DOGE's Plan to Tackle Government Waste
what should its role actually be?
Recent news and online discourse within much of the center to center-right political sphere has been buzzing with excitement over plans to improve government efficiency. This surge of interest comes after Elon Musk and Vivek Ramaswamy were tapped by Trump to lead a special task force, the Department of Government Efficiency (DOGE), during his anticipated second term.
The plan is for DOGE to serve as an independent advisory body to the new administration, offering expertise and insights drawn from external knowledge and research pertaining to government efficiency. This may involve collaboration with the White House, key advisors, the Office of Management and Budget, and directly with Trump himself.
All else equal, if it was a normal Republican or a Democrat, I don’t think this is a bad idea. There is a lot of waste and incompetence in how we administer welfare, generate tax revenue, take on debt for public goods, invest in things with zero-to-little return, etc. However, the devil is in the details; indiscriminately slashing agencies could prove just as inefficient as the dysfunction within our departments themselves. It also doesn’t help that these people aren’t trustworthy. Elon Musk bought twitter for $44 billon and turned it into a sycophantic pro-Trump media enclave to help with his campaign. Now he’s going to head a novice commission to influence what our government spends money on, while owning businesses that are subsidized by the government. This shouldn’t sit well with any reasonable person.
Future austerity is a must
Despite my lack optimism with Musk and Ramaswamy, our economic problems don’t just disappear. Musk was correct when he highlighted on X the urgent need to address our mounting debt problem. Notably, the interest payments on our debt, which have now exceeded the annual defense budget.
Currently, we spend about 13% of our federal budget on interest payments, but the CBO estimates that by 2053, it will be ~35%, far surpassing Social Security, Medicare, and discretionary spending on health, education, transportation, defense, and more.
This is a problem because when the federal government collects tax revenue, over time, more and more of it is being eaten up trying to feed the beast of accruing interest payments. This reduces our capacity to spend on future things like universal health insurance, cash transfers to the poor, improving our defense capabilities, and providing current and future generations with a world-class education.
Additionally, our debt-to-GDP ratio has exceeded 100% since 2016, peaking at 132% during the height of COVID. While I won’t delve too deeply into the nerdy technical literature, most economists agree that this level of debt can hinder long-term growth, engender a lack of confidence in U.S. bonds, and potentially trigger inflation if we resort to printing money to finance it. Even more catastrophic would be the consequences of a debt default.
That said, not all debt is inherently bad. Debt can fund productive investments, as households and corporations often demonstrate, aiming for returns that exceed the initial borrowing. In this sense, the government operates similarly, albeit with incentive structures focused on providing public goods. The key is to tread carefully, ensuring that spending decisions do not exacerbate the very issues we seek to address.
What’s been mentioned?
Both Musk and Ramaswamy have proposed a number of policy ideas for DOGE to back. Some ideas are half-decent. Many strike me as conflicting and problematic. A lot of it is cutting for cuttings sake, while not differentiating between efficient and inefficient government use.
Ramaswamy stated in a Fox News interview that “we expect certain agencies to be deleted outright, we expect mass reductions in force in areas of the federal government that are bloated, we expect massive cuts of federal contractors and others who are over-billing the federal government.”
He has tweeted out that we need “Milei-style cuts, on steroids.” (YIKES)
An independent advisory body wholeheartedly concerned with government efficiency would INVEST in our current and future state capacity, not gleefully plan to DECIMATE it. To propose that the remedy for declining state capacity is to simply get rid of it reflects a dramatically myopic view of government—one that conservatives have perpetuated for decades, deepening ideological divides in the process.
That said, during the interview—and even in the first quote above—Vivek accurately, albeit misguidedly, identified the core issue with U.S. state capacity: government contracting.
We have excessively outsourced significant aspects of the public sector to non-profits, private contractors, and consulting firms. Notably, the federal government delegates the environmental review process mandated by NEPA (the National Environmental Policy Act) to citizens and courts within specific districts and states. This creates a misalignment of incentives between landowning citizens and the formal objectives of our institutions. Economist Noah Smith wrote an impressive article titled America needs a bigger, better bureaucracy, highlighting the extensive environmental review forms imposed on entrepreneurs when citizens and courts allege NEPA violations. These forms often take years to complete, creating massive backlogs, delaying critical land developments, and inhibiting new housing construction. Since citizens are prone to irrational judgments and lack the expertise to determine when environmental laws are being violated, hiring additional government workers trained in environmental law could greatly alleviate these issues.
Furthermore, research from Yale Law has shown an inverse relationship between qualified, capable in-house Department of Transportation workers and overall costs. This is in comparison to independent contractors, who are shown to incur far more costs. This same dynamic can be found in other agencies as well. We can also see how great of an investment bureaucrats can be by looking at the IRS. The CBO estimates that a $1 increase in spending on the IRS’s enforcement activities results in $5 to $9 of increased revenues.
