Why does storage optimization to iCloud not leave enough space on disk?

How do I get the storage optimization to leave a bigger margin? It constantly is running out of room even thought it is supposed to be optimizing things to the iCloud. I can't upgrade I can't sync new photos. It just runs out of space and then quits updating the cloud. This happens for every mac I have. If I delete stuff, it just moves in more stuff from the cloud to clog it up again. It happens for the iPhone as well. I have a ton of photos and I take a lot every week. I don't care about looking at all of them I just want them in the cloud for when I do want to look at them.

Also, the old iPhoto library that hangs around. Are those photos not popped back and forth to the cloud? I think that library is still required and I shouldn't delete it. Is it really a duplicate that just hogs space? Also, the applications take up a lot of space. More space than they actually take up. That space used also grows for unknown reasons.

Thanks for any advice.