At the beginning of May, Elon Musk is reorienting towards trying to shore up his faltering company Tesla. In his capacity as head of DOGE (Department of Government Efficiency), the gap between what Musk has promised versus delivered is immense. Initially stating that he planned to reduce government spending by $2 trillion, he then reduced that number to $1 trillion. He now expects about $150 billion dollars to be the estimated spending cuts achieved. Taking $1.5 trillion dollars (an average of 1 and 2 trillion) as the initial goal, that implies only 10 percent of the stated goal was achieved!
After hundred days in this capacity of head of DOGE, he has beaten a hasty retreat. Ironically, his formal reduction in DOGE activity started on May Day, which commemorates the start of the Labour movement. Harried government workers can now breathe easier since indiscriminate dismissals will, to some extent, abate.
This article is a critique of Musk’s tactics as head of DOGE. At the outset, I should clarify that I have libertarian leanings and am supportive of the goal to drastically reduce government spending. Nevertheless, on a few vital matters, my views are eclectic. To specify one vital issue, relevant to the Trump administration’s goal of saving manufacturing jobs, what needs to be done, in my opinion, is to try to reduce hours per worker in manufacturing -- ideally by tax incentives, but if needed by mandate.
Every now and then, due to lack of taxes to pay for spending, the US Government manages to avert a shutdown by raising the debt ceiling. With the US dollar still being the world’s reserve currency, the situation calls for very drastic measures. Both Musk and President Trump are absolutely correct on the need to reduce the $ 36 trillion debt that exceeds its GDP, about $ 29 trillion in 2024. Some countries, Japan in particular, have a much higher debt-to-GDP ratio. However, most of debt is held domestically, and the yen is not the world’s reserve currency.
The biggest individual item in US Government spending is Social Security. The next biggest items are, in order, defense expenditure, interest payments, health and then Medicare. In 2024, these amounted to 5%, 3.1%, 3.0%, 2.9% and 2.9% of GDP respectively.
Of the three biggest items, Social Security and interest payments are non-discretionary. This does not mean Social Security can never ever be reduced, which is badly needed. But that would require Constitutional amendments – a difficult and long drawn-out process. At best, that can only be started within the one-year term of Musk as DOGE head. Of the fourth and fifth items, Medicare is non-discretionary and so are some components of the health spending category.
Hence in this year, the axe has to fall on discretionary defense and non-defense spending. Defense spending is presumably outside the domain of DOGE. The composite category ‘Other’ from which most of the cuts have to come was 3.9% of GDP in 2024.
In the mid-1980s then US President Ronald Reagan’s promise was to get the government off the backs of the people by reducing both taxes and government spending. To cut spending and reduce the deficit, which had partly soared due to tax cuts, the Balanced Budget and Emergency Deficit Control Act of 1985, also known as the Gramm Rudman Hollings Act, was passed. Its goal was to achieve a balanced budget by 1991. If the budget deficit target was not achieved in a given year, the Gramm Rudman Hollings Act mandated what it called a “sequestration process” with across-the-board spending cuts.
Further, Reagan also repeatedly asked for a ‘line item’ veto that would authorize the President to veto a specific part of a bill -- figuratively one line -- that was being considered. That way the President could curb some of the populist spending powers of the Congress. But he was not granted this power. A Line Item Veto Act was finally passed by Congress in 1996, well after Reagan’s second Presidential term ended. Unfortunately, in 1998, the Act was deemed by the Supreme Court as vesting too much power in the Executive and struck down as unconstitutional. During the brief period when it was operative, then President Bill Clinton implemented the line item veto about eighty times.
What needs to be analyzed is how and why, after running a budget surplus in the late 1990s, large deficits are now perennial. Musk and his hyperactive cyberpunk team of twenty somethings have not done anything of the sort. To signal that they were dead serious about cutting government spending, they could perhaps have started off with a token sequestration of sorts – say a 2% to 3% uniform cut in spending across all departments, effective for a year. That would have established their credibility, without eliminating some vital departments and staff, as they have done, but without adequate advance notice,.
Following such a sequestration announcement, Musk and his team could and should have used their hundred days for wide ranging discussions with various individuals, groups, experts, economists, current and former Administration officials, staff etc. What was needed was a preliminary study period – ask, absorb, analyze, assess a wide range of information and only then act. They should have carefully examined and decided, department by department, how and where the axe should fall, and exempting vital health and science research spending.
Ironically, in trying to undo famous President F.D. Roosevelt’s 1933 sweeping New Deal that changed America irrevocably, President Trump and Musk have gone about it in the same gung-ho manner. In his first hundred days of his term, Roosevelt issued 99 Executive Orders, notably demonetizing gold on 5th April 1933, with criminal penalties for non-compliance after 1st May. By comparison, in the first hundred days of this second term, Trump has outdone him by issuing about 140 such Executive Orders. Judged by financial market variables – stock prices, bond yields, and the dollar -- on all three counts, the response has been negative. Very soon, upcoming employment data for April are likely to tell a much grimmer tale.
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