By David Dayen
The American Prospect, Jan. 27, 2025
Sometime between the 2024 election and the 2025 inauguration, Americans discovered that they had actually voted for Elon Musk for president. Since the election, Donald Trump has faded into the background, while center stage has been taken by the South African–born billionaire with the Twitter addiction of an adolescent, whose frenetic posts are often being treated like official government statements.
Musk and Vivek Ramaswamy were named co-chairs of the Department of Government Efficiency (DOGE), which sounds like a federal agency (and was actually tucked into an existing White House department) but is actually an outside agitator, tasked with devising recommendations to reduce the size and scope of government. During the campaign, Musk said he was confident he could remove $2 trillion in unnecessary waste from the budget. If he meant annually, that’s nearly one-third of total federal expenditures.
Skepticism is heavily warranted. Presidents going back to Ronald Reagan have impaneled blue-ribbon commissions to hack away at deficits, with minimal success. Nongovernmental advisers carry no formal power, and Congress holds the purse strings tightly. “One person’s waste is another person’s vital congressional jobs program,” said Michael Linden, a former official with the White House Office of Management and Budget.
There are signals that DOGE will be even more useless than its predecessors, with early proposals consisting primarily of things that sound funny but serve valuable functions, or things that are far too minuscule to make a meaningful dent in the budget. Hilariously, Musk gave up on his $2 trillion goal before the Trump presidency even started, calling the number a “best-case outcome” in an interview on his social media site and declining to identify specific cuts. And he also gave up Ramaswamy, who was unceremoniously dumped before the project ever got started.
Many Republicans, however, are dead serious about slashing social spending and obliterating the administrative state. House leaders have been passing around a menu of $5.7 trillion in cuts over ten years, including a large chunk from health care and food assistance for the poor. Musk’s following among the rank and file could provide ballast for these long-held conservative wishes, while catering to his own pocketbook in the process.
How Democrats should deal with DOGE has become a top-level conversation. One school of thought argues for calling out Musk’s game of using spending cuts to make room for their own tax cuts. Others draw red lines on cherished, popular programs like Social Security and Medicare, or highlight serial conflicts of interest. Still others counsel constructive engagement.
But the focus on federal spending could also teach Americans how their government really works. I’ve tallied up the savings from redesigning a handful of policies to improve effectiveness, and you really could find $2 trillion in net annual federal outlays, with no direct impact on the most vulnerable. The key lies in knowing where to look: profit-hungry contractors, privatized boondoggles, systemic overpayments, and a mountain of tax avoidance.
The world’s richest man, himself a serial tax evader and one of the nation’s biggest federal contractors, isn’t likely to touch any of this.
This article should come with a warning label: We should not cancel the equivalent of 7 percent in annual GDP all at once, which would trigger a deep recession. But identifying the real sources of inefficiency in our government—the trillions funneled to elites—can preserve resources for programs to help those in need. And it can display the values of an opposition party that has strayed from its core purpose of fighting for the little guy.
Too often, Democrats have leapt to defend institutions that most Americans look upon with scorn. Now it’s the Republicans who control all branches of government; they are the establishment in every sense of the word. The Musk/DOGE plan is one of self-enrichment and outward punishment. Someone should outline a different path.
DOGE’s Game
It’s hard to critique DOGE because it’s hard to divine its actual intentions. Making government more responsive can sit in tension with cutting spending. Smaller government may be ideologically satisfying but also fantastically wasteful. And when billionaires are making the decisions, self-aggrandizement is sure to follow.
Take the preoccupation with labor costs. Ramaswamy has called for a 75 percent personnel reduction across federal agencies. This would hardly save anything. According to the Congressional Budget Office, there are about 2.3 million federal employees with total compensation in 2023 of $271 billion; that’s 4 percent of the U.S. budget. Federal employees were roughly 4.3 percent of all workers in 1960 and 1.4 percent today. As a result, we’ve seen an explosion in contractors undertaking tasks that government workers used to perform. Nearly three times as much money is spent on contractors than federal workers.
