Betting Markets and the Scale of DOGE's Challenge

Will President Trump and Elon Musk really slash government spending this year? If you believe Kalshi’s (pretty thin) betting market this morning, there’s a 34 percent chance that federal spending will be cut by at least $1 billion and a 5 percent chance of $1 trillion in cuts in 2025.

I hate to break it to DOGE’s supporters, but those odds are wildly optimistic. Under the terms of the specific bet, even $1 billion in spending cuts is next to impossible.

Now, don’t get me wrong—I’m supportive of the Department of Government Efficiency (DOGE) and (with Alex Nowrasteh) marshalled Cato scholars to putting in our ideas for spending cuts early. At the very least, the DOGE that exists is shining a light on wasteful and non-priority spending and bringing deficit reduction back into the public conversation (even if Congress is sprinting in the opposite direction). Sure, there are legitimate libertarian quibbles and concerns about DOGE’s execution, but on balance, its existence is a net positive. More power to them.

And, actually, I think DOGE’s activities will almost certainly reduce the path of annual spending by a lot more than $1 billion per year. Remember, the federal government is this year projected to spend $7 trillion. The government’s own GAO suggests that there is $236 billion in “improper payments” alone and up to $521 billion in annual fraud in federal programs for it to go after. Workforce cuts and executive action can certainly trim some fat too. If Congress ultimately stepped up to empower DOGE to eliminate whole agencies and programs, the savings could, of course, get much bigger still.

But that’s not what this bet is about.

The Kalshi contract isn’t on whether DOGE alone finds savings; it’s on whether total federal government spending actually declines by at least $1 billion this year. And that’s simply not happening.

The Congressional Budget Office (CBO) projects that federal spending in 2025 will be $278 billion higher than in 2024 on unchanged policies. Where’s that extra money going? It includes:

• $118 billion in additional Social Security payments (Trump won’t touch that).

• $57 billion more for Medicare (also off-limits).

• $71 billion extra in debt interest payments (nothing DOGE can do about that)

So, to shrink total spending by $1 billion this year, DOGE, Congress, and Musk would need to cut $279 billion from elsewhere just to break even against those (mostly) automatic spending increases. That’s not happening given the activities of DOGE to date, let alone that:

• The House budget framework proposes $2 trillion in spending cuts over a decade, but much of will be backloaded to future years;

• The House and Senate budget resolutions also include new spending for the border and any bipartisan deal to keep the government open will include more spending, not less;

• A large chunk DOGE’s direct savings will come from canceling contracts that reduce future costs, not immediate cash reductions this year;

• Entitlements and interest payment increases would still dwarf discretionary cuts this year anyway, making reducing cash spending this year functionally impossible.

All of which shows the spending headwinds DOGE faces and how, to really cut spending, we need Congress to bring its own chainsaws and sharpened axes to the party.