. That’s pretty specific and comprehensible.

Other program descriptions are too vague to accurately assess exactly what the program is, or is meant to fund, like the “Federal Communications Commission – Universal Service Fund – Other advancement of commerce”.

Both of these needed even further research, so let’s use them as examples to illustrate the level of analysis performed.²

EXAMPLE 1 – The Budget shows an allocation of $9.4 billion per year to the “National Hepatitis C Elimination Program”. I was curious… how many serious cases are there per year of Hepatitis C? It seemed rare to me, but what do I know? So, I looked it up. There are approximately 5,000 reported acute cases per year in the U.S. This implies we effectively spend $1.9 million per case. This seems excessive.

EXAMPLE 2 – The other example, the “FCC – Universal Service Fund”, is budgeted to spend $9 billion per year to promote universal access to telecommunications services across the United States, particularly in rural areas. Is that a lot? It seems like a lot, but we have to ask, “How many people in the U.S. live in a rural area?”

I somewhat randomly defined “rural” as population centers with less than 1,000 people (this is a generous assumption as many towns this size do not feel “rural”). Turns out, about 5 million people in the U.S. live in areas with less than 1,000 people.

If we simply gave the $9 billion equally to these 5 million people (with no overhead costs), they would each receive $1,960 per year. I don’t know about you, but my entire high speed internet bill in Austin is only $960/year. So, for the budgeted amount of money, we could literally pay for all of the “rural” people’s internet or mobile phone service (or most of both) if we just gave them the money. That’s quite a subsidy.

I understand this is likely legacy funding to build the requisite infrastructure to offer Wi-Fi and cellular services in rural areas. But this is now readily available commercially in rural areas via services like Starlink. That is, the infrastructure is already in place through the private sector. Given this, should we continue to subsidize rural Wi-Fi and/or telecom? I argue that we should not. Besides, if you know of internet and telecom companies that provide services like this in more rural areas, you also know they are usually very profitable companies, largely from government subsidies.

Further, in November 2024, the U.S. Supreme Court agreed to review the legality of the FCC’s management of the “Universal Service Fund”. The challenge questions whether Congress unlawfully delegated its revenue-raising authority to the FCC and whether the FCC improperly delegated its authority to the Universal Service Administrative Company (USAC), the private entity managing the fund.

Aha. Now we begin to see hints of what might be going on here… allegedly.

For these reasons, I’m recommending this program takes an immediate 50% reduction in funding, which equates to $4.5 billion in savings.

These are just two examples to illustrate the approximate level of “looking into things” I considered in the analysis and decision making about the budgetary line items. It’s certainly imperfect, but I tried to be thoughtful and create a starting point for the conversation.

Key Considerations

I framed my cost-cutting recommendations by considering the following drivers:

• Overfunding
• Likelihood of fraud, waste, and abuse
  • A note about Fraud – we cannot prove fraud from a budget. We can only ascertain fraud from spending, not the allocation of capital. As such, I will not be making any outright claims of fraudulent spending, although there are sure to be plenty (with some of the largest being improper payments in Medicare, Medicaid, unemployment benefits, military spending, and other entitlement programs).
• Outdated priorities
• Political feasibility – giving consideration to the realistic political will to act on it³
• Total amount spent on an item/program/service (and amount available to potentially cut)
• Speed and ease to implement the spending reduction
• Mandatory vs. Discretionary spending – in fact, let’s detour for just a moment to clarify these two.

MANDATORY VS. DISCRETIONARY

The U.S. Budget categorizes every spending item into Mandatory or Discretionary.

To give you a sense of the split: the Congressional Budget Office (CBO) issues its annual Budget forecast in an Excel file with 2,019 rows (the link downloads the Excel file). Here’s the breakdown by spending items (rows) and dollar amounts.

	Items	Amounts
Mandatory	966 (48%)	$5,255 trillion (74%)
Discretionary	1,053 (52%)	$1,831 trillion (26%)

While Discretionary spending has slightly more budgetary line items, 74% of the Budget dollars are allocated to Mandatory spending.

But here’s an important point – just because a line item on the Budget is categorized as “Mandatory” does not mean it can’t be reduced; it just means the expenditure is approved by existing laws and not subject to annual appropriations by Congress. To change Mandatory spending items, Congress must pass new legislation that amends the underlying laws governing the program or obligation. But it can and should be done in many cases.