Slashing the federal workforce, almost two-thirds of which is at the Departments of Defense, Veterans Affairs, and Homeland Security, would likely lead to more expensive contractors, and also increase the $247 billion in improper payments the government makes every year. “When you talk about cutting people in the Pentagon, these are people overseeing military contracts,” said economist Dean Baker. “There’s already fraud and there would be a lot more.”
Another chunk of the bureaucracy is devoted to processing federal benefits. Social Security’s administrative costs are legendarily low, down to 0.5 percent. Cutting 75 percent of its staff would delay benefit claims, make checks more difficult to process, and invite fraudulent scams. That’s the opposite of the alleged efficiency goal.
Or take what Public Citizen co-president Rob Weissman calls “policymaking by anecdote.” Musk’s brain-poisoned antipathy to anything that sounds woke led him recently to attack the “fake job” of Ashley Thomas, the U.S. International Development Finance Corporation’s director of climate diversification. But Thomas has nothing to do with diversity, equity, and inclusion; she works with farmers to diversify crops, to deal with changing weather patterns. So is efficiency the goal, or merely reverse political correctness and slipshod word-policing?
At times, DOGE’s goals collide with ignorance over governmental procedures. Ramaswamy claimed that $516 billion could be excised by ending programs that are “unauthorized” by Congress. But in every case, lawmakers have allocated funding and therefore inherently authorized those programs, which include things like health care for nine million veterans. Congress can and should reauthorize and improve programs, but any savings would be far lower than throwing out the entire Veterans Health Administration, the Justice Department, or NASA (where Musk has had $11.8 billion in contracts over the past decade).
The closest thing to an official vision for DOGE was laid out in a Wall Street Journal op-ed with Musk and Ramaswamy’s byline. The only named programs slated for cuts are the Corporation for Public Broadcasting and Planned Parenthood, which total about .012 percent of federal expenditures. And there’s a legally suspect claim that the president can nullify congressionally appropriated spending, which would be an enormous grab at Congress’s power of the purse that would trigger a constitutional crisis.
But the main target of the op-ed is regulations written by “unelected bureaucrats.” (I’m straining to understand who elected Musk or Ramaswamy.) Supreme Court rulings, the DOGE duo claim, prohibit agency discretion on rulemaking, and therefore allow the president to simply pause any regulation that he imagines exceeds congressional authority, and subsequently fire the workers overseeing them.
This isn’t what the Supreme Court said; Loper Bright Enterprises v. Raimondo specifically protected past regulations devised under the older framework of deference to agency interpretation. And a president cannot pause regulations without going through administrative procedure, nor fire employees with civil service protections. But these half-truths do serve the goal of rolling back or curtailing enforcement of regulations, which happens to benefit companies that are habitually under regulatory scrutiny, like, oh, I don’t know, Tesla and SpaceX.
Guided by this vision, Musk will pick the lists of regulations the president can insta-vanish. You can see how the incentives would run. “Every regulation has net positive savings for the country,” said Weissman. “They may cost corporations, they may cost billionaires, but they do not cost the country.”
In this sense, DOGE intends to rewire government for personal use. There has been an unusual interest in a $6.6 billion Department of Energy loan to electric truck manufacturer Rivian. Which electric-vehicle maker do you suppose would like to cancel government support for a rival? Musk has also targeted the bipartisan infrastructure law’s program to build out rural broadband; might he be mad about how his own broadband service, Starlink, was excluded from the grant process, and want to reverse that? Is high-speed rail development truly a “wasteful” program, or an old vendetta from a car manufacturer who opposes mass transit? Do bank regulators have to go because they impede the free flow of capital, or because the Securities and Exchange Commission has been fighting with Musk for seven years?
Maybe it seems too parochial to suggest that the “government efficiency” effort is simply cover for defunding Elon Musk’s regulatory police, steering more contracts his way, depriving rivals of the same treatment he gets, and building oligarchy in America. Maybe Musk is a real efficiency expert who wants to bring his style of business cuts to government as a public service. Maybe he’s truly concerned about burdens being left to his children and grandchildren. Maybe he will nobly share in the sacrifice.
