Grok 3 and Me Solving US Government Spending, Doubling Longterm Growth and Avoiding Recession

I worked with Grok 3 to analyze all of the spending deep federal government spending cuts, possible end to the Ukraine war, privatization of parts of government, streamlining agencies and functions. I looked at using improved tax and other policies to achieve strong economic growth (doubling GDP growth from 2% per year to 4-5% per year).

This is an update of a prior analysis. Elon Musk has now discussed $5000 stimulus checks in 2026. The previous plan had recession risks in 2026. Stimulus checks can be used to offset that risk to avoid recession.

For the past 10 years (2014-2023):

The average annual GDP growth rate for the USA from 2014 to 2023 is approximately 2.26% and has been 2.16% over the last 20 years. The new plan could see the US reach double the annual GDP growth with 4-5% average GDP growth.

The potential impacts of federal government spending cuts in the range of $1 trillion to $2 trillion per year (15% to 30% of the $6.7 trillion 2024 federal budget), paired with the proposed policy changes, on the U.S. economy by September 2026, September 2028, and 2030 and beyond. Use historical examples (post-WWI, post-WWII, and Clinton-era 400K federal staffing cuts), economic principles, and the specific measures you’ve outlined—military spending efficiencies, fraud reduction, tax reforms, stimulus checks, and geopolitical/supply chain fixes. Outline a best plan for a stronger economy.

Assumptions include a negotiated halving (or substantial successful agreed reductions) of military spending with Russia, China, and the U.S., $500 billion in annual federal fraud and waste per GAO reports, DOGE identifying waste (e.g., USAID as 90% scams and CIA tool), shutting down the Department of Education with functions transferred to states, privatizing the U.S. Postal Service (USPS) and Veterans Affairs (VA), and implementing DOGE’s X discussions and Project 2025 plans from Heritage for 75% cuts in federal workers/contractors via privatization, IT modernization, and efficient processes. Evaluate all U.S. government agencies for necessity and effectiveness, considering state/local or private delivery. The goal remains a stronger economy by September 2026, 2028, and 2030+.

Overview and Historical Context

Federal spending cuts of this magnitude would be significant but not unprecedented in relative terms. Post-WWI, U.S. federal spending dropped from $18.5 billion in 1919 to $6.4 billion by 1922 (a 65% cut), driven by demobilization, leading to a sharp but brief recession (1920–1921) with unemployment peaking at 11.7%. Post-WWII, spending fell from $92.7 billion in 1945 to $34.5 billion by 1948 (63% reduction), yet the economy transitioned to growth due to pent-up consumer demand, private investment, and a global economic boom. During the Clinton administration (1993–2001), federal employment was reduced by about 400,000 (mostly military-related), and discretionary spending tightened, contributing to budget surpluses by 1998 amid a tech-driven economic expansion. These cases suggest large cuts can trigger short-term contraction but, with the right conditions, enable long-term growth.

Tax Reforms

Flat Tax: A revenue-neutral flat tax (e.g., 1i% across all income with 30K exemption) simplifies compliance, potentially boosting investment. Low earner exemptions prevents low income hit.

Middle-Class Cuts/No Tax on Tips: Eliminating taxes on tips (with rules like a $50,000 cap to prevent abuse) and cutting middle-class rates could increase disposable income by $100B–$200B annually, spurring consumption.

No Taxes on Seniors: Exempting Social Security income might cost $50B–$100B yearly but supports retirees’ spending power.

Stimulus Checks

$5,000 Checks: One round for 80 million households in summer 2026 costs ~$400B; two rounds total $800B. Post-COVID $1,200–$1,400 checks boosted GDP by 1–2% short-term; $5,000 could add 3–5% temporarily, offsetting recession risks.

Geopolitical and Supply Chain Fixes

Ukraine War Cessation: Ending U.S. aid (~$50B/year) saves funds and, if paired with normalized Russia/Ukraine trade, lowers fertilizer/energy costs, cutting inflation by 0.5–1%.

Supply Chain: Streamlining logistics (e.g., port efficiency) could reduce goods prices, amplifying consumer purchasing power.

Inflation/Interest Rates: Effective Fed policy keeping rates at 3–4% (from 5%+ now) supports borrowing/investment without overheating. Managing with deregulation and other policies that lower inflation, interest rates and lower energy costs are pro-growth.

