Inflation came in hotter than expected for January, but the real problem is that this is likely only the start. The money supply was juiced by Biden running up to the election, tariffs may add to pricing pressures and businesses have a fair amount of cost pressure and pricing power. Good luck to Trump doing anything to alleviate that. Musk may make a small dent in spending, but Reps are planning no significant tax revenue increases and big spending of their own. If the deficit isn’t substantially reduced, inflation will go up and up because we have to keep issuing debt which has its own way of juicing the money supply.
And right on course, the US is running a mammoth deficit for the first few months of the current fiscal year, which for some bizarre reason begins in October for the federal government. See this Zero Hedge post for all the gory details on revenue, spending and the deficit. Now look at that and tell me where any significant spending cuts are going to occur. They should occur in Medicare, Medicaid and Social Security, but no politician has the courage to do what is necessary. And we aren’t even talking about real cuts, we are talking about limiting growth. Interest is already the true number one spending category, because both Medicare and Social Security have offsetting revenue streams. We really are screwed, due to feckless politicians who got us into this mess and don’t have a clue or the Big Bolz to get us out. (ZH Post)
And don’t think this is just me being my usual dour, pessimistic self (which is not at all what I really am), look at the market reaction to today’s ten-year US Treasury note auction. In contrast to the excellent auction yesterday, this one, with a much longer maturity, was quite poor. The interest rate was higher than projected and demand was weak. But then this was $39 billion of relatively long-term paper dumped on a nervous market after the inflation report. Rates are headed back up to the 5% area is my guess and won’t recede unless and until there is demonstrable progress on the deficit.
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at 
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Wouldn’t it be great if the necessary spending reforms for entitlement programs would be to eliminate the fraud, waste and abuse? Who would have guessed that Social Security numbers weren’t de duped?
Thanks for all the good news! I hope that history accurately reflects what happened and how and assigns blame accordingly. Sadly, at the rate the Marxists are gaining ground on speech and technology is progressing, there will likely only be the party line.
It’s a Mel Brooks world: Hope for the best — expect the worst.
Perhaps Trump and Musk are thinking along these lines: Debt Reduction Plan: Where Trump and DOGE Can Get $1 Trillion
A Strategic Approach to Reducing the Federal Deficit
Reducing the federal deficit by $1 trillion requires a balanced approach—targeting wasteful spending, streamlining inefficient government programs, and enhancing revenue without burdening middle-class taxpayers.
The Trump administration, working alongside the Department of Government Efficiency (DOGE), has outlined a comprehensive plan focusing on military spending reform, entitlement efficiencies, tax restructuring, and energy independence. Below is a breakdown of how the savings can be achieved.
1. Medicare & Medicaid Cuts: $150 Billion
• Current Budget: ~$1.5 trillion (2024)
• Targeted Reduction: 10% via efficiency improvements and fraud reduction
• Key Areas of Waste & Fraud:
◦ Overbilling & Improper Payments: ~$100 billion annually lost to fraud and abuse.
◦ Inefficient Administrative Costs: Streamlining bureaucratic processes.
◦ Reforming Payments: Incentivizing cost-effective treatment options instead of expensive procedures.
• Estimated Savings: $150 billion
2. Tariff Revenue: $25 Billion
• Current U.S. Tariff Collections: ~$80 billion annually.
• New Revenue Sources:
◦ Expanding targeted tariffs on China and other foreign competitors.
◦ Strengthening enforcement to reduce tariff evasion.
• Estimated Net Revenue: $25 billion
3. Defense Spending Cuts & Military Reform: $100–200 Billion
• Current Budget: ~$900 billion (2024).
• Strategic Downsizing & Modernization:
◦ Reducing Carrier Fleet: Retiring two aircraft carriers (saves ~$20B per carrier).
◦ Increasing Submarines & Unmanned Warfare: Expanding Virginia-class attack subs and Orca XLUUVs.
◦ Shifting to Smaller, Lethal Warships: Expanding the Constellation-class frigates over costly destroyers.
◦ Cutting Waste & Inefficiencies: Eliminating outdated weapons systems.
◦ Reducing Overseas Bases: The U.S. maintains 750+ military bases worldwide—some could be downsized or closed.
