From Reason Magazine, May 12:
Elon Musk promised $2 trillion in cuts but delivered only a tiny portion of that total. We asked seven policy experts to explain what he got wrong.
Elon Musk rode into Washington, D.C., with a chainsaw and a big promise: He would cut "at least $2 trillion" in government spending.
Less than four months after President Donald Trump's second inauguration, Musk is now reportedly scaling back his work with the Department of Government Efficiency (DOGE), the meme-inspired project that Trump authorized to implement Musk's vision for a leaner, more affordable federal government. Officially, DOGE claims to have cut $170 billion in government spending—though there are some doubts about the validity of that figure—mostly by firing bureaucrats and canceling some pretty silly contracts.
Libertarians and other advocates for limited government have plenty of reasons to applaud those cuts. Given the incentives of federal workers and the tendency of government to only ever get bigger, it's possible to regard DOGE's work as a "smashing success"—as Reason's Christian Britchgi termed it last month. And even though Musk is on his way out, DOGE's efforts will continue (reportedly, the new boss plans to target some of the staggering levels of waste in the Pentagon, which would be a very worthwhile project).
Still, $170 billion is plainly not $2 trillion. Why did Musk fall so far short of his budget-cutting goal? Reason asked seven budget policy experts to answer that question, and their answers fell broadly into three categories.
Refusing To Touch Entitlement Spending
"I think they missed a tremendous opportunity," said Veronique de Rugy, a senior fellow at the Mercatus Center at George Mason University. "DOGE's top priority should have been to target improper payments and fraud in entitlement programs—particularly Obamacare, Medicaid, and Medicare."
There's potential for some huge savings in those areas. The $101.4 billion of improper payments made by Medicare and Medicaid in 2023 accounted for 40 percent of all improper payments across the entire government that year, according to the Government Accountability Office (GAO).
"It is insane not to have started there. Given DOGE's comparative advantage in data analytics and [information technology], this is where it can have the greatest impact," said de Rugy. "Cracking down on this waste isn't just about saving money; it's about restoring integrity to safety-net programs and protecting taxpayers. And if fixing this problem is not quintessential 'efficiency,' what is?"
"Cutting $1 or $2 trillion was never feasible in the first place when 75 percent of spending goes to Social Security, Medicare, Medicaid, defense, veterans' benefits, and interest [payments on the national debt]—nearly all of which was taken off the table by Trump," said Jessica Riedl, a senior fellow at the Manhattan Institute and former Senate budget staffer.
Trump campaigned on a promise not to touch Social Security and other entitlement programs, which ruled out much of the work DOGE could have done. Those so-called "mandatory" spending programs constitute the majority of federal spending and most of the expected spending growth in the coming years.
Achieving "the substantial $2 trillion in savings our nation urgently needs, we must address the primary driver of federal debt: unchecked mandatory spending," said Vance Ginn, who served in the first Trump administration as chief economist in the White House's Office of Management and Budget.
Misunderstanding How the Federal Budget Works
"DOGE failed because they got the order of operations wrong," said Ryan Young, a senior economist at the Competitive Enterprise Institute (CEI).By targeting the federal payroll before reducing federal agencies' regulatory powers and eliminating programs, DOGE limited its effectiveness at saving money, Young argued. He pointed to the fact that the federal civilian payroll costs less than $300 billion annually while CEI estimates that the federal regulatory burden is a hidden tax costing well over $1 trillion.
"We're left instead with the worst of both worlds. Agencies still impose the same heavy regulatory burdens, but in some cases now lack the personnel to administer them. That means delays and paralysis for the private sector, while the quality of governance gets even worse," he said. "It's one more example of this administration's laziness. They go for the quick headline-grabbers, then call it a day."
"They were more interested in generating easy headlines by defunding small-ball costs like [diversity, equity, and inclusion] contracts, Politico subscriptions, foreign aid, and government employees," said Riedl. "MAGA voters loved the culture war bait, but that is not where the money is."
Musk was able to cut costs and reduce the employee headcount when he took over Twitter, and he likely thought a similar approach could work in Washington, said David Ditch, a senior fiscal policy analyst at the Economic Policy Innovation Center. It did not work out that way.
"The federal government is not a business, and the executive branch has very limited authority with respect to spending," explained Ditch. "While there is tremendous waste and dysfunction within the federal budget, the largest problem is the government doing too many things it shouldn't and subsidizing nearly everything under the sun. Congress has primary responsibility for the size, scope, and spending of the federal government."....
....MUCH MORE
We've had dozens of posts on the subject of deficit spending, if interested use the 'search blog' box upper left.
Here's one from last month:
Michael Bloomberg: "America Is Headed for a Grim Fiscal Reckoning"
One of the few 'men of the left' to even broach the subject....
Still waiting for suggestions on what to do.
In the meantime, here's one more:
Britain's Man Group Likes Deficit Spending
A lot of folks in alt-investments like deficit spending. Ditto for traditional investment managers.
It gives investors a tailwind, at the expense of those who don't have any money for portfolio assets, and makes leveraged beta look so smart that investment clients will be demanding the manager take a bit larger bonus: "No, really, you've earned it."