Assumptions and Cuts

Federal Budget Baseline: $6.7 trillion (2024). Cuts aim for $1T–$2T (15%–30%), now leaning toward $2T+ with aggressive reforms.

Military Spending: Current U.S. defense budget is ~$850B. A negotiated halving with Russia and China drops it to $425B, saving $425B/year. Assumes global stability reduces need for overseas bases and arms races.

Fraud and Waste: GAO’s $500B/year estimate includes $200B in Medicare/Medicaid, $50B in Social Security, and $250B across other programs (e.g., USAID, discretionary). DOGE targets this fully.

USAID: $50B budget (2024) deemed 90% waste ($45B cut), redirected from “global meddling” (media control, conflict funding) to domestic priorities.

Dept. of Education: $80B budget eliminated; $10B in useful functions (e.g., student loans) shifted to states, saving $70B.

USPS and VA Privatization:

USPS: $80B budget (offset by $70B revenue) nets $10B cost. Privatization saves $10B, improves efficiency via competition.

VA: $300B budget privatized (e.g., via vouchers/healthcare markets), saving $150B–$200B after inefficiencies; assumes private sector absorbs veterans’ care.

75% Workforce Cuts: Federal employees (2.1M) and contractors (~2M) total ~4M full-time equivalents (FTEs). A 75% cut reduces this to 1M, saving $300B–$400B/year (avg. $100K/FTE). Privatization/IT modernization (per Project 2025) shifts functions to states/private firms.

Agency Review: Most of the 400+ federal agencies (e.g., EPA, HUD, Commerce) face scrutiny. Non-essential or redundant functions (e.g., overlapping state roles) are cut or devolved.

Revised Plan for $2T+ Cuts

Spending Cuts ($2.2T Total):

Military: $425B (halving from $850B via negotiation).

Fraud/Waste: $500B (GAO baseline, fully realized via DOGE audits).

USAID: $45B (90% of $50B cut).

Education: $70B (shutdown, states absorb $10B).

USPS: $10B (privatized).

VA: $175B (privatized, midpoint of $150B–$200B).

Workforce: $350B (75% cut to 4M FTEs, avg. $350B savings).

Other Agencies: $625B (e.g., EPA $10B, HUD $60B, Commerce $20B, discretionary redundancies; 50%+ cuts, devolved/privatized).

Total: $2.2T (33% of $6.7T), phased over 3 years ($733B/year).

Tax Reform (Revenue-Neutral)

Flat tax at 18% with $30K exemption ($400B cost offset by cuts).

No tax on tips ($50K cap), Social Security, or middle-class bracket (15% rate), adding $200B–$250B in consumer spending power.

Stimulus:

$5,000 checks in summer 2026 ($400B, 80M households), funded by military/USAID savings. Second round ($400B) in 2028 if needed.

Geopolitical/Supply Chain:

Military deal with Russia/China by mid-2026 stabilizes Ukraine, saving $50B/year in aid and dropping fertilizer/energy costs 10%.

$20B in port/IT upgrades enhances supply chains.

Agency Rationalization:

Keep: Treasury ($15B), Justice ($40B), Defense ($425B post-cut), State ($60B, reduced), core HHS ($150B post-fraud cuts).

Cut/Shift: EPA (to states), HUD (to local/private), Commerce (to private trade groups), Labor (to states), Energy (privatize non-nuclear).

Privatize: Amtrak ($2B), TSA ($10B), alongside USPS/VA.

Savings align with Project 2025’s “best corporate standards.”

Economic Impacts

By September 2026

Shock and Stabilization: $733B cut (Year 1) is 3% of $25T GDP. Job losses (1M–1.5M FTEs) spike unemployment from 4% to 6–7%. GDP drops 2–3%.

Stimulus Offset: $400B checks add 3–4% GDP growth, netting 0–1% growth. Tax cuts boost consumption 1–2%.

Inflation: Supply chain fixes and military de-escalation cut inflation to 2%. Fed holds rates at 3–4%.

Outcome: Flat growth (0–1%), unemployment at 5–6%, recession avoided. Confidence wavers but stabilizes with stimulus.

