How Realistic Is Musk's Budget Plan?
Analyzing DOGE's prospects and the realities of government spending.
Elon Musk’s plan to cut $2 trillion from the federal budget has generated a lot of buzz lately. But it’s unlikely Musk and DOGE will achieve this goal. Here’s why.
What’s Musk’s Plan?
Aided by executive orders, Musk says he wants to cut regulations first. Fewer regulations mean fewer people needed to implement them, so Musk would also like to reduce the size of the federal workforce. Many federal employees have protections against arbitrary firings, so Musk hopes to work with President-elect Trump on authorizing general 'reductions in force.' These layoffs would not target specific employees. Rather, they would likely take advantage of the President's power to shape rules surrounding the bureaucracy.
Additionally, Musk says he wants to cut federal spending. Musk says DOGE may work to eliminate unauthorized or misused expenses and streamline how the government buys goods from non-government sources. Musk also believes President-elect Trump can decline to spend funds allocated by Congress to federal programs, a process called impoundment. To do this, the Trump administration might attempt to overturn the 1974 Impoundment Control Act, which bars the President from this practice. It remains unclear if such an action would survive legal challenges.
Importantly, DOGE is not a government department. Instead, it will function as an outside advisory panel, recommending changes to Congress and the Trump administration. This is why much of Musk’s plan focuses on cooperating with others—DOGE itself has no power!
What Do People Think?
Republican politicians largely support spending cuts but differ on where they should be made. Politico recently reported that some want to cut funding for federal agencies and the Department of Defense, but others want to find savings in big-ticket programs like Medicaid.
Despite widespread Democratic opposition to DOGE, some Democrats seem willing to work with it on various issues. Representative Jared Moskowitz (D-FL) became the first Democrat to join a new Congressional DOGE caucus earlier this month, saying recently that he would not “shy away from the overall conversation that government can't become more efficient.” And last week, Representative Ro Khanna (D-CA) mentioned he wanted to work with DOGE to reduce defense spending. Time will tell if more Democrats jump on board, but there seems to be an appetite for consensus emerging within the Democratic Party.
As for the American public? Though polling is sparse, a recent survey of 1,000 people on the ActiVote app shows a slim majority (52%) agree with DOGE’s mission. But be skeptical of that number, as polls can be notoriously unreliable.
DOGE: Easier Said than Done?
There is little debate that the national debt's rapid growth is a serious problem. Last year, the federal government added $1.8 trillion to the debt and spent more on interest payments than defense. Our current debt level of $35 trillion is unsustainable, and spending cuts are necessary. But there’s more to this story than dollars and cents suggest.
Contrary to popular belief, it's tough to cut most of the federal budget. This is because of how Congress distributes money to federal programs. There are two main spending categories to pay attention to: mandatory and discretionary.
With mandatory spending, funds are allocated via federal statute. Essentially, Congress creates and funds a program within the same law. A whopping 60 percent of all federal spending is mandatory, so over half of the federal budget cannot be altered except by changing the relevant statutes.
What about the remaining 40 percent? Much of this portion falls under discretionary spending. Congress has a bit more flexibility with this category; they get to choose who gets to spend what. Those choices are decided through the appropriations process—crafting bills determining where spending goes. Generally, there are 12 appropriations bills; one for each subcommittee under the House Appropriations Committee (Defense, State, etc.). Congress must pass all of them to keep the government funded. If they do not, there will be a partial government shutdown. The shutdown will only affect areas where corresponding funding bills have not been passed, and many programs (such as Medicare and Social Security) are left relatively undisturbed.
Spending fights on the Hill usually revolve around discretionary spending. Musk and DOGE would likely have the most success recommending reforms in this category due to a friendly, Republican-led Congress. The issue? Discretionary spending only amounts to about $1.6 trillion. So even if Musk gutted all discretionary spending (including all military funding), he would still be short of his goal.
Take out defense spending, which many Republicans seem reluctant to cut, and the situation gets worse. At that point, there’s only about $760 billion in discretionary spending left, which doesn’t give DOGE much wiggle room. Musk would probably have to find cuts on the mandatory side, but even that’s difficult since many mandatory programs (especially Social Security and Medicare) are popular among the public.
Changes in Musk’s rhetoric reflect this reality. Musk asserted he could eliminate $2 trillion from the federal budget a week before Election Day. By his Wall Street Journal piece three weeks later, the word ‘trillion’ wasn’t even mentioned within the article. It appears even the wealthiest man in the world changes his tune when facing the facts.
Musk may bring back impoundment as the solution to this mess—why wrangle with Congress when Trump can cut spending on his own? Yet impoundment is a thorny legal issue with no clear consensus on whether it would stand up to legal scrutiny. Some, like Professor Zachary S. Price at UC Law San Francisco, believe the President cannot disregard spending mandates (with limited exceptions). Others, such as former Office of Management and Budget general counsel Mark Paoletta, contend that Presidents historically wielded impoundment often and that the Impoundment Control Act is unconstitutional. It’s uncharted legal territory with a murky outcome.
If not cuts, then what?
If spending cuts alone won’t balance the budget, what can? Some say increasing taxes could help fix the problem. They point to the United States' low tax rate relative to its peers. To them, raising the tax rate closer to other countries can cover the nearly $2 trillion gap between revenue and expenses.
This solution alone would likely not work, though it could help. Americans are notoriously tax-averse, so pushing through massive tax increases would likely be unpopular. Even increasing taxes on wealthier individuals and corporations, which most Americans support, might not be enough to cover the funding gap.
Increased enforcement might also generate more revenue for the government. In 2022, the IRS did not receive over $600 billion in owed taxes, with only a fraction clawed back through enforcement. More funding toward pursuing these offenses and greater oversight could lower this number and boost government revenues. But again, it alone would barely decrease the debt.
So what’s the best path forward? It may be a bit of everything above—tax increases, spending cuts, and tax enforcement. There is no single solution to this mess—the United States is far past that point. But with drastic action from multiple angles, we might be able to chart a different path.
Have a great weekend and happy holidays.
Looking for more on this issue? I’ve included some additional coverage below.
WSJ - Elon Musk and Vivek Ramaswamy: The DOGE Plan to Reform Government (November 20, 2024)
BBC - What we know about Musk's cost-cutting mission (December 5, 2024)
Fox Business - Elon Musk and Vivek Ramaswamy point to DOGE targets (December 15, 2024)
Business Insider - Here's what we know so far about who's working on DOGE (December 18, 2024)
Politico - DOGE Can’t Do It All. Here’s What It Can Do. (December 19, 2024)