Color me unconvinced. And let me submit as evidence a litany of items that DOGE is likely to leave mostly untouched in its drive for austerity.
Health Care
The federal government is often described as a health insurance company with an army. About 75 percent of all spending is concentrated in four buckets: Social Security payments, health care programs (e.g., Medicare and Medicaid), veterans’ benefits, and the Department of Defense. If you’re not touching them, to cut $2 trillion you’d have to eliminate everything else government does, in total.
But health care in particular is lousy with private-sector profiteering, providing several options for savings.
Nearly 33 million seniors are enrolled in Medicare Advantage, a private insurance substitute for traditional Medicare. It’s heavily advertised to seniors as offering better benefits (including gym memberships and wellness programs) at a lower cost. And it’s true that MA plans typically include dental, hearing, and vision coverage, which is not part of traditional Medicare, as well as reduced premiums.
But Medicare Advantage has been criticized heavily for overbilling the government, not just by liberal activists but also by gold-standard independent auditors. The Medicare Payment Advisory Commission (MedPAC), a congressionally established expert panel, calculated that Medicare Advantage overpayments came to $83 billion in 2024 alone.
There are two reasons for these overpayments. First, Medicare reimbursement is weighted depending on the health of the patient. Insurers are compensated at higher levels for enrolling sicker patients with more diagnostic codes that correspond to ailments. Insurers have exploited this in Medicare Advantage by “upcoding” patients to make them appear sicker, regardless of the actual care they receive. The Wall Street Journal recently found that UnitedHealth, the leading MA plan sponsor and also the largest employer of doctors in the U.S., routinely encouraged its doctors to add codes to their patients.
Physicians for a National Health Program (PNHP), which advocates for a single-payer system, noticed even greater savings potential in the MedPAC report. Traditional Medicare sets a “benchmark” for spending on the average beneficiary. Several studies have shown that MA plans spend between 11 and 14 percent less, because they cherry-pick healthier patients, even after accounting for upcoding to make them look sicker. Increasing denials of care allows MA plans to rake in even more profit.
In all, PNHP found that MA plans charge the government at rates $140 billion per year higher than traditional Medicare. Dr. Ed Weisbart, national board secretary with PNHP, estimated that Congress could use savings from MA overpayments to add an out-of-pocket spending cap, a public drug benefit, and dental, hearing, and vision benefits to traditional Medicare, and have tens of billions left over.
“If you’re serious about DOGE, here’s something you can do,” said Weisbart. “At least let’s agree that Medicare Advantage is being outrageously subsidized.” But with the incoming administrator of Medicare and Medicaid, Dr. Oz, a longtime booster of Medicare Advantage, that’s an unlikely avenue for DOGE.
Reforming physician pay schedules for Medicare could yield more savings. As my colleague Robert Kuttner has written, pay rates are determined mostly by a secretive advisory committee mostly made up of specialists, who give themselves higher reimbursements at the expense of primary care. The government rubber-stamps the recommendations, and private insurers typically use them as a benchmark. Lowering these rates, which incoming Health and Human Services Secretary Robert F. Kennedy Jr. has expressed interest in, would not only slash specialist pay but properly value primary care, reducing health expenditures over time by finding medical problems before they fester.
Dean Baker estimates that bringing U.S. doctor pay (now at $350,000 per year on average) to the level of physicians in Germany or Canada would reduce national health expenditures by around $200 billion per year. Some of that could be done through reductions in the federal pay schedule, but allowing qualified doctors in other countries to practice in the U.S. could also constrain costs through competition. “We have free trade in manufactured goods but we don’t do anything in services,” Baker said. “It would still be a well-paid profession, just not as much as it is now.”
Federal health programs like Medicare (which serves 68 million enrollees) and Medicaid (72 million) account for roughly half of all national health expenditures. So a good estimate for federal savings would be $100 billion per year.