My Proposed Budget Cuts

Apologies for the lengthy preamble, but it seemed important to lay the groundwork. Here’s the meat of it…

Download My Spreadsheet of Budget Research and Proposed Cuts

This file details where I think we should cut, by how much, and by when. It also provides additional color around my reasoning and explains in more detail what many of the Budget line items are funding. Let me know your thoughts in the comments.

If you’d prefer to dodge the full spreadsheet and keep the discussion at a higher level, below I summarize:

• the total spending reductions I would propose
• the largest Budgetary items
• a few special case studies, because I think they bring home the point that there is a LOT of excess spending that we could cut – plenty of low hanging fruit.

Andy’s Total Spending Reductions

Overall, my suggested cuts sum to $586 billion per year. This equates to a 6.4% reduction in the Budget.

Scale of the Budget

Here’s a quick summary of the top four Budget categories to give you a sense of the scale.

Program	Projected Spend ($ trillions)	% of U.S. Budget (~$7.3 trillion)	% of Tax Revenue (~$5.6 trillion)
Healthcare*	$1.9	26%	34%
Social Security**	$1.6	22%	29%
Defense***	$1.4	19%	25%
Interest on Debt	$0.7	10%	13%

* Medicare & Medicaid

** Retirement and disability benefits

*** Military operations, personnel, equipment, and research and development​

Specific Examples

If you do not want to go through the entire spreadsheet, this section highlights twenty select budgetary line items I thought warranted significant cuts, scrutiny and discussion.

Department of Transportation

Budget = $200 million

• Agency – Department of Transportation
  • Bureau – Pipeline and Hazardous Materials Safety Administration
    • Account – Natural Gas Distribution Infrastructure Safety and Modernization Grant Program
      • Subfunction – Other transportation

Purpose – Provides grants to modernize and enhance the safety of natural gas distribution infrastructure, reducing risks and ensuring reliable energy transportation.

AJ Comment – Natural gas distributors should provide safe, reliable energy transportation by default, without government grants. If needed, this expense should fold into the price of natural gas and not be subsidized by the federal government.

Recommended Cut = 100%

Savings = $200 million

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Health and Human Services

Budget = $9.4 billion

• Agency – Department of Health and Human Services
  • Bureau – Departmental Management
    • Account – National Hepatitis C Elimination Program
      • Subfunction – Health care services

Purpose – Funds the National Hepatitis C Elimination Program under HHS.

AJ Comment – According to the CDC, there are ~5,000 reported acute cases of Hepatitis C per year in the U.S. This implies we are spending $1.9 million per case. Cut to $100,000 per case per year, the approximate annual cost for care.

Recommended Cut = 95%

Savings = $8.9 billion

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Department of Education

Budget = $42.3 billion

• Agency – Department of Education
  • Bureau – Office of Federal Student Aid
    • Account – Federal Direct Student Loan Program Account
      • Subfunction – Higher education

Purpose – Supports federal direct student loan programs to promote higher education.

AJ Comment – Even though education represents a long-term investment, I’m not a fan of subsidizing higher education, especially through loans to students. Programs like this have several downsides: (1) It saddles students with significant debt burdens. (2) Government subsidies applied to educational institutions (many for-profit) alter the supply-demand balance in the higher education market and ultimately increase the price for all students. (3) There is not an equitable distribution of educational funds for students who choose a trade route through vocational schools.

Recommended Cut = 75%

Savings = $31.7 billion

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Federal Communications Commission

Budget = $1.44 billion

• Agency – Federal Communications Commission
  • Bureau – Federal Communications Commission
    • Account – Telecommunications Relay Services Fund, Federal Communications Commission
      • Subfunction – Other advancement of commerce

Purpose – The Telecommunications Relay Services (TRS) Fund, overseen by the Federal Communications Commission (FCC), ensures that individuals with hearing or speech disabilities have access to telephone services equivalent to those enjoyed by individuals without such disabilities. Established under Title IV of the Americans with Disabilities Act, the TRS Fund compensates providers for offering various relay services. Telecommunications Relay Service uses a communication assistant that converts text typed by a user on a text telephone or other device into spoken words for the other party and vice versa.

AJ Comment – These services are antiquated and fully supported by just having a smart phone. At this funding level, the U.S. government could literally purchase 2 million iPhones every year and just hand them out for free to these same people. Assuming an iPhone lasts approximately five years, this is equivalent to fully paying for 10 million people (3% of the population) to get a free iPhone. This level of funding does not make sense today.

