Musk Wants To Take A Wrecking Ball To The Budget - But What Can He Cut?

Elon Musk has been bragging about all the money he will save the government. But where's he going to find areas to cut? The following a look at this question by Axios.com:

Elon Musk has persuaded President-elect Trump that government has grown so big, bloated, slow and sclerotic ... only a wrecking ball can fix it.

• Soon, that ball will slam into hard reality: Politicians like to giveth, not taketh away. 

Why it matters: Trump is more fixated on a "deep state" blocking his ambitions, than cost savings, advisers tell us. But he has bought into the Musk concept of using AI and lean-business thinking to try to dramatically shrink a government he helped grow, they say.

The wrecking-ball theory holds that only a massive shock to the system will break a lifetime of build-up.

• Musk wants to be Trump's wrecking ball. Musk has vowed to cut $2 trillion from the federal budget — about 30% of annual government spending. But as this column will show you, that may be harder than Musk's signature mission of planting human life on Mars. 

How it works: Trump announced this week that Musk and Vivek Ramaswamy, a Trump primary opponent, will head a new Department of Government Efficiency (DOGE — like the cryptocurrency). 

• Sources tell us Musk wants to use AI and crowd-sourcing to hunt for waste, fraud and abuse. But DOGE isn't actually a government department: We're told Musk and Ramaswamy plan to set up a nongovernmental entity to try to pull off the entrepreneurial approach to government that Trump envisions. 
• Trump aides are looking for ways the White House could bypass Congress and unilaterally adopt DOGE proposals, which "could trigger a constitutional showdown over a bedrock aspect of the federal government, the power of the purse," The Washington Post's Jeff Stein reports.  
• Behind the scenes: We're told Musk has been free-associating with Trump at Mar-a-Lago at just how deep the fat in the federal workforce runs. (Remember, this is the guy who vowed to cut 80% of Twitter employees.)
• DOGE already has its own X handle, with 1.5 million followers. A DOGE tweet seeks "super high-IQ small-government revolutionaries willing to work 80+ hours per week on unglamorous cost-cutting. ... Elon & Vivek will review the top 1% of applicants."
• The big picture: Talk to anyone in government, and they'll bemoan how process, habit, special interests and innate human fear of change have left us with a wildly inefficient bureaucracy.
• In an era of AI, a race for space and growingly complex cyber fears, the inefficiencies become threats.
• But changing it is so hard that both parties stopped trying years ago. During the campaign, Trump and Vice President Harris didn't even pretend they wanted to shrink it, if you take their policy proposals seriously.
• Mandatory spending programs — Social Security Medicare, Medicaid, the Supplemental Nutrition Assistance Program (SNAP) — are governed by laws laying out formulas for how benefits are paid, Axios chief economic correspondent Neil Irwin pointed out to us.
• Legally, Elon can't just stop cutting checks. Trump would have to get changes through Congress in which he is going to have only a modest majority in the Senate and a minuscule majority in the House.
• Plus Trump, attentive to his huge base of older voters, opposes entitlement reform.
• So DOGE will have few viable targets. The biggest will be so-called "nondefense discretionary" programs — money Congress approves annually for programs not mandated by existing laws, including Social Security.
• The easiest money to cut is the discretionary spending we mentioned above. But it's less than 30% of the total budget — and half of it goes to defense, which members of Congress would rush to protect.
• Lots of people over the years have identified absurd spending or bureaucratic walls — but presidents and Congress simply let them stand. AI might help. But reality is the biggest obstacle. The vast majority of spending goes to:
• 1. Social Security: This popular program eats up 20-25% of total federal spending. It supports retirees, disabled individuals, and survivors. Trump has promised to never cut it. In fact, he wants to eliminate taxes on benefits, which would increase the deficit.
  2. Health care: Think Medicare (for seniors) and Medicaid (for low-income individuals). This is another 25% of the budget. Trump has promised to protect Medicare and a lot of his working-class base benefits from these programs.
  3. Defense: The Defense Department and related military spending constitute about 13-15% of the federal budget. Republicans typically want more defense spending, not less. And it's hard to see the shift to space-based warfare costing less.
  4. Interest on the national debt: This one sucks the most for America because you get nothing in return. Interest payments are growing rapidly, now around 8-10% of federal spending. The only way to save money here is to radically cut the debt. Trump's agenda does the opposite.
  5. Safety-net programs: Programs like food benefits (SNAP), unemployment insurance and housing assistance collectively make up about 10%. Trump won with the support of people who get these benefits, so cuts could be a hard sell.

  Case in point: The expense for entitlement programs goes almost entirely to the benefits themselves, not any administrative bloat involved in issuing checks. For example, the administrative cost of Social Security is only about 0.5% of outlays, $7.2 billion last year, Neil Irwin points out. 

  • So even if somehow you magically cut that in half, you've only cut $3.6 billion in spending — trivial in the context of the federal budget. 
  • And if that streamlining resulted in even a few seniors not getting their monthly benefits, there'd be holy hell to pay politically.

  What to watch: The aspiration of trillions of dollars of savings will run headlong into the unspoken governing theory of both parties: It's easier and more popular to give than to take away.

  •  Krueger, a Washington expert for TD Cowen, warns lobbyists: "This will require attention & focus — and compete with the Appropriations Committees. Every budgetary sacred cow will now likely hire an additional lobbyist."
  • Even on the discretionary side, Congress has the power of the purse. Each of the agencies and functions that survive year after year have important constituencies — many of them part of the Trump coalition. Farm interests won't be too happy if you slash the USDA, and its many subsidies, for example.

  By the numbers: Stare at the budget numbers and you see how little room Musk has to maneuver.

  • In fiscal year 2023, the federal government spent just over $6 trillion, equating to $18,406 per person.
  • This spending was 38% higher than the revenue collected, resulting in a once-unfathomable $1.7 trillion deficit. The budget covers the pay for roughly 5 million federal employees, including civilian jobs, military personnel and postal workers.