The ink on the November 5th American election result had not even dried before President-elect Donald Trump started appointing people to his administration. Among his many notable appointments, he has given entrepreneurs and billionaires Elon Musk and Vivek Ramaswamy the responsibility to run an outfit named ‘Department of Government Efficiency’—inevitably given the acronym DOGE. Their mandate: to reduce the cost and increase the efficiency of the federal government.
Many questions and skeptical comments have emerged regarding the purpose of DOGE. As The Hill notes, there are also questions about its formal status; it calls DOGE “a panel” for inquiries into how to improve government efficiency.
It is correct that DOGE cannot become a formal federal agency of any kind unless it is given the appropriate statutory status by Congress. However, President Trump appears to be intent on getting DOGE started as soon as possible—in other words, during the transition period between the election and his swearing-in ceremony on January 20th. Therefore, The Hill‘s characterization of it is essentially correct: an independent entity whose work will result in a big report to the president and to Congress.
As such, DOGE cannot present any formal regulatory or legislative proposals. All it can do is publish a report with suggestions for changes to the federal government. That, however, is not necessarily a problem: it may give DOGE a better chance at that often coveted out-of-the-box thinking.
With that said, DOGE is not exactly the first outfit that has tried to take on the thankless task of producing government-reform ideas. Writing for Breitbart, James Pinkerton reminds us that
post-war history is riddled with well-intended bodies that sought to shrink, or at least streamline, the federal government, including the Hoover Commission, the Ash Council, the Grace Commission, Gramm-Rudman, Reinventing Government, and Simpson-Bowles.
A few small pieces of good legislation came out of some of these initiatives but, as Pinkerton points out, the overall upward trend in federal government spending has prevailed over time.
What reasons do we have to believe that DOGE would do better? Vivek Ramaswamy laid out the plan for his panel in an interview on Maria Bartiromo’s Fox News Sunday morning show on November 17th. Ramaswamy envisions a three-step strategy for a slimmer, more efficient federal government.
The first step consists of exposing just how wasteful the federal government is. As an example, Ramaswamy mentioned that the Department of Defense has “failed its seventh consecutive audit.” In plain English, this means that the department has been unable to explain to the American people, for seven years in a row, what it does with its nearly $1 trillion annual budget.
Although things are not quite as bad in other parts of the federal government, there is a considerable waste of resources. Anyone interested in a more humorous take on this should read Senator Rand Paul’s annual ‘airing of grievances’ report on government waste that he traditionally publishes in December.
The second step for DOGE will be to help the president roll back regulations that the “administrative state”—as Ramaswamy puts it—has imposed on the economy. These regulations raise the cost of operating businesses, generally by 50 cents for every dollar a business pays in taxes. Those regulations also require staff in the federal bureaucracy for enforcement and compliance purposes. For this reason, regulations are bad for the economy in two ways, making their rollbacks a two-fold win for businesses and households.
According to Ramaswamy, many regulations have been created through executive action, technically known as executive orders. These orders have legal status but are not of the same permanence as statutes passed through the legislation process. Since they are issued by the president, it is also under his jurisdiction to roll them back.
Ramaswamy does not articulate the third step with nearly the same clarity as the first two. He refers to the discussion about entitlement reform as “theoretical” and effectively leaves it to the future. This is not a problem, though: a successful reduction in inefficiencies and waste will adjust federal spending downward, which gives Congress and the president much-needed time to prepare and execute step three: a substantial reform to the welfare state’s entitlement programs.
This third step is necessary for anyone who wishes to reduce government spending permanently. There are important analytical arguments for why this is the case, but there is also a simple arithmetic reason that I hope Ramaswamy and Musk have already considered. I have my doubts, though, since Elon Musk has apparently set a target for their spending-cut recommendations to $2 trillion per year.
Spending cuts of that size simply cannot be attained through the first and second steps of the DOGE plan. To see why, let us take a look at the 2023 figures for federal spending, federal employment, and federal payroll.
In total, the federal government spent $6.1 trillion in 2023. Its total of 2.9 million employees cost $635 billion in payroll.
Suppose we leave the military out of the cost-cutting efforts. So far, the DOGE spokespeople have given no hint about whether they want to include or exclude the military, but given the currently tense state of world relations, it is reasonable to assume that President Trump would not want to upset the organization of the armed forces by subjecting them to an entirely new form of spending cuts.
A total of 2.4 million civilian employees of the federal government spent a total of $5.3 trillion in 2023. According to the plan that Ramaswamy laid out above, their cost cuts are going to come from waste-fraud-abuse eliminations; with Elon Musk’s $2 trillion as the target, this means cutting away 37% of civilian spending.
In 2023, payroll for the civilian side of the federal government amounted to $434.1 billion, or 8.2% of total non-military federal spending. This means that even if Ramaswamy and Musk suggested the termination of every single civilian federal employee, they would still have to identify $1.6 trillion of wasteful, fraudulent, and abusive spending. If we keep half the civilian federal workforce, the DOGE will have to recommend to Congress a reduction of civilian federal spending by $1.8 trillion.
There is another way to skin this cat. In his Fox News interview (see reference above), Ramaswamy puts a lot of emphasis on regulations that must be removed because the Supreme Court has found them to be unconstitutional. The removal of regulations—laudable as it is—does not bring with it any reduction in spending that is not associated with payroll.
Put simply, cuts in regulations only reduce government spending if their removal makes the associated compliance-enforcing personnel redundant. No matter how Musk and Ramaswamy go about this, they still cannot get even close to $2 trillion in cuts this way. Again, the total civilian payroll is $434.1 billion.
It is also important to keep in mind that a large share of the civilian workforce is employed to administer entitlement programs. Inefficient as they may be, a large portion of the federal employees who run the entitlement programs are needed to make those programs work. By not considering entitlements at all, Musk and Ramaswamy are putting their pursuit of a more efficient government in jeopardy. If they are not careful, they may end up with serious unintended consequences, not unlike those that some European countries have experienced.