The government also spends massive amounts of money on prescription drugs. In 2022, U.S. drug prices were 178 percent higher than in 33 other industrialized nations, according to a report funded by the Department of Health and Human Services. Some of these drugs are sold at 20 to 30 times the cost of production and distribution; pharmaceutical profit margins are significantly higher than private-sector counterparts.
Democrats did take some action in 2022 by allowing Medicare to negotiate drug prices with manufacturers for the first time; new prices on ten drugs will begin to come online in 2026. But more can be done. “It’s not all drugs right away negotiated to the best price possible. Anyone would look at that deal and say you should get the best deal right away,” said pharma activist Alex Lawson of Social Security Works.
Using federal statutes to seize certain drug patents and distribute them to generic manufacturers that charge less would also save billions. But more structurally, we could overhaul the monopoly patent system that gives drug companies exclusive rights to charge whatever they want for a set period.
Baker has proposed having the government pay for clinical trial research up front, rather than distributing patents to private companies so they can recoup research and development costs. Paying for clinical trials wouldn’t be cheap—maybe $100 billion annually—but the savings realized by free-market prices for drugs without monopoly protection would be considerable: $500 billion per year by Baker’s estimates. Again, some of that would accrue to patients and private health plans; let’s call it $200 billion per year in government savings. The fact that Trump and RFK Jr. literally dined with pharma executives during the transition, however, makes this unlikely to get onto the DOGE list.
There are smaller opportunities. Group purchasing organizations, which help hospitals buy bulk supplies, have been shown to inflate health care prices and cost Medicare and Medicaid $17.3 billion a year, according to a 2010 report; with conservative inflation assumptions, let’s raise that to $20 billion. Medicare and Medicaid made $101 billion in improper payments in 2023, according to the Government Accountability Office, and have been criticized for weak enforcement even when they find health care scofflaws. Moderately better enforcement could yield $10 billion a year. Boosting funding for community health centers, which efficiently fund direct primary care, saves Medicaid $2,371 per enrollee according to one study. Spending $3 billion to get ten million more people care through these clinics would therefore save about $20 billion a year on net.
Of course, moving to a single-payer system wholesale could yield over half a trillion dollars in savings from administrative expenses alone, per the People’s Policy Project. But even if the nation isn’t ready for single-payer, limiting private-sector profit-taking and boosting public provision comes to roughly $490 billion per year.
Military Spending
In 2023, Congress appropriated $841 billion in military spending, nearly equivalent to all nondefense discretionary spending combined. And the Department of Defense (DOD) is not a model of efficiency. In 2024, it failed its seventh consecutive audit, which means it could not account for all its spending in the last fiscal year, or the six preceding ones either. The best the Pentagon could muster in response was a press release claiming it “has turned a corner in its understanding of the depth and breadth of its challenges.” Even Musk had to admit that “DoD gets terrible value for money.”
He ought to know! His companies have $3.6 billion in contracts with the Defense Department, and SpaceX is in talks with a consortium of tech firms seeking to win a greater share of military spending. But this merely doubles down on a prime source of waste in how we finance our military.
“Our budget wouldn’t be justified if the DOD did pass this year’s audit,” said Julia Gledhill, research associate for the National Security Reform Program at the Stimson Center. “Contractors continue to be rewarded for not doing their jobs terribly well.”
One of the best examples of this underperformance is Lockheed Martin’s F-35 Joint Strike Fighter, now slated to cost $2 trillion over its lifespan. As with most new weaponry, the Pentagon invested heavily in producing F-35s before the design was complete, and before thorough testing had been conducted. The F-35 is not optimal for traveling long distances or close-range combat; in 2021, over 800 continuing defects were found on the plane. Yet after 20 years of spending, it was greenlit for full-rate production in 2024, because to do otherwise would be too colossal a waste of prior funds.
Weapons systems that are excessively over budget breach the Nunn-McCurdy Act, triggering reviews of whether to continue the program. But when Northrop Grumman’s Sentinel, the land-based missile part of the nuclear triad, exceeded the Nunn-McCurdy threshold last year, DOD determined that it could go forward, arguing that it was critical to national security. “There haven’t been any significant consequences for that critical breach, and we’re just chugging along,” Gledhill said. “We do have guardrails in place, but corporate interests are so entrenched.”
