Elon Musk and Vivek Ramaswamy, co-chairs of President-elect Donald Trump’s Department of Government Efficiency (DOGE) initiative, plan to cut federal spending by $2 trillion (over an undisclosed period), along with a substantial reduction in the federal workforce. Musk, Ramaswamy and their army of unpaid voluntary cost savings are likely to fall woefully short of their admirable goals—for reasons that have developed among public economists in recent decades. To those who doubt my pessimism, good luck!
One of Must and Ramaswamy’s biggest challenges is identifying $2 trillion in cost savings from the total projected fiscal year 2025 expenditure of $7.3 trillion – with two-thirds of the total spent on duties and interest payments, which is likely outside the limits of DOGE’s costs. cutters. But perhaps DOGE’s cuts will be spread over successive annual budgets.
Cost cutters will face other formidable challenges that could prove insurmountable, not least the political construct of ‘waste’, even though ‘waste’ in federal spending is (seemingly) an obvious source of support from both parties in a polarized polity. Even U.S. Senator John Fetterman has admonished his fellow Democrats to embrace the DOGE goals. Who can and would be against reducing the ‘waste’ of spending, he asks (seemingly the fiscal equivalent of apple pie and motherhood?)
No doubt some government “waste” is the result incompetence and fraud (the proverbial completed bridges to nowhere [overpasses and exchanges] found across the country), but much of the “waste” is driven by top-tier politics designed to serve special interests willing to pay (and have paid) politicians for the democratically approved “waste,” meaning overpayments embedded in federal contracts (dubbed continues to rent economist Gordon Tullock in the 1960s) planned to offset the campaign contributions of special interest groups to their well-placed political advocates.
The infamous hammer that the Pentagon (supposedly) bought for $700 decades ago has long been the example of excessive rent-seeking by a host of special interests. Critics assume that the Pentagon could and would have purchased hammers from Home Depot, but that is hardly the case for Pentagon-purchased hammers that are ordered to precise specifications, made by companies that comply with a host of government regulations and must keep their political contributions get it back – with all its consequences. of rent-seeking, often hidden from public scrutiny in massive reconciliation bills that can run into thousands of pages and obscure the “political pork” designed to pay back a host of special interests (as most recently reconciliation bill rejected which was defeated and reduced to one hundred pages in December 2024).
Moreover, as economist Dwight Lee says observed for decades In the past, government waste could – and does – serve much the same purpose in politics as profits in business: government waste (or rents) can induce people to produce. public goods (e.g. defense and CO2 reduction) that might otherwise have disappeared underproduced. DOGE enthusiasts must remember that many identified dollars of “waste” will be dollars of political “gain” for special interest groups.
Understandably, Musk and Ramaswamy will have to deal with a host of special-interest lobbyists, many of whom have likely already booked additional flights to DC with the intention of pooling their political connections to protect their rents from DOGE, and perhaps sending out serious PR warnings that cutting their waste (rents) is an “existential threat” to national security – not to mention their stock prices![i]
Many ‘waste’ beneficiaries will now feel entitled to their rent based on the lands they have ‘prepaid’ for them with past political contributions. They will likely object for much the same reason Tesla owners would protest DOGE’s efforts to recoup their already received and spent Tesla subsidies. Why? Maybe because a new study comes out that proves conclusively that they were an ineffective climate change boodoggle!
Even though Musk and Ramaswamy are (partially) successful, their success (like their recent efforts (the continuing resolution laden with $200 billion in “pork” spending) could be short-lived, especially since DOGE backers’ now vocal commitment to government cost-cutting is likely to be short-lived (with their unpaid volunteers understandably only for a few months of service). Sooner or later, the cost-cutters will have to return to managing their businesses and asset portfolios and making money. In contrast, special interest groups’ incentives to maintain and increase their rents will be. . .well, sustainable.
I hear the objections: “The public will rise up and push for cost cuts and tax cuts.” The political problem? Members of the public are allowed want to cost savings, but they have few incentives, individuallyto actively promote it. However, special interests (Boeing, GM and labor unions) have concentrated interests in maintaining rents for their companies and industries. The politics of DOGE’s efforts will obviously be lopsided – with considerable pessimism warranted.
My pessimism has been reinforced by the recognition that the Trump/Musk/Ramaswamy coalition, now seemingly held together by their shared interest in cost-cutting, could unravel prematurely due to their different orientation: Trump must be interested in the politics of cost-cutting. , given its broad agenda objectives (beyond waste reduction). He needs congressional supporters (and can’t lose more than a handful of votes) on a range of agenda items.
Musk and Ramaswamy are likely to be more intensely focused on achieving DOGE goals, rather than winning over Republicans in the 2026 or 2028 elections. They won’t be judged by the declining flow of illegal immigrants for much longer. Expect political tensions to falter, or even dissolve, their coalition in terms of achieving cost-saving targets (aside from face-saving cuts with PR value). I fear that the best that can be achieved will be a slight reduction in taxes growth rate of waste.
Richard McKenzie is professor emeritus of economics at the Merage School of Business at the University of California, Irvine and author of Reality is tricky: contrarian approaches to contentious economic issues.
[i]As I write this, December 2024, Coke, Pepsi, Mountain Dew and other soda makers have already launched a campaign to prevent the Trump administration from removing sugary sodas from the approved list for purchase by food stamp recipients.