By Scott Kupor, Director, U.S. Office of Personnel Management

August 29, 2025

“A billion here, a billion there, and pretty soon you’re talking about real money.”

When Republican Senator Everett McKinley Dirksen coined this phrase in the late 1960’s, the federal budget was about $185 billion, and the U.S. was running a small budget surplus (about $3 billion). So, Senator Dirksen was right, both literally and figuratively – a billion dollars was in fact “real money” and well worth fighting over as part of the annual Congressional appropriations process.

Today, the annual federal budget is about $7 trillion (yes, that’s trillion with a “t”), we run a deficit of $2 trillion, and we have an accumulated debt of $36 trillion.

Given that, does “a billion here, a billion there” still amount to “real money?”  The answer is unequivocally “yes,” and President Trump’s administration is committed to demonstrating that.

The federal budget in less than one page

To understand why, we first need to understand the federal budget in a bit more detail. There are three big areas of the $7 trillion in federal spending:

• Mandatory spending – these are programs such as Medicare, Medicaid, and Social Security. Some people collectively refer to these as “entitlements” – commitments the federal government has made to cover health and retirement benefits for older Americans and less fortunate Americans. Today, we spend approximately $4 trillion in this bucket.
• Interest payments on the debt – we have to “service” our $36 trillion debt, or pay people interest for the privilege of lending us that money. Today, the U.S. spends approximately $1 trillion in this bucket.
• Discretionary spending – this is the catch-all bucket for everything else. It includes lots of stuff, but a few of the big items are: (i) the roughly 2.4 million non-military federal employees (e.g., IRS, Commerce, Interior, and a whole hosts of other federal agencies); (ii) Defense-related personnel and other spending; and (iii) Veterans Affairs. Today, we spend approximately $2 trillion in this bucket.

Luckily (or not, depending on your view of taxes), the federal government also collects some money each year, the vast majority of which comes in the form of tax payments that you and I pay. The government collects about $5 trillion today, leaving us $2 trillion in the hole.

Lots of people may debate the size of the debt, how much is too much and what are the longer-term implications. But one thing is clear: a growing debt means you must pay interest payments each year to satisfy your lenders. That’s “dead money,” meaning we’re paying lots of interest without getting anything of value in return.

A brief walk down memory lane

How did we get here? Or does the government just always rack up annual deficits? Yes, debt levels accumulate over time, but there have been some real changes in spending in recent years.

Let’s go back to 2019; the government spent about $4.5 trillion. At today’s $7 trillion spend, we have increased government spending by about 55% over the past six years.

Spending has grown in all three major buckets, but one of these things is not like the other. While mandatory and discretionary spend increased by roughly 50% each, spending to service the debt has growth by 150%.

For context, the total amount of U.S. debt in 2019 was about $23 trillion; that compares with the roughly $36 trillion that we have today. But, not only has the size of the debt grown, interest rates (the “cost” of servicing the debt) have also nearly doubled since 2019.

Is a 55% increase in spending over roughly six years a lot? One way to look at this is to compare it with the growth in gross domestic product (GDP), which is a measure of the production of the U.S. economy. Over the same period, U.S. GDP grew about 36%, whereas federal spending grew at 55%.

Had federal spend simply grown at the rate of GDP growth, our total spend today would be about $6 trillion. It would be even lower, however, because we wouldn’t have $36 trillion in debt, thus reducing our annual interest payments substantially.

That thing called COVID

So, why have we grown spending so much more than the economy?

Enter COVID in 2020. To deal with that, the government increased spending by about $2.4 trillion in 2020 alone!

No doubt that spending was justified. COVID was a global health emergency that could have created even more catastrophic health and economic outcomes had we not dealt with it appropriately. I’m certainly not here to argue anything differently.

But, typically in an emergency, we increase spending during the crisis and then we revert to our prior spend level post-emergency. Think about it for yourself: If you had a medical emergency or lost your job, you would of course need to spend to sustain yourself through that crisis. But once you got past the emergency, you might consider ways to reduce your spend (or increase your income) to try to get yourself on a more sustainable financial path.

It’s simply common sense; but it’s not what happened in the Biden Administration. Instead of trying to find ways to revert our spend to pre-COVID levels and grow in line with GDP, we grew much faster than that. And, as a result, we now spend $7 trillion annually and have burdened our children and grandchildren with $36 trillion in debt – and growing.

So, what can we do about it?

Ok, I am going to cheat a bit to simplify the problem – let’s just ignore mandatory spending and debt interest payments. Yes, they are huge buckets of spend – $4 trillion and $1 trillion, respectively – but here’s why I suggest we cheat.

