Musk aims to slash deficits. Trump has put key solutions out of reach.
Empowered by President Trump to make government more efficient, tech entrepreneur Elon Musk has targeted entire agencies for closure, seized control of payment systems, ousted career civil servants, and pressured employees to retire early.
Even as questions swirl about whether his actions are legal, Mr. Musk’s lightning strike on the federal bureaucracy raises a fiscal puzzle: What do all these actions actually mean for the federal budget and the national debt? And how do they map onto the president’s tax-cutting budget agenda that Republicans in Congress are working to achieve?
Mr. Musk claims that he’s uncovered a mountain of waste and fraud in spending and that his efforts to rightsize the bureaucracy will slash the fiscal deficit, which hit $1.8 trillion in 2024. On Wednesday, he wrote on X, the social-media platform he owns, that fraud in federal spending “is closer to 10% of disbursements, so more like ~$700 billion per year. Outright waste is at least 15%, so another trillion+ dollars. Anyone who works in government knows this.” He provided no evidence for his claims. He has previously promised that he can cut $1 trillion to $2 trillion in annual spending from a roughly $6.8 trillion federal budget.
Why We Wrote This
Elon Musk’s disruption of entire federal agencies, even if it works, would leave the biggest drivers of federal deficits untouched. That’s the hard math of fiscal responsibility for America.
On Thursday, a federal judge put on hold the Trump administration’s buyout offer that is part of Mr. Musk’s drive to cut the federal workforce, pending a hearing on the offer’s legality. The White House had estimated that up to 10% of employees would accept the offer.
Supporters of Mr. Trump, steeped in his rhetoric about Washington elites conspiring to waste taxpayer dollars on liberal causes, have greeted Mr. Musk as a cost-cutting hero. His round-the-clock updates of what his Department of Government Efficiency (DOGE) is finding in places such as the U.S. Agency for International Development (USAID) are hailed by Musk’s followers on X as proof of genius.
Not so fast, say veteran deficit watchers in Washington. Even if Mr. Musk finds new ways to cut waste from the federal budget – a big if – the purported savings don’t add up since the lion’s share of government spending goes on Social Security and medical-insurance programs, along with defense and debt servicing. And the path to deficit reduction runs through Congress, which has punted for more than two decades on hard political choices about a rising national debt.
“There is certainly waste, fraud, and abuse in a $6 trillion budget,” says Thomas Kahn, a Democrat who served as director of the House Budget Committee from 1997 and 2016. But “the only way to make serious reductions in deficits is to cut mandatory spending or to raise taxes.”
The government “needs a scrubbing,” he allows. “But if the goal is to… reduce the deficit, he’s aiming at the wrong target.”
Mr. Musk’s efforts to shine a light on federal spending could be helpful but only go so far to tackle the deficit, agrees Kevin Kosar, a senior fellow at the conservative American Enterprise Institute who studies Congress. “It’s all well and fine that we have a look at various federal expenditures and ask, ‘does this really make sense?’” The far bigger issue, he says, is what Congress does about spending, taxes, and the national debt, currently at $36 trillion.
The hard math of deficit reduction
Mr. Trump has vowed to extend the tax cuts that he signed in 2017 and which would mean forgoing $5 trillion in revenue over 10 years, according to the Congressional Budget Office. He has also called for other tax cuts, such as on tipped income. During his campaign, he promised to protect Social Security and Medicare, the two largest federal programs, and has called on Congress to find more money for the military and for immigration enforcement, including hiring more agents.
On Thursday, Mr. Trump met with congressional Republicans to discuss what is likely to be a reconciliation bill passed on partisan lines. So far, Mr. Trump hasn’t proposed any spending cuts to offset revenue costs, let alone reduce the size of the deficit, says Robert Bixby, executive director of the Concord Coalition, a bipartisan group that advocates for debt reduction. Possible items on the chopping block include Medicaid, food stamps, and other social programs.
As a thought experiment, says Mr. Bixby, Congress could cut all discretionary spending, including on defense, to zero, eliminating large swaths of the federal government. That still wouldn’t close the deficit since it wouldn’t end mandated payments to social programs and interest on public debt. Nor would Mr. Musk’s efforts to shrink the bureaucracy and root out waste suffice. “Math is math. We all have to be cognizant of the size of the [fiscal] gap.”
He adds, “People throw up their hands because of the size of the federal government, and the debt frustrates people. There’s a sentiment that we need a disruptor. But even a disruptor can’t change the math.”
How much “waste”?
Waste in public spending is subjective; what conservatives consider wasteful may be programs that progressives value, and vice versa. There’s more consensus on fraud and abuse. In 2023, the Government Accountability Office (GAO) identified around $236 billion in “improper payments” by the federal government, of which Medicare and Medicaid made up more than $100 billion. Mr. Musk’s team has begun analyzing the $1.5 trillion-a-year payments system at the Department of Health and Human Services for these programs, The Wall Street Journal reported.
The GAO estimates that improper payments spiked during the pandemic as relief packages passed by Republicans and Democrats shoveled money out of the door. Between 2019 and 2021, such payments rose from $175 billion to $281 billion, before falling back. For example, around 8% of loans made under the Paycheck Protection Program may have been fraudulent. Small business loans and unemployment claims also suffered from fraud. (Economists point out, however, that the speed of disbursements helped the U.S. economy to rebound much quicker than peer nations and to grow tax revenues as a result.)
Mr. Musk’s dismantling of USAID represents another front for DOGE. Mr. Trump has backed the closure of an agency he says was run by “radical left lunatics,” but it’s not clear if the agency’s budget can be redirected or cut without congressional approval.
Going after foreign aid is good politics since it’s not popular with voters, says Mr. Kahn, now a faculty fellow at American University. Voters also imagine there are big savings to be had: Polls suggest that Americans believe around one-quarter of the budget goes to foreign aid. In reality, it’s less than 1%, or around $40 billion in 2024. “In Peoria, that’s a lot of money. But in terms of an annual deficit of [nearly] $2 trillion it’s trivial,” says Mr. Kahn.
The public wants more than efficiency
In a post on X, Jessica Riedl, a longtime budget hawk at the conservative Manhattan Institute, pointed to the blind spots in DOGE’s focus on such cuts. Ms. Riedl, formerly Brian Riedl, chided Republicans for buying into Mr. Musk’s hype. “Don’t brag about your coupon-clipping frugality at the same time you are buying a $250,000 Ferrari,” she wrote, and added, “You can’t significantly cut the deficit just by cutting waste, firing bureaucrats, and defunding immigrants and foreigners. There are no easy short cuts.”
Jason Saul, who teaches law and public policy at the University of Chicago, says Mr. Musk’s efficiency drive has so far relied on two approaches, which he calls “slash-and-burn” – cutting agencies and reducing headcount – and targeting waste, fraud, and abuse. What neither does is tackle the harder question of how to improve the efficiency of programs that the public wants and expects from the government, such as services for veterans and the elderly.
“Everyone values these outcomes,” says Professor Saul, executive director of the Center for Impact Studies, who has advised governments in Canada and the United Kingdom on how to measure social impacts from public programs. The challenge, he says, is to reduce the cost. “That is going to require a different set of tools and techniques than…[DOGE’s] artificial intelligence and software programmers. You’re going to need people who can analyze the [return on investment] of 1,000 federal grant programs and figure out how to get twice the impact for half the cost.”
