Department of Government Efficiency
DOGE: The 18-month Mission
Nothing bothers me more, as a citizen and taxpayer of Chicago, than to have people hired by our tax money go down to Washington — on that tax money — to persuade Congress to impose taxes on us, send the revenues to Washington, deduct for the turnaround, and permit some of it to return here for things we could vote for directly.
Friedman, Milton. Containing Spending. Society, 14 (March-April 1977): 89-92.
The Department of Government Efficiency (DOGE) is a new initiative announced by President Donald Trump, with Elon Musk and Vivek Ramaswamy at the helm. Its name playfully references one of Musk's favorite internet memes and his support for the cryptocurrency Dogecoin. DOGE's mission is to streamline government operations by eliminating bureaucracy, reducing excessive regulations, and restructuring federal agencies for greater efficiency. This 18-month initiative is scheduled to conclude on July 4, 2026, marking the 250th anniversary of the Declaration of Independence.
The size and structure of the initiative remain uncertain, as does how Musk and Ramaswamy plan to deliver the sweeping government overhaul they've pledged. However, Musk has expressed a desire to reduce U.S. federal government spending by $2 trillion at a Trump rally in New York City.
"I think we can do at least $2 trillion."
Can He?
The U.S. federal government's total spending has experienced significant changes over the past decade. Below is a summary of total federal outlays — the funds that have been disbursed rather than merely pledged, for fiscal years 2015 through 2024:
It’s helpful to understand the distinctions between mandatory, discretionary, and supplemental spending for analyzing government budgets.
Mandatory spending refers to legally required expenditures, with funding automatically determined by eligibility criteria and benefit formulas in the law. These programs, such as Social Security, Medicare, and Medicaid, do not need annual congressional approval and continue unless modified by legislation. Without spending caps, these programs limit Congress and the president's ability to adjust spending priorities.
Discretionary spending is determined through Congress’s annual appropriations process, funding programs for a fixed period—typically one fiscal year. It requires renewal each year. Examples include defense spending and various non-defense programs.
Supplemental spending provides additional funding outside the regular budget process, often for emergencies or unforeseen needs. Examples include disaster relief for hurricanes and wildfires.
Musk’s ambitious goal of cutting $2 trillion suggests significant adjustments are needed in those spending areas.
The DOGE and Kennedy Tag Team
Mandatory spending constitutes the largest portion of federal expenditures, making it a key area for potential efficiency improvements. The Congressional Budget Office (CBO) projects that federal government spending will reach $10.1 trillion, or 24.1% of GDP, by 2034. During this period, mandatory spending, including interest, is expected to increase from 73% of the federal budget in 2024 to 79% in 2034, highlighting the growing impact of entitlement programs and debt servicing on overall expenditures.1
Medicare and Medicaid represent one of the largest portions of mandatory spending. Managed by the U.S. Department of Health and Human Services (HHS), these programs are projected to comprise 83% of HHS’s estimated $1.7 trillion total outlays for FY2024.2
While changing mandatory spending, particularly for Medicare and Medicaid, is difficult due to legal constraints on funding and eligibility, there are opportunities to improve efficiency. Strategies include negotiating drug prices, promoting the use of lower-cost generic drugs instead of expensive brand-name options, and enhancing oversight and auditing to reduce improper payments.
President Trump has nominated Robert F. Kennedy Jr. to lead HHS, a decision that has generated significant debate. Kennedy envisions substantial changes to agencies under HHS, such as the Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC). His plans focus on enhancing transparency, addressing conflicts of interest, and reducing pharmaceutical companies' influence over these agencies. Viewing his nomination as an opportunity to reform health policies, Kennedy has proposed initiatives like banning specific food additives as part of his "Make America Healthy Again" agenda. These reforms aim to invest in programs that prioritize preventing chronic illnesses to reduce long-term healthcare costs.
Ramaswamy has openly criticized federal health agencies, particularly the FDA. In an X post on August 28, 2023, he condemned the FDA's regulatory processes, claiming they stifle innovation in the pharmaceutical industry. He stated, "The corrupt FDA says you don’t have the right to even try medicines that haven’t been through 10+ years of testing, yet the government mandated Covid vaccines that sailed through FDA approval in less than 1 year."3
Additionally, addressing fraud and waste could further enhance efficiency. For instance, in 2013, the U.S. Department of Justice revealed that four patient recruiters in Miami pleaded guilty to participating in a $20 million healthcare fraud scheme. They were tied to Trust Care, a home health agency that billed Medicare for unnecessary or nonexistent home health and physical therapy services.4
From a political standpoint, addressing mandatory spending, even by targeting waste and fraud, carries significant risks. Such initiatives are easily politicized and can become the subject of misinformation, with headlines like “Trump Targets Medicare” quickly sparking controversy. As a result, politicians often shy away from these efforts to avoid voter backlash, particularly to secure next election seasons. Nevertheless, it is crucial to ensure that efficiency improvements in mandatory spending do not compromise the quality of services delivered through these programs.
