Mapping the way for Elon Musk’s efficiency drive
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Gabriel Rubin
WASHINGTON, Nov 26 (Reuters Breakingviews) -Elon Musk’s understanding of the so-called deep state comes off as rather shallow. The Tesla CEO reckons $2 trillion can be slashed from the U.S. bureaucracy, echoing decades of arm-waving over wasteful spending in Washington. It’s a noble cause, but an implausible figure. Although there are undoubtedly savings to be found, it would be more helpful to find better ways to use allocated government capital.
President-elect Donald Trump has enlisted Musk and biotech entrepreneur Vivek Ramaswamy to lead a newly created Department of Government Efficiency. Setting aside the unserious tone set by naming it to have an acronym that references Musk’s preferred cryptocurrency, dogecoin, the endeavor lacks a dedicated budget and has no legal jurisdiction in a system where Congress controls the purse strings. Moreover, no one has yet explained how the 13-digit headline number was derived or even what period of time it covers, suggesting it might have just been pulled from thin air.
What’s clear is that of the $6.1 trillion U.S. budget in 2023, only about $1.7 trillion is discretionary, or spent on optional items. The rest goes to healthcare for poor and elderly voters, the Social Security retirement fund and federal interest payments, none of which require regular legislative reauthorization. To cut them would mean rescinding benefits for millions of Americans or defaulting on the country’s debt, unlikely propositions to say the least.
During their prescribed 18-month assignment to produce an analysis, Musk and Ramaswamy will uncover plenty of grist to enrage social media users, including funding for obscure government research projects, numerous grants and subsidies, and absurdly priced supplies bought through tedious procurement processes. Early efforts, however, have been lackluster. Musk’s political action committee released a list of cost-cutting targets that includes $659 billion of government interest expenses. For one thing, it’s for money already borrowed and spent. And not repaying bondholders would be catastrophic.
There is no shortage of belt-tightening exercises around the world to study both for inspiration and avoidance. Musk, for example, has lauded, and befriended, Argentina’s libertarian President Javier Milei, whose own electoral campaign symbol was a chainsaw. Since being inaugurated in December 2023, he has closed entire government departments, ended popular consumer subsidies and devalued the country’s currency. They helped Buenos Aires record its first quarterly budget surplus in 15 years. Curbing monthly inflation to 3% from 25% also won plaudits from creditors including the International Monetary Fund. At the same time, more than half of Argentines now live below the poverty line, up from 42% at the end of 2023.
What’s more, given its long history of runaway inflation, public mismanagement and bailouts, Argentina is probably not a model to follow. More developed economies haven’t fared much better with austerity.
After the 2008 financial crisis, Britain’s Conservative government under Chancellor of the Exchequer George Osborne ruthlessly attacked the budget. Typically taboo areas like pensions and housing weren’t spared either. Whitehall spending as a percentage of GDP fell to 38% by 2019 from 51% a decade earlier, but also badly missed targets. Public sector debt hit 84% of GDP in 2016, when Osborne left office, even though he had predicted it would peak at 70%. The Bank of England discovered there was a 2% hit to GDP growth between 2010 and 2015, and a House of Lords report blamed the cuts, including to the National Health Service, for 300,000 deaths.
The United States had its own brush with austerity after the collapse of Lehman Brothers and other bank rescues. A ballyhooed bipartisan supercommittee – the National Commission on Fiscal Responsibility and Reform – led by Alan Simpson and Erskine Bowles aimed to pare the federal deficit by almost $4 trillion over a decade using a range of reductions in military and other spending, accompanied by the elimination of certain tax credits and deductions. Despite garnering support from the likes of JPMorgan boss Jamie Dimon and House Speaker Nancy Pelosi, only 11 of 18 committee members voted in favor. Congress and the Obama administration did subsequently commit to spending caps, but they proved so unpopular that they were scrapped in later budgets.
Musk and Ramaswamy say this time will be different. They plan to use untested legal strategies to shift powers of the purse from Congress to the executive branch, and to focus on deregulation alongside spending, in a bid to boost economic growth. For that to work, however, they will need the Supreme Court to shred civil service protections so that bureaucrats in neutered agencies can be fired. Federal labor unions already are exploring legal options to protect jobs and challenge Trump’s expected attempts to relocate departments out of the Washington area, which he tried to do during his first term. Federal contractors and their congressional allies would fight any changes to longstanding government procurement rules. Musk’s companies, it’s also worth noting, have more than $3 billion in federal contracts with 17 different agencies, the New York Times reported.
Instead of embarking down this tortuous road, there’s a better template to consider: Al Gore’s National Performance Review from 1993. The vice president under Bill Clinton at the time was able to take advantage of post-Cold War defense and intelligence bloat. His commission identified actionable savings from streamlining regulations and eliminating more than 400,000 government jobs, trimming $136 billion in the process. Gore, a techno-optimist throughout his career, also pushed federal agencies to modernize and improve customer service, including by embracing the internet in its early days.
At the start of Clinton's term in 1993, U.S. government spending represented 34% of national economic output. Gore's efforts combined with the military drawdowns reduced it to 32% by 1997. Today, it’s back to 34% of GDP, suggesting that comparable cuts probably would chop at least $500 billion. Still, it would be equivalent to almost a third of discretionary budget items.
The more promising pieces of Gore’s initiative are the concrete user-experience improvements, and an area where Musk’s skillset is better applied. He has materially changed the U.S. dealership and delivery model for cars. He’s already talking about a free electronic filing system for taxpayers. Maybe congressional Republicans will come around on the idea after opposing the Biden administration’s test run of such a program. Taxpayers getting better service out of their government will be easier to implement and pay bigger dividends. Outstretched hands make a better symbol than a chainsaw.
Follow @Rubinations on X
CONTEXT NEWS
U.S. President-elect Donald Trump on Nov. 12 said Tesla CEO Elon Musk and biotech investor Vivek Ramaswamy would co-lead a newly created Department of Government Efficiency that will operate outside government. The duo is tasked with identifying spending cuts by July 4, 2026.
Musk said during a Trump campaign rally in October that the federal budget could be reduced by at least $2 trillion.
In an op-ed published on Nov. 20 by the Wall Street Journal, Musk and Ramaswamy said they would be “taking aim” at more than $500 billion of annual expenditures “that are unauthorized or being used in ways that Congress never intended.”
Most US government spending is on autopilot https://reut.rs/4198481
UK government spending plunged after financial crisis https://reut.rs/3V7G4hd
Editing by Jeffrey Goldfarb and Pranav Kiran
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