The leader of DOGE (aka Elon Musk) has fallen from grace with President Trump and the rest of the agency is crumbling behind him. So, where does this leave the Department of Governmental Efficiency?
DOGE’s promise to cut $2 trillion from the federal budget has gone up in smoke. The estimated savings are likely closer to ~$30 billion. You know, hiring and firing and rehiring people can get a bit expensive. And Trump’s new bill codifies only $9.5 billion in cuts, which doesn’t even scratch the surface of what was originally promised by DOGE. To add insult to injury, the new budget working through Congress adds ~$2.5 trillion to the deficit over four years (and it could be higher than that).
To be fair, cutting the federal budget is extremely difficult, so this was kind of a suicide mission from the start. Unless we want to just take a massive chunk out of defense, Social Security, Medicare, and Medicaid…but I don’t see that happening.
Hey, all. Peter Zeihan here coming from Colorado. Now that Elon Musk is no longer part of the federal government, I think it’s worth doing a little postmortem on Doge. That’s the Department of Governmental Efficiency. Very short version is after the dramatic falling out between Musk and US President Donald Trump over the last several days, the Doge leadership has basically been gutted because most of these people were folks that were either already loyal to Musk or became a loyal to Musk, and he’s now taking them all out.
So Dodge is in the process of a not so slow motion collapse. So the question then is what has been done to this point in terms of budget cutting? And the short answer is very, very little. According to the campaign pledges made by Mr. Musk last year, he would be able to cut $2 trillion out of the annual federal budget.
By the time the election actually was over and we got an inauguration, he said that that number would actually be closer to 1 trillion. And if that number kept getting scaled down and down and down and down and down, and the official number, on the day that he lost was 180 billion, most people say it’s closer to 150 billion.
And the original budget office says it’s closer to actually to 20 billion, because the Doge numbers neglected to include the things that the cabinet secretaries, in the Trump administration had to do. You see, a lot of the things that the federal government does, really almost everything that the federal government does is congressionally mandated unfunded.
So when you fire the people who are responsible for programs or try to close up programs, you then come against this legislative wall that mandated that that money actually be spent on those things. And so to not go to prison, a lot of bureau heads and a lot of cabinet secretaries going right up into Donald Trump’s leadership court itself was forced to actually rehire people or part time contractors, in which some cases were the same people that had been fired.
Bring him back in. Well, once you add that cost back in, that’s a total of $122 billion, which brings the entire savings to somewhere between 20 and $30 billion. Also, the Trump administration has finally submitted a bill to Congress to codify some of the cuts, and that slims it down to just 9.5 billion. So we have had a lot of drama and not much has changed.
And if you just remember back a few days, the reason that at least Prox, the proximate reason that we had such a falling out between Trump and Musk was because of the mega bill that is working its way through Congress that will include the budget. If it passes in its current form, it will increase the federal deficit by roughly $2.5 trillion over the next four years.
And that’s before you consider some changes that the Trump administration is considering making to things like Medicaid, Medicare and Social Security, which will increase spending. And so we’re looking in a conservative environment of additional deficit spending of around $800 billion a year at a starting point that assumes no new funds for things like border security, that assumes no changes to the military budget, that assumes nothing of all the various spending programs that Donald Trump says he wants to engage in conservatively.
We’re really looking more realistically at $1 trillion deficit increase per year. Now, while that’s not great and obviously is a great example of the carpets not matching the drapes, I need to underline for everyone how hard it is to cut the federal budget, especially in the way that Doge and Trump have attempted. You see, if you were to fire every single non-defense employee of the federal government, you’d only actually reduce federal spending by about 5%. There is no version of deficit control in the United States that is not centered on four things defense, Social Security, Medicare, and Medicaid. That is well over three quarters of the total.
And if you’re not willing to take a very, very deep gouge into those four programs, not one of them, all of them, we are not going to get anywhere near a balanced budget. So before you say X is stupid or Y is wrong, keep in mind the core math. If we don’t do this in a way that hurts a lot, it doesn’t mean anything anyway.