Recommended Cut = 75%

Savings = $1.1 billion

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Federal Communications Commission

Budget = $9 billion

• Agency – Federal Communications Commission
  • Bureau – Federal Communications Commission
    • Account – Universal Service Fund
      • Subfunction – Other advancement of commerce

Purpose – Established under the Telecommunications Act of 1996, the Universal Service Fund (USF) supports initiatives that promote universal access to telecommunications services across the United States, particularly in rural areas.

AJ Comment – This is the example I discussed above. It is legacy funding and should not be subsidized. Also, there are some concerns about potential mismanagement.

Recommended Cut = 50%

Savings = $4.5 billion

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International Assistance Programs

Budget = $6.1 billion

• Agency – International Assistance Programs
  • Bureau – International Security Assistance
    • Account – Foreign Military Financing Program
      • Subfunction – International security assistance

Purpose – The FMFP provides grants or loans to foreign countries to help them procure U.S.-manufactured defense equipment, services, and training. Funds are typically provided as grants but can also be distributed as loans. Major recipients often include countries of strategic importance, such as Israel, Egypt, Jordan, and others, depending on geopolitical considerations. One of the key objectives is the economic benefit of funding U.S. defense exports to support the U.S. defense industry.

AJ Comment – This program mostly grants (gives) money to other countries so they can purchase U.S.-manufactured military equipment. This seems like earmarked spending for the defense industry. We should significantly reduce subsidies of foreign wars and proxy wars and reduce subsidies to the Defense sector.

Recommended Cut = 50%

Savings = $3 billion

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International Assistance Programs

Budget = $66 billion

• Agency – International Assistance Programs
  • Bureau – Military Sales Program
    • Account – Foreign Military Sales Trust Fund
      • Subfunction – International financial programs

Purpose – This program is designed to support the sale of U.S. defense articles, services, and training to foreign governments. This trust fund manages the financial transactions related to these international sales, ensuring that funds are deposited and used according to specific agreements. A stated economic benefit is that the FMS program supports the U.S. defense industrial base by generating revenues and sustaining jobs in the defense sector.

AJ Comment – Unlike the $6 billion grant program above, this program requires foreign countries to pay for the military equipment, training, and logistics support they receive. The allocation for this trust fund is to manage the financial transactions, to provide a mechanism for foreign governments to fund defense acquisitions, and to ensure financial accountability for these transactions. But… $66 billion to manage the financial transactions? By way of comparison, Visa recorded revenue of ~$36 billion to manage a huge swath of all the various credit card transactions globally. The U.S. government should be able to manage payments for military and defense purchases at least within the budget of Visa’s annual revenue. I think this is a generous assumption. AI initiatives should provide significant further operational efficiencies to this program.

Recommended Cut = 50%

Savings = $33 billion

More broadly, the Budget shows 42 different line items for “International Assistance Programs” with a total of $98 billion in funding, most of which is related to military and defense spending. There’s considerable cost cutting opportunities in these items.

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Department of the Treasury

Budget = $529 million

• Agency – Department of the Treasury
  • Bureau – Internal Revenue Service
    • Account – Payment to Issuer of Qualified School Construction Bonds
      • Subfunction – Elementary, secondary, and vocational education

Purpose – Funds payments to issuers of bonds used to finance school construction and renovation, reducing costs for educational infrastructure projects. This program provides financial assistance to state and local governments by subsidizing the interest payments on Qualified School Construction Bonds (QSCBs). These bonds are used to finance the construction, renovation, repair, or improvement of public-school facilities, as well as to purchase equipment for these facilities. QSCBs were introduced as part of the American Recovery and Reinvestment Act of 2009 (ARRA) to stimulate the economy following the 2008 financial crisis and to improve public school infrastructure.

AJ Comment – I understand there is near zero political will to cut funding for schools. That said, this was a program started in 2008, as part of the economic stimulus package. It should have had an expiration date timed to the duration of the economic stimulus. School bonds should consider the required interest payments when issuing the bond and plan accordingly. These should be local decisions, by town, city, school district, or state.

