Can DOGE Make A Differecne?

President Trump has appointed Elon Musk and Vivek Ramaswamy to lead a Department of Government Efficiency ("DOGE").

This is not an official cabinet department.

DOGE will operate outside of government with the objective of making the federal government less bureaucratic, more efficient and less wasteful in spending tax dollars.

Elon Musk provided a few tidbits on how DOGE will operate in a recent article on NewsNation.

Musk has provided some tidbits on what could be in store for DOGE since Trump’s announcement on the agency. 

“Incentives matter. There should be rewards for wise spending, but those who waste taxpayer funds cannot be allowed to keep doing so without consequences,” Musk posted on X of DOGE on Wednesday, hinting that cuts will be imminent under his guidance. 

He also said the department would provide “maximum transparency” and that all of DOGE’s actions will be posted online.

“Anytime the public thinks we are cutting something important or not cutting something wasteful, just let us know!” Musk posted. 

Musk also said that DOGE would create a “leaderboard for most insanely dumb spending” of tax dollars, which he said would be “extremely tragic and extremely entertaining.” 

Trump has asked that the work conclude no later than July 4, 2026---the 250th anniversary of American independence.

Elon Musk says that it will be done much faster.

That is something that Musk says quite often when he is told how long something should take with Tesla, SpaceX or one of his other ventures.

He has rarely been wrong.

Of course, the challenge that Elon and Vivek face in attempting to reform the federal government, its bureaucracy and its spending borders on the impossible.

For example, look at this comparison of the U.S, budget deficit as a % of GDP in comparison with other developed countries.

Credit: https://thebahnsengroup.com/dividend-cafe/a-comprehensive-post-election-commentary-november-15-2024/

For the just completed federal government fiscal year the U.S. had a primary budget deficit of 5.8% of GDP.

On the other hand, Greece (yes, Greece!) had a budget surplus of 1.1% of GDP.

Portugal had a budget surplus of 2.9% of GDP. Ireland had a 2.1% surplus.

For context, a 1% budget surplus as a % of GDP in the United States would amount to $290 billon

The U..S. had a reported deficit of over $1.8 trillion in fiscal 2024.

What more evidence does one need to see that the United States is on a road to fiscal disaster without significant reform in Washington, D.C.?

Can DOGE make a difference?

Elon Musk has stated that it is his goal to find $2 trillion in savings in the federal budget.

It is an admirable goal but color me skeptical that he can make many recommendations that Congress would approve that would come close to that number.

Let's look at the numbers.

The federal government spent $6.8 billion last year.

We are at the point that almost $1 trillion of that total is net interest on the federal debt.

Social Security payments are another $1.5 trillion.

Interest on the debt must be paid. It is hard to see where Social Security benefits are also not sacrosanct in any DOGE assessment other than small amounts of fraudulent payments that are made each year.

That leaves $4.3 trillion in spending to find efficiencies and savings of which the largest expenditures are Medicaid  & General Health ($912 billion ), Medicare ($874 billion) and Defense ($874 billion). That totals another $2.7 billion.

If those expenditures are excluded, the remaining federal government spending that is left is only $1.6 trillion.

It is going to be difficult to find $2.0 trillion in savings and efficiencies in $1.6 trillion in spending.

Reining any the federal government bureaucracy and its spending is a herculean task.

Speaking of herculean tasks, consider what Javier Milei faced when he took over as Argentina's President last December.

Argentina has been ruled by far left socialists for many years. Beset by economic malaise, bureacracy and hyperinflation, the voters finally revolted.

This is how Columbia University's Institute of Latin American Studies described the situation in Argentina that Milei inherited.

President Javier Milei was elected as President of Argentina last December with 53% of the popular vote. He inherited one of the worst economic situations ever, one that was undoubtedly heading towards hyperstagflation and economic collapse. In his political campaign, Milei proposed a radical libertarian plan to attempt a 180-degree turn in Argentina’s socio-economic organization which he had characterized as beset by rent-seeking and corruption. He presented to Congress a package of laws including an across-the-board elimination of all types of regulations to transform Argentina into a modern capitalist economy. However, he still has governed with a minority in both chambers of government and many of the proposed reforms have been blocked.If anybody has a chance to do it, Elon and Vivek are the people to do it.

How is Milei doing?

Inflation has decreased from 25.5% per month when he took office to 3.5% today.

Milei fulfilled a campaign pledge to take a chainsaw to the bureaucratic state by eliminating entire government departments and slashing government payrolls.

The government is showing a 0.3% of GDP surplus in the first eight months of the year compared to a 4.6% deficit at the end of 2023.

"One international financial official describes it as “the most drastic fiscal adjustment ever seen in a peacetime economy”.

Investors in the country's debt and those considering investing in business in the country are showing renewed confidence in the country

The "country risk" premium for Argentina's sovereign debt has fallen sharply but still needs to fall further to come close to its Latin American neighbors.

Source: https://www.reuters.com/world/americas/argentina-investors-bet-mileis-popularity-year-after-his-election-2024-11-18/

The Argentina stock market index has tripled in value over the last year.

Source: https://www.spglobal.com/spdji/en/indices/equity/sp-merval-index/#overview

The economy for everyday Argentinians has not yet taken hold. Milei is still the most popular politician in Argentina but the population is split on the new President.

Voters like the government spending cuts. However, they want to to see more from the economy that benefits them.

If Milei can make these types of changes in Argentina, why can't something similar be done in the United States?

Elon Musk likes to point out that the United States has 428 federal agencies. That is equivalent to creating more than one per year since the nation was founded. 

He thinks we should be able to get away with no more than 99 agencies.

Link to video

I have learned to never underestimate Donald Trump.

Or Elon Musk.

An interesting side note in all of this is that Trump's cabinet appointments may actually make it easier to trim some of the deep state bureaucracy without Elon and Vivek lifting a finger.

There are reports that a number of government bureaucrats may resign simply because they don't like the Trump cabinet appointments.

At the FBI.

At the DOJ.

At the Department of Defense.

At the FDA.

If these federal employees actually follow through ( I doubt many will), it will just make the work of DOGE easier.

It would seem a simple tactic for DOGE to reduce the current bureaucracy might also be to just require all federal employees to work in the office.

Well past any Covid concerns, close to half of the federal government workforce still works remotely.

A federal government report from last year found that 17 or 24 government agencies that were surveyed are using less than a quarter of their office space because of work from home employees.

Remote work has become so entrenched in some agencies that employees who are assigned to work in D.C. or New York City have moved to New Hampshire, Florida, Texas and other states for a lower cost of living.  However, they still get a pay differential that can be 30% or more that is tied to their official work location.

A bill was introduced in Congress earlier this year to get federal employees back in the office and remove the pay differential for those working from home.

Source: https://www.romney.senate.gov/romney-manchin-introduce-bill-to-get-federal-workers-back-into-the-office/

Of course, why would anyone think that you would need to pass a law to do this?

These employees work in the executive branch. It would seem to be a simple matter of their managers just ordering them to report to work at their assigned office location.

Can DOGE make a difference?

We may not get $2 trillion or even half of that in efficiencies and savings from DOGE.

However, I have no doubt we will get substantial savings that we never would have seen if the status quo was left in place.

Cutting the red tape and the bureaucracy on the American people carries enormous benefits beyond the government spending.

That in itself makes it all well worth the effort.

Let's get on with it.