Rather than hiring our own system players (the “bureaucrats”), we have opted to replace them with laborers and a government model devoid of agency and accountability. While Ramaswamy understands this flaw, he overlooks the fact that we LACK sufficient in-house personnel to handle the complex tasks of directing, preparing, managing, coordinating, and executing agency missions—let alone tackling fraud, waste, and abuse effectively. He has the right diagnosis but prescribes the wrong treatment.
On the other hand, Elon Musk is tangled up in his own issues. He stated at a Trump rally in Madison Square Garden that DOGE will be able to cut $2 trillion out of our ~$6.75 trillion annual budget. This goal is both highly improbable and politically untenable.
You would most likely need to either stop subsidizing
Elderly people (Social Security and Medicare).
Rich people and the middle class (Tax exemptions, exclusions, deductions, and credits).
and/or
Poor people (SNAP, WICK, The Earned Income Tax Credit, The Child Tax Credit, Medicaid, etc).
You’re not going to find $2 trillion in fraud or waste within our annual budget. Inevitably, one or more of the three major spending categories will need to be addressed. Trump is focused on his legacy and this would not be viewed as a tangible win for him. There wouldn’t be any easily visible short-run benefit from a 30% reduction in our budget, in fact, many of his constituents would probably view him unfavorably. The second Musk mentions touching any of our favorite programs, Trump will probably disregard the commission when making decisions. If his voters get wind of these proposals, it wouldn’t surprise me if Trump threatened to scrap DOGE in it’s entirely. This is because Trump’s populist messaging runs counter to the objectives of DOGE. He pushes for broad-based tax cuts in the name of helping “the people,” despite the added strain on the deficit. At the same time, he promotes tariffs—one of the least efficient, most economically damaging forms of taxation. Lastly, the very “forgotten Americans” he claims to represent will face benefit reductions and diminished access to essential public services if DOGE were to carry out its plans in full force. In the end, it’s difficult to sustain a populist image when you’re deeply unpopular.
Trump is likely to support parts of DOGE’s agenda that align with his rhetoric, but may avoid proposals that carry significant risks or drawbacks. There are both good and bad things to take from that.
What should they prioritize?
Incrementalism. Change doesn’t happen over night. The government can do three things to reduce our deficits over time; cut some, tax some, and grow more. DOGE must be a champion of all three, not just the first one.
Cut some: We should cut tax expenditures, since they mostly benefit high income earners. If we’re limited in how much we can spend, why should a chunk of it go to subsidizing mortgage interest for people who are well off? Or private jet usage? Or hot tub purchases? There are a myriad of other similar expenditures that distort the tax code. Like…seriously, why have we allowed this? We could also make due with getting rid of subsidies for farming, oil, gas, and much more. Depending on the manner of the cuts and the political environment, you could easily reduce our budget by anywhere from $800 billion to $1.5 trillion. This probably couldn’t all happen at one time, but that’s why incrementalism is the optimal approach.
Tax some: We can easily crack down on tax avoidance by changing the corporate tax structure to one that’s destination based, called a DBCFT (destination-based cash flow tax). Trump had previously supported this proposal in an unrefined version of his Tax Cuts and Jobs Act of 2017. We should also just throw money at the IRS. Like I mentioned earlier, a $1 increase in spending results in $5 to $9 of tax money collected. When, in recent history, has the government ever been able to achieve an ROI like that? There is a significant amount of money currently beyond our reach—and it shouldn’t be.
Grow more: There should be a strong push to introduce productivity-increasing automation into the public sector. We need to streamline the modernization of our existing processes and databases, automate and digitize repetitive tasks, and harness AI’s data-driven decision-making to increase efficiency, reduce costs, and improve goods/service delivery to citizens. We need to lower administrative costs by consolidating clearing houses and centralizing claims databases for Medicare, Medicaid, CHIPS, VA health insurance (CHAMPVA), and all publicly provided insurance. Not very practical, but Trump should reconsider his imbecility on immigration, as embracing it would be the most pro-growth policy he could implement. I will probably make a separate article on this. More realistically, he could uncap the limit we arbitrarily place on skilled immigration, reform our H1-B visa program to improve labor mobility, and he can deregulate zoning laws, occupational licensing laws, and NEPA.
My guess? There's a 5-10% chance DOGE goes in the ideal direction—the one I’ve laid out (obviously). In all likelihood, it’ll remain a conservative anti-statism platform that Trump shrugs off when faced with hard choices, prioritizing his own interests. But really, would anyone be shocked by that?