Recommended Cut = 50% (phasing to 100% cut)

Savings = $265 million

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Court Services and Offender Supervision Agency for the District of Columbia

Budget = $311 million

• Agency – Court Services and Offender Supervision Agency for the District of Columbia
  • Bureau – Court Services and Offender Supervision Agency for the District of Columbia
    • Account – Federal Payment to the Court Services and Offender Supervision Agency for the District of Columbia
      • Subfunction – Federal litigative and judicial activities

Purpose – Provides federal payments to support court services and offender supervision in the District of Columbia. The Federal Payment to the Court Services and Offender Supervision Agency for the District of Columbia (CSOSA) provides funding to support federal responsibilities for supervising adult offenders on probation, parole, and supervised release in Washington, D.C. CSOSA was established by the National Capital Revitalization and Self-Government Improvement Act of 1997 (Public Law 105-33), which transferred responsibilities for adult probation, parole, and supervised release in D.C. from the D.C. government to the federal government.

AJ Comment – I’m not sure why this was moved from the District of Columbia budget to the Federal Budget, but I can guess. Most of this funding should move back to the DC budget. Further, make some assumptions about how much you think it should cost annually to supervise adult offenders on probation and parole in DC (per offender). Then calculate how many offenders this implies they have in DC. Either DC has an extraordinarily high number of adults on probation and/or parole or there is significant wasteful spending in this program.

Recommended Cut = 50%

Savings = $156 million

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Appalachian Regional Commission

Budget = $400 million

• Agency – Appalachian Regional Commission
  • Bureau – Appalachian Regional Commission
    • Account – Appalachian Regional Commission
      • Subfunction – Area and regional development

Purpose – Funds economic development in Appalachia through infrastructure and business support.

AJ Comment – The federal government should avoid funding general economic development in specific regions.

Recommended Cut = 50%

Savings = $200 million

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Department of Energy

Budget = $460 million

• Agency – Department of Energy
  • Bureau – Power Marketing Administration
    • Account – Bonneville Power Administration Fund
      • Subfunction – Energy supply

Purpose – The Bonneville Power Administration Fund (BPA Fund) is a revolving fund used to manage the finances of the Bonneville Power Administration (BPA), which markets hydropower in the Pacific Northwest.

AJ Comment – The Federal government should not subsidize a specific energy operation in one region of the U.S. This expense should be built into the cost of power for the customers using that service provider for energy.

Recommended Cut = 33% (cut to 100% over a decade)

Savings = $152 million

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Legislative Branch

Budget = $637 million

• Agency – Legislative Branch
  • Bureau – Capitol Police
    • Account – Salaries
      • Subfunction – Legislative functions

Purpose – The Capitol Police Salaries, under the Legislative Branch appropriations, funds the salaries and compensation of personnel within the United States Capitol Police (USCP).

AJ Comment – This is one of the few (if only) police/security items I have recommended we cut, because it should not cost this much for Capitol police salaries. Salaries averaging $100,000 per person per year would employ 6,370 police officers for the Capitol alone. By comparison, Austin, TX has ~2,200 “sworn and civilian personnel” in their police department for a larger population. The population of DC is ~70% of Austin. It just doesn’t add up. Further, it’s not clear why this is not funded through local tax collection like all other cities.

Recommended Cut = 30%

Savings = $191 million

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Department of Transportation

Budget = $2.4 billion

• Agency – Department of Transportation
  • Bureau – Federal Railroad Administration
    • Account – Northeast Corridor Grants to the National Railroad Passenger Corporation
      • Subfunction – Ground transportation

Purpose – The “Northeast Corridor Grants to the National Railroad Passenger Corporation” program, administered by the Federal Railroad Administration (FRA), provides funding to modernize and enhance infrastructure along the Northeast Corridor (NEC), the busiest passenger rail line in the United States. The NEC runs from Washington, D.C., to Boston, handling over 200 million passenger trips annually.

AJ Comment – This regional transportation should be self-funded by those in that region who benefit from the service. In other words, let the passengers who ride the train pay for this through ticket prices. It is also no surprise this system connects to Washington D.C.

Recommended Cut = 50%

Savings = $1.2 billion

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Department of the Interior

Budget = $482 million

• Agency – Department of the Interior
  • Bureau – Department-Wide Programs
    • Account – Payments in Lieu of Taxes
      • Subfunction – General purpose fiscal assistance

Purpose – Provides payments to local governments to offset property tax revenue losses from federally owned lands. PILT compensates local governments for non-taxable federal lands within their boundaries. These lands include national parks, forests, wildlife refuges, and other areas managed by federal agencies, which are exempt from local property taxes. The program ensures local governments have adequate funding to deliver public services such as education, law enforcement, infrastructure maintenance, and emergency response.