Much of the reason that DOD fails audits is that it cannot account for the property it owns that’s in the possession of contractors. “The government doesn’t know if contractors are accepting bids to create spare parts that they already have, because that’s against their interest” to tell the government, Gledhill explained. Amid this confusion and despite all this funding, the military still has trouble producing enough ammunition or missiles.
The lack of accountability for contracting failures combines with rampant price-gouging dating back decades. TransDigm, a private equity rollup in spare parts for military aircraft, was caught marking up prices as high as 4,451 percent in 2019, and had to give $16 million back to the government. But they’re hardly the most lucrative contractor. Five “prime integrators” (Lockheed Martin, Northrop Grumman, RTX, General Dynamics, and Boeing) now take the lion’s share of contract dollars; in the 1990s, it took 50 contractors to command an equivalent share. Some of the five have been routinely cited for overcharging the government. Sole-source suppliers have proliferated, becoming expert in gaming rules to hide cost data from procurement officers, or sidestepping prohibitions on selling commercial items to the government at a higher price than you could get off the shelf.
Solutions are available. In 2021, the Congressional Budget Office offered a range of options to take the Pentagon budget down by $1 trillion over a decade. Gledhill estimated significant savings from service contracts, which make up close to half of all Pentagon obligations. Many are redundant or could be done more cheaply in-house. Other possibilities include unwinding ineffective contract orders and bringing in other firms to drive down costs through a competitive bidding process.
Making such cuts requires backbreaking political work. Military contractors have skillfully spread components of their systems across the country; Lockheed brags on its website that the F-35 has “suppliers in nearly every U.S. state.” Lawmakers are constantly pressured into agreeing that weapons systems are really jobs programs. And DOD is the only federal agency required to send in “unfunded priority lists” (UPLs), essentially wish lists of extra spending they would like but which wasn’t included in their formal budget. “Imagine if you get a raise and you submit a wish list so you can take a ski trip or get a laptop,” Gledhill said. “[But] once the budget gets to the committee stage, when they add $10 to $25 billion as they regularly do to the Pentagon budget request, they include UPLs.”
Putting a number on Pentagon savings is difficult, but using CBO’s conservative figures would net $100 billion per year. Some people I talked to think that could double. Let’s split the difference and say $150 billion a year.
The kind of procurement reform in service contracts and equipment orders needed at DOD could be replicated across the government, insourcing operations and ensuring that taxpayers aren’t routinely ripped off. The Project on Government Oversight has found that federal employees are almost uniformly less expensive than contractors. The Organization for Economic Co-Operation and Development estimates that one-fifth of government procurement globally is siphoned away through bid-rigging. In the U.S., that translates to $150 billion a year. As much as $521 billion a year is lost due to fraud, according to the Government Accountability Office. As Matt Stoller has written, management consultants with a tendency to do nothing but add bloat cost the government $70 billion in 2023.
Some of these projected savings overlap with Pentagon savings. But by reining in the runaway contractor state just modestly—more stringently enforcing fraud and abuse, insourcing operations, and no longer paying for bad advice—you could get another $150 billion.
Taxes
Deficit commissions often play the game of looking only at the spending side of the ledger for budget savings. The revenue side is simply ignored. The typical retort to this is that tax-and-spend liberals just want to raise taxes on hardworking people. But the much bigger available pot of money lies in merely collecting what is owed.
The Internal Revenue Service regularly estimates the tax gap, the distance between tax liability in a given year and actual taxes paid. In 2022, the last year studied, the IRS put this number at an astonishing $606 billion per year. This gap is concentrated among the top 1 percent, who evade $163 billion per year, according to a 2021 Treasury Department report.