By September 2028

Adjustment: Full $2.2T cut implemented. Private sector absorbs 1M+ jobs via privatization (e.g., VA, USPS). Unemployment falls to 4–5%.

Growth Drivers: Tax reform and military savings (invested in IT/infrastructure) yield 3–4% growth. Fraud elimination boosts efficiency.

Debt: $2T/year surplus (assuming $4.5T revenue) cuts debt-to-GDP from 100% to 85–90%.

Outcome: 3–4% growth, unemployment at 4%, leaner government. Risks of service gaps (e.g., veterans’ care) mitigated by private uptake.

By 2030 and Beyond

High-Growth Economy: Sustained 4–5% growth as private investment (up 15–20%) replaces government. Debt-to-GDP hits 70–80%, freeing $100B–$200B in interest costs.

Structural Shift: States handle education, housing, and labor efficiently; private firms excel in postal, health, and transport services.

Risks: Overreliance on private sector or geopolitical instability (if Russia/China renege) caps growth at 3%. Social unrest if privatization falters.

Outcome: 4–5% growth, 3–4% unemployment, globally competitive U.S. economy.

Best Plan for a Stronger Economy

Phased $2.2T Cuts:

Year 1: $733B (military $142B, fraud $167B, USAID $45B, Education $70B, workforce $150B, other $159B).

Year 2–3: $733B each (military $142B, fraud $167B, workforce $100B, VA/USPS $185B, other $139B).

Mitigates shock, allows private/state transition.

Tax Reform:

18% flat tax, $30K exemption, no tax on tips ($50K cap), Social Security, or middle-class (15%). Funds stimulus, boosts consumption 5–7%.

Stimulus:

$5,000 checks in summer 2026 ($400B), optional 2028 round ($400B) if growth <2%. Targets households under $150K.

Geopolitical/Supply Chain:

Military halving deal by mid-2026 with Russia/China, saving $425B/year and stabilizing Ukraine trade.

$20B in IT/port upgrades cuts costs 10%.

Agency Overhaul:

Eliminate: Education, USAID, EPA, HUD, Labor (to states/private).

Privatize: VA, USPS, Amtrak, TSA.

Streamline: Defense (post-halving), HHS (post-fraud), Treasury, Justice.

75% workforce cut via IT modernization (e.g., AI for tax processing).

Monetary Policy: Fed targets 2% inflation, 3% rates, supporting investment.

Conclusion

By September 2026, phased cuts and stimulus deliver 0–1% growth, avoiding recession despite workforce upheaval. By 2028, a leaner government and private surge drive 3–4% growth, with unemployment at 4%. By 2030+, a <B>4–5% growth economy emerges, debt-to-GDP at 70–80%, and the U.S. thrives competitively—assuming privatization succeeds and geopolitical deals hold</b>. This aligns DOGE’s vision with Project 2025, leveraging waste cuts and state/private efficiency for a transformative economic reset.

BTW Cheaper Fertilizer Means Cheaper Food and Lives Improved Around the World

Solving the Ukraine war will make food cheaper and improve lives around the world.

The Ukraine front lines have barely budged in the last 2 years. About 250,000-450,000 dead and wounded each year on both sides. Over the last three years, the US has provided about $350 billion of military support. And the Europeans about half that level. A lot of this money did not go into actual military support but was stolen to corruption in the US, in Ukraine and others in the middle.

Ukraine and Russia have been the global leaders in fertilizer production. If they got back to regular production then Global food prices could go down by 10%. Cheaper food can save and improve lives in Asia and Africa and elsewhere. This would include children. Continuing the war will continue to kill civilians was waste soldiers lives to no purpose. Sacrificing the fathers, uncles or sons of other families does not get dead civilians back.

In the current war, it has become a war of attrition. Russia has four times the number of possible soldiers versus Ukraine. Russia has encircled a few key cities. Capturing those locations will collapse the defensive position and enable a few hundred mile deep loss of more land. The only way to stop or reverse this would be actual direct US air power and direct NATO involvement, which would be WW3. Russia has nuclear weapons and would use them in that situation.

I am open to hearing a viable approach to winning the war or getting far better terms in negotiations. Military negotiations reflect current facts on the ground and larger geopolitical and economic bartering.