Why DOGE Will Fail

There is a long and inglorious history of failure

George Noga
Dec 15, 2024

 

I have posted frequently about cutting government spending.1 There is no way to make government more efficient; the most that can be accomplished is to reduce its size and scope. It still will be inefficient – just on a smaller scale. None other than Ludwig von Mises weighed in at length in his 1944 book, Bureaucracy. 2

“Citizens compare the operation of the government to business. They find bureaucracy is wasteful, inefficient, slow and cumbersome. They don’t understand how reasonable people allow such a system; why not adopt proven business methods? However, such criticisms are invalid and do not consider the differences between government and business. The bureaucracy cannot be improved by bringing in businessmen.”

There is a lengthy and inglorious history of the appointment of élite blue ribbon committees to cut government waste. The most recent are the 1982 Grace Commission and the 2010 Simpson-Bowles Commission.

Grace Commission

The Grace Commission was established by President Reagan in 1982 to identify government waste and inefficiency. It was chaired by noted businessman J. Peter Grace. The commission presented its report to Congress in January 1984. It concluded that one-third of all government revenue was consumed by waste and inefficiency. Its recommendations would have saved $140 billion per year. However, the GAO and the CBO estimated the savings at only $24 billion per year.

Although the commission highlighted areas for potential cost savings, only a very few of its recommendations were adopted. The actual impact of the Grace Commission was negligible and it proved to be a disappointment. There are compelling parallels between the Grace Commission and DOGE. Both were initiated by conservative presidents fresh off an election mandate and run by acclaimed businessmen.

Simpson-Bowles Commission

In 2010 President Obama established the Simpson-Bowles Commission to address the national debt and deficit. The commission proposed a comprehensive plan to reduce the deficit by $4 trillion over 10 years. The plan included both revenue increases and spending cuts. Despite the bipartisan makeup of the commission and the sterling political reputations of Simpson and Bowles, the plan never even came to a vote in Congress – it was dead on arrival.

Department of Government Efficiency (DOGE)

DOGE is the latest attempt to cut spending. It was created by a popular president, fresh off an electoral mandate, and is cochaired by the most successful businessman on the planet (Musk) along with another billionaire entrepreneur (Ramaswamy). It has generated much public interest and support. One would certainly think that if ever slashing government spending could be done, it would be by this president and these co-chairs. However, so it also was with Reagan and Grace.

Musk initially asserted he could cut $2 trillion annually. That is impossible without deep cuts to both Social Security and Medicare – which Trump ruled out. Even cutting $1 trillion is a pipe dream; it would require cutting the entire government except for entitlements, mandatory spending, defense and interest on the debt. Following is the actual spending for the fiscal year ended September 30, 2024 in billions. 3

Total revenue from taxes and all other ………. $4,920

Medicare, Medicaid, CHIP, Obamacare …….. 1,600

Social Security ……………………………………………..….. 1,461

Interest on the Debt ………………………………………… 882

National Defense …………………………………………….. 874

Income Security4 ……………………………………………. 671

Veterans’ Benefits …………………………………………… 325

Discretionary Spending ………………………………… 937

Total Spending ……………………………………………… $6,750

Deficit ……………………………………………………………… $1,830

What Will DOGE Actually Accomplish?

Social Security and Medicare are off the table. Income security (government pensions) and interest on the debt cannot be cut. Only minor cuts can be made to defense spending – which most agree should be increased. Big cuts to veterans’ benefits are impossible. That leaves only the cost of running the government ($937 billion). So, what will DOGE accomplish? Following is my fearless forecast.

The best outcome is for DOGE to cut $250 billion or 3.7% overall, but 26% of the $937 billion cost of running the government, i.e. discretionary spending.

• A realistic expectation is for DOGE cuts of $100 billion to $200 billion.
• The hype from Trump, Musk and Ramaswamy will be over the top. They will shamelessly trumpet and flog all their spending and personnel cuts. They will represent them to be more significant than they really are.
• The hype from those opposed to the cuts will be outrageous. They will shamelessly trot out people allegedly harmed and assert DOGE is throwing granny over the cliff and starving children to death. Be prepared to see ads depicting alleged victims in the most dire circumstances imaginable.
• Every government program has a constituency both inside and outside government. Expect them to fight fiercely to save even minor budget cuts.

DOGE has the most propitious opportunity in my lifetime to effect meaningful spending cuts. However, the math is heavily stacked against it. I look for a typical government ending to DOGE. In the final reckoning, DOGE will cut spending by up to $200 billion (including fiscal legerdemain) and will claim victory by asserting they cut $2 trillion over 10 years. Opponents also will claim victory by limiting spending cuts to a minimum and living to fight another day to restore the cuts.

It is impossible to take the politics out of politics. In the end, all sides will claim victory. The spending cuts will be less than meets the eye – they will be mostly hat and no cattle. Over time, the cuts will be restored and life in Washington will go on as before.

If DOGE cuts say $200 billion, that’s exactly 3% of all spending – weak tea indeed. All such a cut will do is to reduce the deficit by 11%. At most, it would delay the final reckoning by one year. It would not alter the death spiral trajectory of America’s spending, deficit and debt crisis.

Moreover, Trump’s campaign promises exert a strong bias for more spending and/or less revenue and will offset most of the DOGE spending reductions which, contrary to assertions, cannot be made up by tariffs and more energy production.

At day’s end, it is all about the numbers. There simply is no pathway for significant spending cuts without putting Social Security and health care (Medicare, Medicaid, CHIP and Obamacare) on the table. Stay tuned; it will be a wild ride!