Of course, a well-funded industry has been constructed to help certain persons avoid taxes by any means necessary, but you can only access it if you can afford it. A secret trove of tax files published by ProPublica in 2021 showed that Elon Musk paid no income taxes in 2018 and had an effective tax rate of 3.27 percent during a five-year stretch. I don’t think he’s ideally suited to lead the charge to make himself pay more.
To reduce the tax gap, you need more personnel to enforce audits. Economist Kathryn Anne Edwards walked me through some numbers showing the extreme efficiency of tax personnel. “The IRS collecting all the taxes owed will beat anything that the government efficiency bros can do any day,” she said. For every dollar spent on an in-person audit, Edwards estimated, $2.17 in revenue comes back. For an in-person audit for the top 0.1 percent, it’s $6.29. A separate study from last year estimated the value of every dollar spent on auditing the top 10 percent at $12 in revenue.
A large majority of such savings actually comes in during the ten years after the audit. “There are tax cheats but also tax idiots,” Edwards said. “The audit could be a threat but also an educational intervention, [showing] you are not doing taxes correctly. You get ten years of higher tax collections for that person.”
For this reason, Democrats added $80 billion in funding for the IRS in the Inflation Reduction Act (IRA), as a major method to pay for its policies. The Congressional Budget Office estimated a gain of $207 billion in revenues from that $80 billion investment, for a net deficit reduction of $127 billion. (The White House put the return on investment much higher, at around $700 billion in revenue.) But nearly the entire allotment earmarked for enforcement has been eliminated in successive budget deals with Republicans.
Given Republican antipathy toward the IRS, reducing the tax gap will not be on the DOGE agenda. But a real effort to cut the tax gap in half, even with the conservative estimates calculated by CBO, could bring in around $200 billion per year, and more under different estimates. But that would require investing in enforcement, the complete opposite of DOGE’s plan to cut head count in government.
One way to actually reduce head count and increase tax collection simultaneously is through Dean Baker’s idea of taxing stock returns. Corporate taxes are notoriously difficult to collect, thanks to loopholes and creative accounting. But stock returns are dead simple to determine: combine dividend payouts with stock appreciation in a calendar year, all of which is publicly reported. This obviously only holds for publicly traded companies, but that would comprise the vast majority of corporate profits.
This would dramatically cut down on tax avoidance. But the big losers would be companies with impossibly high stock price/earnings ratios, like … Tesla. So scratch this off the DOGE list.
But what could be gained from it? A one-percentage-point increase in the corporate tax rate equals about $13.5 billion per year in revenue. Setting a 25 percent tax rate through stock returns would lead to almost no difference between the nominal and the effective tax rate. For the past couple of years, the effective corporate tax rate has been around 20 percent. Add five points and you’re up to $65 billion per year.
Ramping up this automatic tax collection would also allow the IRS to devote more resources to auditing the wealthy to close the tax gap. This could get you to $100 billion per year. If you think about it as $1 trillion over a decade, it’s equivalent to an amount put forth in an interesting recent research paper from George Washington Law professor Jeremy Bearer-Friend, who suggested a $1 trillion capital fund to pay for reparations through a 2 percent, one-time tax on all $50 trillion of wealth held in shares.
Bearer-Friend didn’t see tax paid in stock as a substitute for corporate taxation, but he did see the benefits of simplicity. “Companies buy other companies with stock,” he said. “It’s unnecessary to turn to the public sector and not use tools that have been so effective and efficient.”
Another reason to scrutinize the tax code is the seemingly endless instances of spending embedded in it. This “submerged state,” as Cornell political scientist Suzanne Mettler famously termed it, cuts the public off from how the government really distributes wealth. Two of the biggest tax expenditures are the tax exclusion for employer-provided health benefits ($300 billion per year) and tax exclusions on retirement benefits ($250 billion). Both are upwardly redistributive. The health insurance tax exclusion is bigger for higher-income policyholders, and more high-income people get insurance at work than those with lower pay and incomes. Tax exclusions for retirement benefits are also weighted toward wealthier people with actual retirement savings.
