Government Spending Is Up Despite DOGE Cuts — Here’s What That Means for the Economy and Your Wallet

The Department of Government Efficiency (DOGE) was created to slash waste and reduce federal spending, but so far, the opposite has happened.

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According to U.S. Treasury Department data, total government spending has increased by 9% or $340 billion since last year.

Despite headline-making cuts, the effects are already showing up in the economy and everyday life. Here’s what that means for your wallet.

What DOGE Was Supposed To Fix

Launched in February under President Donald Trump and led by Elon Musk, DOGE was billed as a bold plan to eliminate government waste. Its mission: cut costs, automate outdated systems and reduce the federal workforce.

DOGE officials tout $170 billion in savings through agency closures and layoffs as of late May. However, critics warned early on that these cuts targeted only a fraction of the budget, leaving deeper drivers of spending untouched.

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View Offer Powered by Money.com - Yahoo may earn commission from the links above. “We’ve seen that DOGE has terminated contracts for convenience, cut services related to climate and DEI, and started to examine larger services providers,” said Kevin Brancato, senior vice president of product strategy at TechnoMile. “But DOGE has learned something over the past four months: Terminating contracts for convenience is difficult and time consuming.”

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Why Spending Is Still Rising

Despite DOGE’s cuts, overall government spending has increased.

DOGE focused on discretionary spending, which makes up less than 30% of the total budget, according to the Center on Budget and Policy Priorities. Most of the federal spending lies elsewhere.

“The largest spending increases are concentrated in entitlement programs, defense and infrastructure, with the FY2024 defense budget alone exceeding $850 billion, reflecting heightened geopolitical tensions and long-term strategic investments in military modernization,” said Sean Jasso, an economist at Pepperdine Graziadio Business School.

In addition, a National Public Radio (NPR) review of DOGE’s website found that many of its initial savings claims were inaccurate, overstated or typos.

Nevertheless, the savings DOGE promised are outweighed by rising obligations and the ripple effects of rushed downsizing.

Economic Impact

Rising government spending can stimulate short-term economic growth, especially in sectors like defense and tech. However, when that spending is driven by growing deficits, like the $196 billion deficit increase reported by the Congressional Budget Office this year, it raises long-term risks.

Story ContinuesGeorge Carillo, a former state health official now serving as the CEO of the Hispanic Construction Council, said for average Americans, such spending shifts could be a mixed bag.

“The good news is that money going into infrastructure and healthcare might mean smoother commutes, better internet or more affordable medical care,” Carrillo said. “The tough part is that higher spending could eventually lead to higher taxes, especially if leaders decide to tackle the growing national debt.”

What It Means for You

For everyday Americans, these shifts can hit close to home. Cuts to education, healthcare programs and local services may limit access to critical resources.

At the same time, rising federal deficits could lead to higher taxes and inflation down the line, which could reduce purchasing power.

“Long term, we are going to have to get coherence between our spending and revenue,” said Tim Rosenberger, a legal policy fellow at the Manhattan Institute. “The best-case scenario is probably finding a way to spend less on services without Americans experiencing a decline in service.”

What to Watch Next

Experts said the real test will be whether future budgets tackle the big drivers of federal spending, like Social Security and Medicare, or continue to trim around the edges.

Chris Motola, a financial analyst at National Business Capital, pointed to the “Big, Beautiful Bill” recently passed by the House, which includes an increased standard tax deduction and tax exemption on tips, “all of which will put some money back in pockets while raising the deficit,” he said. “On the other hand, we’re also looking at cuts to regulatory agencies and some forms of financial assistance.”

Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.

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This article originally appeared on GOBankingRates.com: Government Spending Is Up Despite DOGE Cuts — Here’s What That Means for the Economy and Your Wallet

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