What's Happening?
A report by the Cato Institute reveals that the Trump administration has significantly reduced the federal workforce by nine percent in 2025, marking the largest reduction since post-World War II demobilizations.
Despite this, federal spending has continued to grow, with expenditures reaching $7.6 trillion in the first 11 months of 2025, an increase of $248 billion compared to the previous year. The Department of Government Efficiency (DOGE) led the workforce reduction, which saw a decline of 271,000 employees, primarily driven by a civil service buyout offer. However, the report notes that the reduction in workforce did not translate into decreased federal spending, as most expenditures are tied to entitlement programs that require congressional action to cut.
Why It's Important?
The report underscores a critical issue in federal budget management: reducing the workforce alone does not significantly impact overall spending due to the nature of federal expenditures. Most federal spending is allocated to entitlement programs like Social Security and Medicare, which are on 'policy autopilot' and require legislative action for any substantial cuts. This highlights the challenge of managing federal budgets and the limitations of administrative actions without congressional support. The findings suggest that while workforce reductions can streamline operations, they do not address the structural spending issues that contribute to the national debt, which has surpassed $38 trillion.
What's Next?
For meaningful reductions in federal spending, the report suggests that Congress must take action to cut or eliminate entitlement programs, which constitute a significant portion of the budget. Additionally, state governments could play a role by refusing federal funds tied to these programs. The report calls for legislative efforts to repeal and defund unconstitutional programs to reduce the size and scope of the federal government. The ongoing debate over federal spending and workforce management is likely to continue, with potential implications for future budgetary policies and economic strategies.