There are several other major tax expenditures; the Tax Policy Center lists the top 13 as costing between $1.12 trillion and $1.38 trillion per year, depending on the estimate. It’s a dizzying amount of money, funneled mostly from working people to elites. “When we have public policy debates, they hinge on who’s deserving,” said Mettler. “But where we’re different is that much more of our social welfare spending is going to high-income people.”
Just bringing this submerged spending to the surface, and having a real debate about the extreme amounts involved, could radically change the level of distribution. Rebalancing the support given tacitly to high-income people through the tax code, and asking for less than 20 percent of it back, would get you another $200 billion.
One glaring example of this disparity is the cap on Social Security taxes. Every dollar of earnings above $176,100 in 2025 is not subject to payroll taxes; as Michael Hiltzik has written, many billionaires met their Social Security tax burden on the first day of the new year. Scrapping that cap, the Congressional Budget Office estimates, would take in $100 billion per year.
There are countless other ways to raise revenue, but I’ve confined myself here to limiting exclusions and collecting what’s owed. That adds up.
Interest Costs
There are several smaller giveaways that could also be eliminated. Fossil fuel subsidies for a mature industry with stable profits cost the government about $10 billion per year. The crop insurance program has been consistently cited as a haven for waste and fraud, and cutting down on that would save another $5 billion. The Federal Home Loan Bank system receives an implicit federal subsidy of $7 billion per year despite massive growth and a shift far away from its original mission to improve housing finance. A loophole that allows pass-through businesses to shift assets between different entities and avoid taxes is worth $5 billion per year. Baker notes that we still spend $4.5 billion a year on manned spaceflight, even as unmanned probes gather just as much knowledge.
If you sum up everything (see chart), you’ll see that the current budget savings already laid out in this article stands at $1.4215 trillion, entirely from corporate welfare, tax avoidance, procurement abuses, and other funneling of funds to the ruling class. And now we get to the other big cost in the federal budget: interest on the national debt. Last year, the government paid nearly $900 billion in net interest costs, more than was spent on defense or Medicare; the ten-year estimate for interest costs exceeds $12 trillion.
First of all, if you’re saving something like $1.4 trillion per year, the hypothetical interest costs on that money will disappear, reducing the overall deficit. But the bigger way to eliminate large amounts of interest payments is to reduce interest rates. Stephanie Kelton, economics professor at Stony Brook University, recently wrote that instructing the Fed to sharply curtail interest rates and use other tools for purposes of inflation management would create on net trillions of dollars in savings over time.
“The trick is to look for ways to cut spending that will have minimal impact on those who can least afford to bear them,” Kelton said. “I just want to try to explain to the public that there is a painless way to cut $2 trillion, and Elon and company are determined to choose the painful alternative.”
Cutting interest rates would cause maybe the biggest freak-out in the history of rich people if it were even suggested. But theoretically, yes, lower interest rates would sharply reduce the government’s interest costs over time, by trillions of dollars. I’m going to use my version of a magic asterisk and say that the combination of interest rate reduction and reduced interest generation from all the other savings will be enough to get you to $2 trillion in cuts per year.
A Question of Values
Such a dramatic and immediate budget cut is not something that anyone in the government should even think about doing. A dollar of federal spending is no different than a dollar of private-sector productivity for the purposes of economic growth; in fact, removing that dollar from circulating through the economy would cause more than a dollar hit to GDP, a reverse multiplier effect as that dollar is not spent on consumption.
“If they found $2 trillion in cuts, and actually tried to do that? Instant recession,” said Michael Linden. Even Baker, who originated several of these cost-cutting plans, acknowledged that “we do have an issue of maintaining demand in the economy,” and that a rapid $2 trillion deficit reduction would spike unemployment for a long time.
But many of these measures will take time to ramp up. Tax collection improves after audits in the out years, and moving to public clinical trials will gradually bring a free market to pharmaceuticals. Moreover, cuts need not all go to deficit reduction: Congress could instead invest in programs with a more equitable reach. Abolishing Medicare Advantage and using the savings to bolster traditional Medicare is a good example.