AJ Comment – It seems odd that the Federal Government pays counties (not countries) in lieu of property taxes for federal land in their county. Generally, property owners pay taxes for services they receive from local governments by living in the area. The Federal Government, as a landowner in these counties, is not a consumer nor a benefactor of local benefits like a citizen living in the area would be. This could be cut significantly more with time.

Recommended Cut = 25%

Savings = $121 million

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Department of State

Budget = $1.7 billion

• Agency – Department of State
  • Bureau – Administration of Foreign Affairs
    • Account – Embassy Security, Construction, and Maintenance
      • Subfunction – Conduct of foreign affairs

Purpose – This budget allocation is specifically dedicated to the security, construction, and maintenance of U.S. embassies and consulates worldwide.

AJ Comment – There are 271 U.S. embassies around the world. While it is a little difficult to ascertain the required annual spending for the “security, construction and maintenance” of these facilities, $6 million per embassy per year seems expensive. Perhaps we should aim more for functionality and less for luxury at the embassies. Google for pictures of the U.S. embassy in Iraq as an example. It’s very impressive, and consequently expensive. This is not the highest and best use of tax payer funds.

Recommended Cut = 25%

Savings = $433 million

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Tennessee Valley Authority

Budget = $4.2 billion

• Agency – Tennessee Valley Authority
  • Bureau – Tennessee Valley Authority
    • Account – Tennessee Valley Authority Fund
      • Subfunction – Energy supply

Purpose – The Tennessee Valley Authority (TVA) Fund supports the operations of the TVA, a federally owned corporation established in 1933 to provide economic development, electricity generation, and environmental stewardship in the Tennessee Valley region. The TVA’s initiatives include managing the Tennessee River system, offering low-cost electricity, supporting flood control, and aiding regional economic development.

AJ Comment – This should be a self-funding entity through the sale of electricity. It’s not clear to me why the federal government should subsidize electricity prices in a particular region.

Recommended Cut = 33%

Savings = $1.4 billion

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National Archives and Records Administration

Budget = $456 million

• Agency – National Archives and Records Administration
  • Bureau – National Archives and Records Administration
    • Account – Operating Expenses
      • Subfunction – General property and records management

Purpose – Funds the preservation and accessibility of government records, archives, and historical documents.

AJ Comment – There is no way we should spend $456 million per year on archives and historical document preservation. I have no other argument except that this seems wildly unreasonable.

Recommended Cut = 25%

Savings = $114 million

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Department of Labor

Budget = $645 million

• Agency – Department of Labor
  • Bureau – Bureau of Labor Statistics
    • Account – Salaries and Expenses
      • Subfunction – Other labor services

Purpose – Primarily supports activities related to gathering, analyzing, and disseminating labor-related data not covered under other specific categories. This includes providing statistical information on employment, wages, productivity, and occupational trends. Funding ensures data collection, maintenance of surveys, and production of reports that guide policymakers, businesses, and the public.

AJ Comment – It should not cost $645 million to provide labor statistics (data collection through surveys plus report production). Further, this is an area ripe for AI to add enormous operational efficiencies.

Recommended Cut = 50%

Savings = $323 million

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Department of Commerce

Budget = $378 million

• Agency – Department of Commerce
  • Bureau – National Oceanic and Atmospheric Administration
    • Account – Promote and Develop Fishery Products and Research Pertaining to American Fisheries
      • Subfunction – Other advancement of commerce

Purpose – Supports research and promotion of American fisheries. Focused on the following objectives: Fisheries Research and Development. Market Promotion (promoting the consumption of fishery products through marketing and public education campaigns). Support for Fishermen and Industries. Environmental Sustainability. Data Collection and Analysis.

AJ Comment – The Federal Budget should not provide funds to the benefit of specific industries. While the details are not provided, I’m quite certain that a very, very small percentage of this Budget goes to the stated “Environmental Sustainability” objective. If you read the entire U.S. Budget, you learn that these are the types of phrases inserted into almost every budget line item to ensure others cannot strike its funding, lest they be politically labeled as ”against the environment”.