First, mandatory spend is both very politically hard to deal with (politicians are loathe reducing these benefits) and technically difficult to deal with (because of the slim majorities in Congress, these expenses are mostly dealt with via the reconciliation process, which has strict governing rules). In the One Big Beautiful Bill, there were some changes to Medicaid to eliminate fraud, waste and abuse, that will yield some savings, but for now let’s just put that aside.

Second, we’re going to ignore the $1 trillion in debt service payments because that is ultimately a function of spend (if we spend less, we will lower these payments) and interest rates (if we have lower interest rates, the cost of servicing the debt will fall). So, if we can find a way to reduce discretionary spend – the topic of this post –we’ll get a double benefit of also reducing the debt service.

There is no avoidance in delay

Enough waiting – let’s tackle discretionary spend.

Here are the big buckets that make-up the $2 trillion in discretionary spend:

• Defense spending – approximately $1 trillion – this includes active-duty military personnel, weapons procurement, operations, etc. Basically, all the money we spend to protect the security of our country.
• Civilian personnel – approximately $250-300 billion – the U.S. employed as of January about 2.4 million civilians in all the various agencies in the government (IRS, Veterans Affairs, EPA, Homeland Security, Health & Human Services, etc.).
• Non-personnel agency costs – approximately $700 billion – these are the other costs to run the various government agencies. It includes contractors, procurement, program spend, etc.

Interesting – the $2 trillion we spend in this category is exactly equal to the $2 trillion annual deficit we have. So, why not just wave a magic wand and just cut all of this $2 trillion and we’d immediately solve our way to a balanced budget? Obviously, we can’t do that, or we literally wouldn’t have a government to maintain our sovereignty or to make sure fundamental things happen such as drugs getting approved, highways being built, planes not falling out of the sky, etc.

And then there was $1 trillion

So, what can we do? Let’s focus on the non-defense spending for now. No doubt there are great minds in the Trump Administration thinking about ways to increase efficiency here, so to simplify, let’s put a pin in that for now.

As of the beginning of this year, there were approximately 2.4 million civilian employees in the federal government. Based on the current plans submitted by the various agencies, we estimate we will end the year at about 2.1 million employees, a reduction of 12.5%.

Of those reductions, roughly 80% are coming from voluntarily resignation, the vast majority from the Deferred Resignation Plan (DRP) (a program that offered eligible employees eight months of paid leave in connection with their voluntary separation). The other approximately 20% are estimated to come from either elimination/reduction in force of functions or probationary employees (typically those employees with less than one year of tenure).

For example, at the Office of Personnel Management (OPM), we expect to reduce our headcount by about one-third (or 1,000 employees). In one case, we made the decision to eliminate a function that was focused on executive training for federal employees. The team was dedicated to their work and performed the function admirably, but we determined in a world of constrained resources, we simply could not afford to support this activity anymore. In that case, we offered the DRP for eligible employees and did involuntarily terminate the remaining employees.

In other cases, we retained a function but determined we could increase the operational efficiency of the team – through some combination of the use of technology, a reorganization of the team, or a re-prioritization of their objectives – and thus reduced headcount by a more modest amount.

None of this is to minimize the seriousness of headcount reductions. Employees have families, friends, and communities who rely on them, and the disruption of needing to look for a new job is destabilizing to say the least. This is why the government offered the DRP –to try to reduce costs through mostly voluntary departures.

In addition to direct headcount costs, we at OPM also substantially reduced our contractors – part of that $700 billion annual non-personnel agency cost bucket. We started the year with approximately 1,300 contractors and estimate that we will end the year under 500.

When you add these two items up – reductions in headcount and contractors – we estimate that we will save taxpayers nearly $300 million – approximately 1,000 people at $180,000 loaded + over $100 million in contractor dollars.

And that’s from our relatively small agency. When you forecast just the approximate 300,000-person reduction in headcount across the government, that could save close to $35 billion annually (and another $1.6 billion in foregone interest on the debt). And that ignores any other savings from contractors, defense spending, etc.

Before you know it, we are talking about “real money”

Reducing spends – like dieting – is never easy. And – also like dieting – they don’t work as one-and-done exercises. Just as we all know with losing weight, if we want to sustain weight loss, we need to make behavioral changes to how we eat, how we exercise, etc.

The same is true of making a real dent in federal spending and the debt. We need to modify our spending behavior over long periods of time to recognize that we can’t be all things to all people. In a world of scarce resources, trade-offs matter.

No, the federal government will not eliminate our $2 trillion deficit over night, but if we can keep chipping away at it – while also growing  GDP through President Trump’s agenda (e.g., permanent tax cuts, de-regulation, AI/energy investment, normalizing global trade) – we have a real shot at providing our children and grandchildren even more of the American dream than many of us have lived.

And, yes, a few billion here and a few billion there will in fact turn into real money.