Pouncing on the IRS and Defense Contracts
The DOGE account on X recently hinted at plans to simplify the U.S. tax code, sparking a mix of support and memes from users. Some suggested eliminating the Internal Revenue Service (IRS), others proposed a flat tax to tackle the complexity of current laws, and a few called for reducing federal income tax rates.
The IRS has been criticized for inadequate oversight of its budget, raising concerns about wasteful spending. Senator Mike Crapo highlighted these issues, pointing out that after receiving an $80 billion funding boost through the Inflation Reduction Act, the IRS is now requesting an additional $104 billion in mandatory multi-year spending. Crapo questioned the justification for such significant increases, noting that historically, the IRS's annual appropriations have been relatively stable when adjusted for inflation. He stressed the importance of accountability and transparency to ensure taxpayer funds are used efficiently.5
The IRS's largest expense is its enforcement activities, which account for $5.9 billion. This constitutes the biggest share of the agency's budget, often exceeding 40% of total spending. These activities include audits, investigations, and legal actions to ensure compliance with tax laws. Another significant expense is operations, which total $4.5 billion. This category covers employee salaries and benefits, technology systems, office maintenance, and administrative overhead.6
The fraud and waste within the IRS, combined with public frustration toward the agency, could create significant pressure for DOGE to push for reforms. In truth, IRS reform is a highly populist policy. After all, the American Revolution was sparked by taxes like the Stamp Act and Tea Act, which, though modest in monetary terms, represented deeper grievances.
The IRS budget falls under discretionary spending, as it is allocated through Congress's annual appropriations process. Similarly, defense spending is also categorized as discretionary.
One of Trump’s key proposals involves deploying military resources to bolster border security and combat drug cartels, framing these efforts as critical to national security. Could this result in a higher defense budget? It falls to DOGE to ensure that resources are utilized efficiently to safeguard national security without significantly increasing expenditures.
The nature of defense operations, especially those conducted overseas, can create certain vulnerabilities. For example, in December 2014, Supreme Foodservice GmbH, a Swiss company, along with its UAE affiliate, Supreme Foodservice FZE, admitted to committing major fraud against the United States. The companies confessed to overcharging approximately $48 million for food and bottled water provided to troops in Afghanistan.7
This is just one example of an overpriced contract in defense spending. If we delve further into costs stemming from a lack of accountability, unused equipment, excess inventory, and other overpayments, the potential efficiencies could amount to billions.
And yes, the Pentagon fails 7 audits in a row and unable to fully account for its $824 billion budget. 8
So, $2 Trillion?
A $2 trillion reduction would amount to roughly 30% of the federal government's annual spending. In the private sector, comparable cost-cutting measures have been easily implemented, such as Elon Musk's 50% workforce reduction after acquiring Twitter in October 2022. While this demonstrates that a 30% reduction is theoretically possible, achieving it in the government sector would require extensive structural reforms rather than the more straightforward approaches often seen in private businesses.
The Tax Foundation's report, "A Short History of Government Taxing and Spending in the United States," provides an analysis of the evolution of federal, state, and local government revenues and expenditures from 1900 to 2012. From 1930 to 2012, total government spending grew from 12.1% of GDP to 35.6% of GDP. Until the 1930s, the federal government was relatively small, focusing on national defense, enforcing limited federal laws, and running the national mail service. Most revenue came from customs duties and excise taxes until 1917. During peacetime before the 1930s, the federal government typically balanced its budget or achieved surpluses, with receipts and expenditures averaging 2.1% of economic output from 1900 to 1916, prior to World War I.9
The U.S. has traditionally maintained relatively low government spending and occasionally achieved budget surpluses. During the Civil War, the first income tax was introduced in 1862 with a 3% rate, as the deficit surged from $30.3 million in 1861 to $425.6 million in 1862. However, by 1866, the U.S. had changed its fiscal course, achieving a budget surplus of $36.3 million, equivalent to roughly $1.4 billion in today’s terms.10
The U.S. federal income tax system now includes seven brackets, with rates ranging from 10% to 37%, significantly expanded from the earliest income tax structure. And in fiscal year 2024, ending on September 30, the federal budget deficit reached $1.8 trillion, reflecting a $138 billion (8%) rise compared to the previous year's deficit.11
Let that sink in!