Most Americans remember the scene from the classic movie, “It’s a Wonderful Life.” George Bailey jubilantly enters his Building and Loan after spreading the news around town that his brother Harry had won the Congressional Medal of Honor. George’s celebration is interrupted when he’s met by the state bank examiner who is there to confirm that the company’s books are in order.
George deadpans to the bank examiner, “Uh, well, between you and me, Mr. Carter, we’re broke.”
The remark, which George thought was a joke, turned out to be the truth, as across town George’s well-meaning but bumbling uncle was simultaneously misplacing a large sum of company cash which would wind up in the hands of Mr. Potter, the villainous owner of the town bank.
There are similar themes at play in real-world Washington, D.C., today–misplaced funds ending up in the wrong hands, audits (by Elon Musk and the Department of Government Efficiency instead of the state bank examiner), and exuberance in the face of an unseen fiscal disaster.
Despite the similar themes, the woes of George Bailey don’t quite line up with what’s happening in the nation’s capital today.
In the film, the stoic bank examiner is in a hurry to complete the examination of the company books because, as he says, “I want to spend Christmas in Elmira with my family.”
In real life, the energetic Elon Musk and the team at DOGE are working long hours, methodically seeking to root out hundreds of billions of dollars of misplaced or misused government funds. Under the direction and discretion of President Trump, DOGE has tallied $65 billion in taxpayer savings so far. That includes up to $20 million for green transportation and logistics in the Eastern European country of Georgia, $469,000 for the Census to procure contractor services to assist with interviews on sexual orientation and gender identity, and $38 million for a study on “transition support for youth with disabilities.”
In the film, the banker who himself had pocketed the missing $8,000 accuses George of “misappropriation of funds, manipulation, malfeasance.”
Meanwhile, many real-life beneficiaries of frivolous federal spending—from public union leaders to NGO workers, to left-wing media companies—have turned their ire on Musk and his small team of tech-savvy workers. Their foes attack them for supposedly acting as an unelected “shadow government” in their efforts to rein in the 2.3-million-person federal civilian workforce, all of whom are unelected and—until DOGE—largely unaccountable to the American electorate.
But perhaps the biggest difference between the movie and real life is that the deficit George Bailey faced was only $8,000—worth about $130,000 today after accounting for inflation. A fair amount of money for a small business, to be sure, but not an insurmountable obstacle for one man and his friends.
In contrast, the U.S. deficit stands at about $2 trillion per year, with the total accumulated debt over $36.2 trillion. That’s more than $270,000 per household—Each American’s share of the nation’s debt dwarfs George Bailey’s shortfall. America doesn’t have any friends that can bail us out of such a jam.
That’s why the work of deficit reduction that DOGE has begun is critical. And Musk and the Trump administration are smartly targeting some of the most egregious waste in the government first.
But Americans must be realistic about the scope of the fiscal problem that we face. The fight to bring deficits, interest rates, and inflation under control has just begun.
Paying off all or even most of the $36.2 trillion debt won’t happen in this administration or, likely, at any point in our lifetimes.
To balance the annual budget and stabilize the debt at its current level, we would still have a very long way to go. If the U.S. was George Bailey, and started in an $8,000 hole, even after all of DOGE’s great work so far, we’d still be about $7,740 short of that goal.
And that’s assuming that Congress follows through by cutting appropriations where DOGE has trimmed the government bloat. Otherwise, the next presidential administration could just continue spending as though no cuts were ever made.
The other elephant in the room is Congress’s ongoing negotiations to extend the expiring 2017 tax cuts. Government forecasts that project annual deficits will only rise from about $2 trillion to $3 trillion over the next decade dubiously rely on an anticipated influx of cash from letting the tax cuts expire, what would effectively be a nearly $500 billion per year tax hike starting in 2026.
Even if Congress allowed the 2017 tax changes to lapse and subjected Americans to such a large, nearly across-the-board tax hike, revenues would almost certainly rise by less than anticipated. Tax hikes stunt growth, and slow economic growth reduces tax collections.
But a tax cut package will likely pass this year, even if most, if not all, of the “cuts” will simply go toward maintaining the current tax rates.
The House is pushing for a single big tax and spending bill this year to deal with the tax extensions, along with other budget priorities. The Senate is pushing for two bills—the first bill focused on border and defense needs, with tax extensions to be considered in a later bill.
Whichever approach Congress takes, the conservative majority will have to grapple with razor-thin margins, especially in the House. And they will be constrained by the very real fiscal challenges America faces.
To help align Congress’s incentives in favor of spending cuts, the House smartly included a provision in their budget resolution language that would tie the amount of allowable tax cuts in the fiscal package to the amount of spending cuts included.
The developments in Congress, like many other developments in Washington over the past month—from Trump’s flurry of common-sense executive orders to DOGE’s work rooting out wasteful spending—have been heartening for conservatives.
But make no mistake, Trump and the new Congress inherited a disastrous fiscal position, a shaky economy, and high inflation fueled by excessive spending and debt.
Decades of reckless spending got America into its current precarious situation. Righting the ship will take time and resolve.
The fight to restore fiscal sanity has only just begun because, well, between you and me, we’re still broke.