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!

Episode Transcript

Speaker 1 (00:00):
Hello, my name is Todd Federman.
I teach economics at theFeliciano School of Business at
Montclair State University.
Well, everybody's talking aboutDoge and Elon Musk and budget
cutting, and I'd like to talkfor a few minutes about what's
going on and is there a realpossibility for something known
as a Doge dividend To getstarted.
We have to take a short look atthe federal budget.

(00:22):
In 2025, the federal governmentis going to take in
approximately $5 trillion inrevenue.
Half of that comes from incometaxes.
That's on your 1040.
About 36% comes from SocialSecurity taxes.
Some of that's paid by you,some of that's paid by your
employer.
There's a small amount thatcomes from corporate taxes.

(00:43):
It's a small relative to incometaxes.
And then there's an even tinierslice that comes from corporate
taxes and say, small relativeto income taxes.
And then there's an even tinierslice that comes from tariffs
and that may be changing becausethat's all in the news, but
that's for a separate podcast.
So the government this year isgoing to take in approximately
$5 trillion.
Where's the money go?
Well, unfortunately, we take infive, but this year we're going
to spend about seven.
Out of that seven trillion thatwe're spending, approximately

(01:08):
five trillion of it is mandatoryor required.
That money goes to SocialSecurity and it goes to Medicare
, also goes to Medicaid and topay interest on the debt.
Those four items alone push inthe ballpark of $5 trillion and
it's basically untouchable.
There's very little cutting tobe done there, so what's left is

(01:32):
about $2 trillion worth ofdiscretionary.
The discretionary money issplit into two different pieces.
Congress sets a budget everyyear for themselves, for all the
three-letter agencies the FDA,the CIA, the NSA, the Supreme
Court budget, the congressionalbudget and then there's another

(01:52):
trillion roughly that goes todefense, which might be subject
to cutting, but probably not,because that's fairly protective
money.
So when we get down to it, outof the $7 trillion that we're
spending, there's really onlyabout a trillion dollars of
discretionary items that areavailable for cutting, and
that's what Doge has beenworking on Since they got

(02:12):
started.
Six weeks ago they claimthey've cut a little over $100
to $150 billion.
Now you have to have a bigquestion mark in your mind,
because when you talk aboutgovernment budgeting, when the
CBO, the Congressional BudgetOffice, when they talk about
budgets, they talk about a10-year period.
So if you're going to save $25billion a year, they might say

(02:33):
they're saving $250 billion over10 years.
So when the Doge people saythey're saving $150 billion, is
that one-time expenses?
Is that expenses over fiveyears or ten years?
We're not even sure.
Wall Street Journal, new YorkTimes have done analysis of what
they say they've cut.
There's lots of question marksand it's still very much brand
new.

(02:54):
Let's make an assumption.
Let's assume that Doge issuccessful in cutting $500
billion annually out of thebudget.
That sounds like a veryaggressive number to me.
I don't even know where you canfind that $500 billion annually
out of the budget.
That sounds like a veryaggressive number to me.
I don't even know where you canfind that amount of money.
But let's assume they could.
So there's been talk of taking20% of that, or $100 billion,

(03:18):
and returning that to Americantaxpayers.
Forget about the details abouthow it would go.
Who gets what per household.
Could they really send $100billion back to people?
Well, it'd be very popular.
But here's the problem.
We're currently spending twotrillion more than we're taking
in.
Let's assume Doge is successfuland they can take 500 billion
and chop it out.

(03:38):
So now we're only going tospend a trillion and a half more
than we're taking in If we'regoing to take $100 billion and
send it back to people.
We're already borrowing $1.5trillion this year.
To send $100 billion back meanswe're going to have to borrow
another $100 billion.
We're going to basically beborrowing money to send

(04:00):
ourselves money and, in addition, if we send that money out to
households, they've made someclaims that say they think
people will pay off debt etc.
But with the current conditionsand the recent inflation over
the last couple of years, thereare so many households having
difficulty making ends meet thatif you give them money back

(04:20):
whether it's $5,000 perhousehold or more most of that's
going to be going to payingbills.
And if you increase spending by$100 billion it's 5,000 per
household or more most of that'sgoing to be going to paying
bills.
And if you increase spending bya hundred billion, it's
probably going to be somewhatinflationary.
So I'm a little bit skeptical ofthe numbers.
It's too soon to tell, even ifthey're successful in chopping
out five hundred billion dollarsof expenses, whether you're
laying people off or you'reeliminating contracts.

(04:41):
The concept to me of sending acheck back to people basically
is going to require borrowingmoney to give money to people,
and I don't understand how thatwould work.
Anyway, that's my little recapover here what's going on with
Doge right now.
There's a lot more to discuss.
Maybe next time we'll go backover tariffs as we discuss
what's going to go on in thenext couple of weeks.

(05:02):
This is Todd Federman fromMontclair State University, the
Feliciano School of