The U.S. Budget

And why balancing it by cutting is not doable

With talk about cutting federal spending in the air, I thought it would be good to get a few facts out there in merely two graphs. First, Figure 1 is the U.S. revenue and spending since 1981.

Figure 1. Data from the U.S. Treasury Fiscal Data page.

First, we note that we have spent more than our income for all but four years since 1981. Both parties are largely to blame here, although we can debate magnitude. Currently, to balance the budget by cost-cutting alone, we need to roughly cut $7 trillion in spending down to $5 trillion. In other words, almost 30% of spending. If we were a household, that would be really hard to do, and we’d be looking to increase our income.

For the federal government, it is even harder, as most spending is referred to as mandatory, about 70%, meaning it is written into law, and to change spending in these categories, you’d have to change the law. Discretionary spending is not baked in by law and can more easily be cut.

Figure 2 is the 2024 spending by budget function. As best I can, I colored the bars by mandatory and discretionary (please let me know if I got something wrong), noting that within discretionary categories, there is some mandatory spending and vice versa.

Figure 2. Data from usaspending.gov.

If you want to balance the budget by cutting, you basically need to reduce 30 points in total from the bars in Figure 2. It can’t be done with just discretionary spending and the one big discretionary spending category, national defense; well, good luck cutting from that. The top two spending categories are Social Security and Medicare, which would require changes in the law to cut; again, good luck. We can largely keep doing this for most all categories.

In principle I don’t have a problem with DOGE looking to reduce waste, although implementation seems a lot like using a sledge hammer to put in a tac on a bulleting board, but if you think they can balance the budget, then think again. Also, don’t get fooled by the number being thrown around. Most people think of the government saving a million dollars, but as a percent that is 1,000,000 / 7,000,000,000,000 = 0.0000001. Here is an animation I made to help understand Million vs. Billion vs. Trillion visually.

Ultimately, achieving budget balance requires the government to increase its revenue, which is another can of worms.

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Please let me know if you believe I expressed something incorrectly or misinterpreted the data. I'd rather know the truth and understand the world than be correct. I welcome comments and disagreement. We should all be forced to express our opinions and change our minds, but we should also know how to respectfully disagree and move on. Send me article ideas, feedback, or other thoughts at briefedbydata@substack.com.

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I am a tenured mathematics professor at Ithaca College (PhD Math: Stochastic Processes, MS Applied Statistics, MS Math, BS Math, BS Exercise Science), and I consider myself an accidental academic (opinions are my own). I'm a gardener, drummer, rower, runner, inline skater, 46er, and R user. I’ve written the textbooks “R for College Mathematics and Statistics” and “Applied Calculus with R.” I welcome any collaborations.