Recommended Cut = 50%

Savings = $189 million

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Small Business Administration

Budget = $320 million

• Agency – Small Business Administration
  • Bureau – Small Business Administration
    • Account – Entrepreneurial Development Program
      • Subfunction – Other advancement of commerce

Purpose – Funds the Entrepreneurial Development Program to support small businesses and promote commerce. The program aims to foster small business growth and success by offering technical assistance, mentoring, and training. It supports entrepreneurs at various stages of their business journey, from starting a business to scaling and navigating challenges.

AJ Comment – I like the SBA because it represents a capital investment into the future economy. I’m in favor of that. This particular program could be good, but I can also imagine it is staffed with administrators who have likely never started nor operated a company themselves. Further, AI is almost certainly a better resource for entrepreneurs, and it’s free.

Recommended Cut = 50%

Savings = $160 million

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That concludes our list of 20 funding examples where I have proposed significant cuts (there are a lot more in the Excel file). But I would be remiss if I also didn’t write about at least one of the largest funded items (Healthcare, Social Security, Defense). Consequently, I wanted to discuss the Defense budget a little further.

Defense

There is no chance to balance the budget without touching the largest categories and agencies. This includes military and defense spending.

The United States accounts for nearly 40% of global military spending, suggesting the U.S. overspends in this category. The largest opportunities to reduce defense spending are likely in reducing fraud and abuse in procurement, reducing the overseas military presence, improving contracting efficiency, and reducing unwarranted entitlements.

Procurement

Miliary procurement is well-known for overpaying for ordinary items and price gouging by military suppliers and contractors. Here are a few examples to highlight the issue.

• TransDigm Half-Inch Metal Pin: In 2019, defense contractor TransDigm was reported to have charged $4,361 for a simple half-inch metal pin, resulting in an astounding markup of around 9,400%. This incident reflects broader issues within defense procurement, where contractors can avoid providing cost breakdowns and use loopholes to inflate prices on items without competition.⁴
• $435 Hammer and $37 Screw: Historical examples from previous decades highlight exorbitant costs on simple items, such as the Pentagon paying $435 for a hammer and $37 for a screw. These cases underline persistent issues with cost control and transparency in defense spending on basic equipment.⁵
• $9,000 Office Chair and $4.6 Million on Food: In a “use-it-or-lose-it” spending spree near the end of fiscal year 2018, the Department of Defense spent $9,341 on a single leather office chair and $4.6 million on luxury food items like lobster and crab, spending funds to ensure next year’s budget wouldn’t be reduced. Such expenditures are not uncommon as departments rush to exhaust budgets by year-end, sometimes prioritizing non-essential or overpriced items.⁶

Reduce Overseas Military Presence

We can significantly lower defense spending by scaling back the costs associated with maintaining bases, personnel, operations, and logistical support for the 750 military installations abroad.⁷ The largest cut to these programs is a reduction in headcount, rather than just deployments back to domestic installations. This likely necessitates that the U.S. scale back its participation in foreign conflicts.

Improving Contracting Efficiency

It’s well-known around military bases that the way to get wealthy is to land a military contract.

To improve military contracting efficiency, we need to:

• Increase competition in contracting
• Reform cost-plus contracts that simply incentivize contractors to increase spending
• Strengthen contract oversight and auditing
• Leverage bulk purchasing and strategic sourcing
• Eliminate unnecessary programs

A Controversial, Contentious Issue with Military Spending

Some people will recoil as I address this topic. I have asked multiple people I trust if I should omit this section, as it is controversial and therefore a touchy subject, I believe. My trusted advisors have all unanimously said I should address it, even if reluctantly.

I guess someone needs to risk unpopularity and accusations of a lack of patriotism and bring this to the forefront of the discussion, particularly within the discussion of Budget cuts. Here goes…

Too many of our ex-military members are taking advantage of military disability benefits for which they do NOT qualify.

This problem has become so rampant, many of our service members now view military disability as part of their expected pension.

Don’t hear me wrong on this point. Clearly, many soldiers have legitimate disabilities from their military service. Obviously, these people deserve compensation for the extreme sacrifices they have made. In fact, we ought to err on the side of caution and provide benefits, even when uncertain and in the gray area, just to be sure we are being fair to our military service men and women. That said, there’s an issue we need to fix.

If ex-soldiers claim they can no longer perform a certain job for the military due to a disability, and they get on-going, life-time compensation for this disability, they should NOT simultaneously have a civilian job performing the same or similar tasks and still receive the military disability payments.

