Cut $2 Trillion from the U.S. Budget…or What?

Let’s hope Musk and Ramaswamy have been paying close attention to David Stockman’s ten-part series on how to cut the U.S. budget before America spends its way into bankruptcy. Stockman was Reagan’s budget director in 1981-85 and eminently qualified to spell out the tough reforms needed to force the U.S. to live within its means. He is no fan of Trump, to put it mildly, but he sees the Musk/Ramaswamy ‘DOGE’ project as America’s last chance to get spending under control. Musk famously asserted during the campaign that he could cut $2 trillion annually from a total federal budget of around $6 trillion. Although we’ve come to expect big things and even the impossible from Musk, in this case, even with the intrepid Ramaswamy aboard, DOGE may have bitten off more than it can chew.

Ironically, it is Stockman’s long, detailed list of cuts that makes Musk’s goal seem farfetched if not impossible. Stockton admits that eliminating nearly every U.S. department and agency you can think of, and laying off more than half-a-million government employees at the outset, would scarcely dent deficit spending that’s been pushing the national debt toward $40 trillion at a rate of more than $3 trillion per year. The list of 16 agencies Trump should axe as soon as he takes office in January includes the FBI, DEA, BATF, NHTSA, Legal Services Corp. and the Department of Education.  Additionally, says Stockman, DOGE should shoot for 50% staff reductions in these fat cows: the SEC (2,250 workers, for savings of $360 million); FCC (750 workers, for savings of $120 million: FAA (22,500 workers, for savings of $3.6 billion); IRS (41,500 workers, for savings of $6.64 billion); National Labor Relations Board (800 workers, for savings of $130 million); Office of Personnel Management (1,250 staff, for savings of $314 million); Environmental Protection Agency (8,500 staff, for savings of $1.36 billion); NASA (9,000 staff, for savings of $1.4 billion); and the General Services Administration (6,500 staff, for savings of $1.04 billion).

Why Bother?

Total savings would amount to $264 billion, or just 0.33% of the $8.0 trillion of Federal spending projected by the Congressional Budget Office for 2029, DOGE’s target year. So why bother, especially when the political fallout from these relatively ‘modest’ cuts could trigger all-out war on Capitol Hill? Here Stockman states the obvious: If we can’t make it through a first round of serious reductions, America is doomed financially and economically.

Doubters may not have much time to dither about whether this is true, since even under the best circumstances, Medicare and Social Security will go belly-up long before the fiscally nettlesome Baby Boomers are safely in their graves. If you believe otherwise, you are implicitly arguing that Millennials and Gen-Xers who are living in their parents’ basements will somehow be able to pay the doctor bills of Boomers who live into their 80s or 90s, and to keep sending them inflation-adjusted Social Security checks every month. Both of these gargantuan programs are propped up precariously by asset inflation that will reverse when the stock market’s long bull-run ends.  In such circumstances, the budget catastrophe Stockman says is all but inevitable could be upon us not in a few years, but in mere months or even weeks.