What is DOGE trying to do with spending cuts and how does it affect consumers in the economy?
- Insights Digest
- Apr 2
- 3 min read
Harshul Agarwal
02/04/2025
The Department of Government Efficiency (DOGE), led by Elon Musk under the 47th
president of the United States, Donald Trump, has quickly become one of the most
talked-about agencies globally. In just under two months of operation, DOGE has canceled
thousands of government contracts and grants, claiming to have saved over $115 billion.
While the exact figures remain under scrutiny due to a lack of transparency, the objective is
clear: reduce government spending in order to better manage the national debt and ease the financial burden on American consumers whose hard earned money is used to pay off interest on trillions of national debt every year.
To understand why this matters, we need to look at the current situation of the US National
Debt. Over the next 12 months, more than $7.6 trillion of U.S. debt is set to mature. The
government obviously doesn’t have that money on hand, meaning it needs to refinance. But
with current interest rates hovering around 4.5%, refinancing that debt would cost hundreds
of billions more annually in interest compared to the 1.5% rates the government locked in
during 2022. Jerome Powell, chair of the Federal Reserve, however has a bearish view on
inflation however has led to interest rates remaining high however.
This is where DOGE’s spending cuts come in. By cutting down on unnecessary expenditures, the government sends a signal to markets and the Federal Reserve that it is serious about fiscal responsibility. That, in turn, could help drive down interest rates by reducing inflationary pressures and lowering expectations of future deficits. In simple terms, cutting spending now might help the government refinance its debt at more favorable
rates—potentially saving $200 billion or more annually.
What does this mean for everyday people? If the government fails to rein in spending and is
forced to refinance at high interest rates, the cost of servicing the national debt could rise by
over $200 billion per year—on top of the $730 billion already spent annually on interest, that
is an extra 27% a year in financing the government debt. That money doesn’t come from
nowhere; it comes from taxpayers. In other words, without reforms, consumers could face
higher taxes, reduced government services, or both.
These rising interest payments increase the power and leverage of foreign debt holders—the three largest being Japan, China, and the UK—each of whom holds close to a trillion dollars of U.S. debt. More of the taxpayer dollars of the American people would be sent overseas just to pay interest, instead of being invested in American infrastructure, education, or healthcare.
DOGE’s aggressive cuts aim to prevent this. While controversial, and at times lacking in
accountability as well as justification, the agency represents a bold attempt to change how the government operates: spending less today to stabilize tomorrow. If successful, these cuts
could help avoid future tax hikes, preserve key public services, and even open the door to tax refunds or rebates in the long term.
In summary, DOGE’s strategy revolves around one core idea: reduce government spending
now to prevent skyrocketing debt costs later. While the approach has sparked debate and
protest, especially from those who view Musk’s influence with suspicion, its goal is rooted in
economic fundamentals. If it works, the biggest beneficiaries won’t be politicians or
corporations—but regular consumers hoping for a lighter financial load in the years to come.
Sources:
Murray, E., Kim, J. and White, J. (2025). How DOGE Is Slashing Spending and the Federal
Workforce. The New York Times. [online] 28 Mar. Available at:
Peterson Foundation. (2024). National Debt Clock: What Is the National Debt Right Now?
[online] Available at: https://www.pgpf.org/national-debt-clock/.
Fowler, S. (2025). DOGE wants to cut $1 trillion this year. But it’s not looking at big
spending drivers. [online] NPR. Available at:
Picchi, A. (2025). What is DOGE? Here’s what to know about Elon Musk’s latest cost-cutting
efforts. [online] Cbsnews.com. Available at:
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