◦ Renegotiating Defense Contracts: Reducing F-35 cost overruns and procurement inefficiencies.
◦ Reducing Active-Duty Personnel by 10%: Raising recruitment standards while downsizing non-essential forces.
• Estimated Savings: $100–200 billion
4. Social Security Payroll Tax Cap Increase: $150 Billion
• Current Payroll Tax: 12.4% applies only to income up to $168,600.
• Proposed Reform:
◦ Raise the tax cap to $250,000+ so high-income earners contribute more.
◦ Avoid benefit cuts while strengthening long-term solvency.
• Estimated Revenue Increase: $150 billion
5. Eliminating Redundant Government Agencies & Programs: $100–150 Billion
• Government Accountability Office (GAO) Findings:
◦ Overlapping job training programs: 15+ federal agencies manage similar initiatives.
◦ Agricultural subsidies: Large corporations receive billions in subsidies intended for small farmers.
◦ Federal Research Grants: Many programs duplicate funding for similar projects.
• Estimated Savings: $100–150 billion
6. Discretionary Spending Cuts (Non-Defense): $75–125 Billion
• Current Discretionary Budget: ~$900 billion.
• Targeted Areas for Reform:
◦ Industry Subsidies: Ending tax breaks for ethanol, fossil fuels, and inefficient green energy projects.
◦ Education Reform: Decentralizing programs to reduce federal oversight and return funding to states.
◦ Postal Service Reform: Ending Saturday mail delivery and increasing automation.
• Estimated Savings: $75–125 billion
7. Federal Workforce Reduction & Hiring Freeze: $50–100 Billion
• Current Federal Workforce: 2.2 million employees.
• Proposed Reforms:
◦ Hiring freeze for non-essential federal positions.
◦ Increasing automation & AI to reduce bureaucracy.
◦ Privatizing select government services.
• Estimated Savings: $50–100 billion
8. Tax Reform & Closing Loopholes: $150–250 Billion
• Corporate Tax Loopholes:
◦ Closing offshore profit-shifting loopholes.
◦ Ending carried interest tax breaks for hedge funds.
◦ Establishing a minimum corporate tax rate.
• Individual Tax Loopholes:
◦ Limiting deductions for high-income earners.
◦ Increasing capital gains taxes for the ultra-wealthy by 5%.
• Estimated Revenue Increase: $150–250 billion
9. Energy & Oil Revenue Expansion: $50–100 Billion
• Expanding U.S. Energy Production:
◦ Increasing offshore drilling and leasing federal lands.
◦ Increasing natural gas exports to reduce reliance on foreign energy.
◦ Expanding nuclear energy investments for lower long-term energy costs.
• Estimated Revenue Increase: $50–100 billion
Total Estimated Deficit Reduction
Source
Estimated Savings/Revenue
Medicare & Medicaid Cuts (10%)
$150 billion
Tariffs
$25 billion
Defense Spending Cuts & Modernization
$100–200 billion
Social Security Payroll Tax Cap Increase
$150 billion
Redundant Government Program Cuts
$100–150 billion
Discretionary Spending Cuts
$75–125 billion
Federal Workforce Reduction
$50–100 billion
Tax Reform & Closing Loopholes
$150–250 billion
Energy & Oil Revenue Expansion
$50–100 billion
Total Estimated Savings
$875 billion–$1.3 trillion
Key Takeaways
✅ Balanced Approach: A combination of spending cuts, efficiency improvements, and revenue increases makes the plan viable and politically feasible.
✅ Defense Reform is Critical: Reducing carriers, increasing submarines, and shifting to unmanned warfare lowers costs while maintaining military strength.
✅ No Major Benefit Cuts for Social Security & Medicare: Instead of cutting benefits, this plan increases revenue by raising the tax cap for higher earners.
✅ Targeting Waste & Fraud: Cutting inefficiencies, redundant programs, and wasteful spending provides hundreds of billions in savings.
✅ Energy & Domestic Production: Increasing U.S. energy output lowers energy costs, boosts GDP, and generates billions in revenue.
A good plan, big problem is lots of Reps benefit from a bunch of this spending and won’t want to see it go away