The basic point is that government outlays are far too heavily weighted toward wealthy individuals and mega-corporations. The right-wing governing majority demanding budgetary austerity will almost certainly ignore that. Hard-liners have demanded $2.5 trillion in cuts just to lift the nation’s borrowing limit, but reversing health care privatization or reforming runaway Pentagon contracting or ensuring proper tax collection aren’t part of that agenda.
There have been conflicting reports on whether Social Security and Medicare are at risk; for every pronouncement that they will not be touched, there is another floating hundreds of billions in cuts. More likely, the targets will be Medicaid, the health care program for over 72 million poor people, and the Supplemental Nutrition Assistance Program, commonly known as food stamps, providing food for another 42 million poor people.
Work requirements for Medicaid beneficiaries (millions of whom are destitute “dual-eligible” seniors, so get into the job market, grandpa) and block-grant spending caps for both programs are among the options being discussed. Separately, allowing bigger subsidies for Affordable Care Act exchanges to expire would save a relatively small sum—about $30 billion a year—but hit millions of middle-class families with significantly higher premiums.
There are other possibilities, like tariff collections, repealing clean-energy investments from the Inflation Reduction Act, and reversing student debt forgiveness. But the overall picture provides a very stark choice. The Republican message is to throw deficit reduction on the backs of the most vulnerable people in society; the reality is that it’s the rich and well-connected who disproportionately benefit from federal budget expenditures.
That’s the kind of contrast Democrats could easily and effectively draw. Even without much of a push yet from the opposition party, DOGE was down to 49 percent support in December polling, with a majority of independents disapproving. A more plainspoken approach on the differences between making government more efficient and denying vulnerable people assistance could spiral DOGE further downward. “We shouldn’t give the richest man in the world the benefit of the doubt that he has the interests of working people at heart,” said Linden.
Some liberal base voters have seethed at Democratic representatives who have joined the DOGE caucus, or made overtures on certain facets of deficit reduction. Rep. Ro Khanna (D-CA) has focused on trims to the Pentagon budget, for example. “I’ve been pushing for a Truman-like commission for defense cuts,” he told me. “If DOGE wants to make concrete recommendations on defense cuts and holding the five primes accountable, I’ll work with them.”
But when I asked him whether he’s optimistic that a serious effort was in the offing, he acknowledged that the variance between DOGE’s lip service on Pentagon spending and their hints on Medicaid or Social Security cuts was a “total cognitive disconnect … We’ll see what they come up with. It’s better to say, ‘We’re willing to work with you,’ and then see what they do and hold them to it.”
Rep. Chris Deluzio (D-PA), a former naval officer, also saw a path for taking a stand on corporate corruption in the budget debate. “If you pay attention to some of the Armed Services Committee hearings, you’ll get some head nods on the Republican side,” he said on the podcast that I co-host, Organized Money. “These are folks who are pretty muscular about defense spending and don’t like getting ripped off, don’t like seeing weapons systems not on time, don’t like seeing us paying for things that aren’t worth what we’re paying for.”
DOGE did not need to be invented. The nation’s auditor, the Government Accountability Office, already does an admirable job identifying waste. “These [are] quiet heroes at GAO,” said Kathryn Anne Edwards. “People love bringing up waste, fraud, and abuse in DOD, I think that’s been on GAO’s high-risk list since 1993.”
Unfortunately, agencies like DOD and others won’t change their practices to conform to GAO recommendations, Congress won’t write laws in line with GAO recommendations, and if either of them tried, every lobbyist on K Street would rush to the Capitol to browbeat the members until they gave up. In very real ways, we really do know where the fat is in the budget; we simply don’t have the will to trim that fat.
But DOGE has forced these conversations to the fore. In a political battle, having an actual plan is typically helpful. And Democrats have a pretty killer one available. Right-wing Republicans and outside oligarchs are making room for billionaire tax cuts by taking aim at meager benefits for the poor. But the real sources of waste, fraud, and abuse in the budget come not from welfare queens or greedy seniors, but from bloated contractors, health care middlemen, and wealthy tax cheats.