With this all-too-common practice, ex-military members are getting paid through the Defense budget because they cannot do the job, while simultaneously getting paid by their new employer to do that very job, often as a contractor to the military. This is the epitome of taking advantage of the system.

To give us a sense of scale, for 2025, the U.S. Department of Veterans Affairs (VA) requested approximately $204 billion specifically for disability compensation and pension benefits, including funding allocated for increases in disability claims and related services. This represents a substantial portion of the VA’s total budget as the number of veterans filing for benefits continues to grow.

The VA’s total budget request for 2025 is around $370 billion, encompassing various mandatory and discretionary programs, with disability payments making up the largest share.

How much money is bleeding from the military for the special cases of dubious disability payments? Obviously, that’s difficult to quantify, but it’s substantial, and should be audited. Even if found to be only a 5% adjustment, that would equate to immediately savings of $15 billion per year.

This may sound like a drop in the bucket, relative to the annual deficit, but those drops add up.

Spending Cuts Effect on Interest Rate on Debt

There’s an additional benefit to cutting expenses besides the savings itself. There is a knock-on effect.

Any real effort put into cost cutting and spending controls should also impact interest rates on U.S. debt. As (non-Fed) buyers of U.S. debt see the country attempting to address the deficit, they will likely place greater confidence in the country’s ability to pay back the debt.⁸ With this, we should see a reduction in future interest rates and therefore simultaneously address the 4^th largest item on the Budget, interest on debt.

The resulting savings from lower interest rates could equate to as much as the cost cutting exercise itself, potentially more.

Summary

The U.S. is in the 11^th hour to address the annual budget deficits and the national debt. Consequently, spending cuts can no longer be surgical. Instead, they will need to be blunt, broad, and deep.

In this blog post, I have outlined how I would approach cuts to the U.S. Budget that might result in $588 billion in annual savings. There could be another $200 – $400 billion in cost avoidance by implementing a broad-based cut averaging 2% – 3% across the board for remaining budget items where I have not already proposed specific cuts.

Download Andy’s Spreadsheet of Proposed Budget Cuts

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Bonus 1 – Supplemental Appropriations

In addition to Budget cuts, we must also enforce adherence to the Budget on the spending side of the equation as well. Without this, the Budget is just a fictitious document, as it has been every year legislators approve “supplemental appropriations” – a vote to allow additional budget authority beyond what was originally enacted in the annual appropriations bills.

This is a crucial point because legislators have approved supplemental appropriations in 19 out of the last 25 years. This essentially nullifies the Budget.

Bonus 2 – Avoiding an Economic Depression

Because the federal government is such a large part of our entire economy, significant spending cuts will almost certainly cause a recession in the near-term. The balancing act will be to cut enough to tackle the deficit, live with the consequences of a recession, but avoid a full depression.

As I have previously stated, cuts alone are insufficient. In tandem with the budget cuts, we will also need to adjust our tax code and, (I hate to say it), we will need to print money. This is the mechanism that allows us to cut spending and avoid a depression.

Printing money serves a dual purpose, it juices the economy and inflates away our debt. Make no mistake about it, printing money is a tax due to the resulting and inevitable inflation. This is a foregone conclusion. I wouldn’t say that I would bet on it, I would just bet on it… and I have.

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FOOTNOTES:

1. This last point should not be underestimated. The government has become such an enormous part of the U.S. economy, albeit an inefficient one, that a sudden reduction in spending might trigger a near-term recession. It’s difficult to understand secondary and tertiary effects of sudden changes to the flows of money in large economies.
2. …and as an excuse to explain why it took me so long to publish Part 3.
3. It’s difficult to get politicians to cut anything. They are personally incentivized to spend, which is a large part of the problem. But there are some things no politician will touch. Consequently, there’s no reason to include items like this in my sum of spending reduction recommendations if the probability of it happening is exactly 0%.
4. Source: Military Times
5. Source. Roll Call
6. Source: Military Times
7. Source: EconoFact
8. One of the drivers of the higher interest rates now is that the U.S. Treasury is not the only seller of U.S. debt. Some large holders of U.S. debt are also sellers (of existing debt), addressing their concern about the economic health of the U.S. and its ability to repay these loans. Reducing the number of sellers would reduce the supply of debt to the market. Consequently, the Treasury could offer a lower effective interest rate for newly issued debt.