How the Department of Government Efficiency Is Cutting $365 Billion in Federal Spending

President Trump’s newly established Department of Government Efficiency is set to tackle federal spending and streamline operations. With the U.S. DOGE Service now under its wing, the department aims to modernize government functions and drive massive cost reductions across the board. Interestingly, this new change has already benefited the US government within just a week of Trump passing an executive order.

According to The Kobeissi Letter, DOGE has reportedly saved the U.S. government $1 billion per day since the new administration took office. If this trend continues, it could reduce the national deficit by $365 billion by January 2026—equivalent to a 20% cut in the FY2024 deficit of $1.8 trillion.

For context, the U.S. spent around $850 billion on defense in 2024, meaning DOGE’s savings could cover nearly 43% of that budget. Plus, with U.S. interest payments on debt reaching $882 billion last year, a $365 billion deficit reduction could slash interest costs by over $12 billion annually.

DOGE pulled off this historic financial feat, with three key moves: freezing non-essential hires, eliminating DEI programs, and cracking down on improper payments abroad.

Also by halting unnecessary hires, trimming bureaucratic excess, and ensuring taxpayer dollars don’t vanish into foreign black holes, DOGE claims it’s setting a new standard in fiscal discipline. Hence, if sustained, this could mean approximately $365 billion saved annually—redirected to infrastructure, healthcare, or national security.

Could DOGE Impact Interest Rates?

The Kobeissi Letter highlights that for DOGE to cut deficit spending by 50%, it must increase daily savings to $2.5 billion. Lower deficit spending could naturally bring down bond yields, reducing interest costs and creating a positive economic cycle.

Moreover, rising inflation and deficit spending concerns have pushed the 10-year Treasury yield up by 100 basis points since rate cuts began. If DOGE’s deficit reduction leads to lower government borrowing, yields could stabilize, potentially saving U.S. consumers trillions in interest over the next decade.

However, completely eliminating the FY2024 deficit would require cutting $5 billion per day—five times the current rate. The last time the U.S. achieved a budget surplus was in 1998 under Bill Clinton. If successful, Trump and Elon Musk’s DOGE initiative could mark the second such achievement since 1969.

While the numbers sound promising, whether DOGE can truly reshape the U.S. economy remains to be seen.

Crypto Reaction

With the latest development, the market is cheering how DOGE an underdog crypto coin is making waves in the US economy.