DOGE’s Chaotic First Month

On Saturday, federal employees received a chilling email: list your accomplishments last week in five bullet points, and cc: your manager. The email’s ultimate source, entrepreneur turned presidential aide Elon Musk, threatened on X that employees who didn’t respond would be fired. 

Musk’s transition from tech billionaire to fiscal discipline fanatic has been rapid and impactful. His newly-created Department of Government Efficiency, or DOGE, has promised to take a machete to the American state - firing workers, cancelling contracts and selling assets in an effort to fix what he sees as an oversized and corrupt public sector staffed by progressive bureaucrats. 

However, while the US public sector is large and prone to waste, DOGE’s opaque operations, shaky constitutional authority and ‘shoot first, ask questions later’ approach to budget responsibility risk doing serious damage to the functioning of the US government without delivering substantial savings. 

The State of US Government Finances

The US government is a massive financial operation. It spends more than $6 trillion per year - higher than the GDP of all other countries in the G7. It employs around 22 million people across the federal, state and local levels. It supports a wide range of services and public goods, from social security to defence to foreign aid. 

Conservatives see three problems with this. First, high levels of spending require tax revenues from individuals and businesses to pay for it. While the US tax-to-GDP ratio is lower than the OECD average of 33.9%, it still represents around 25% of GDP - meaning that for every $1 of output produced in the US economy, a quarter of it goes to the government. 

Second, the US spends more than it raises in tax revenues and runs a large and growing fiscal deficit. The US has not run a fiscal surplus since 2001,and has to borrow money from investors through government bonds in order to finance its spending. As a result, US debt has grown to more than $35 trillion, representing 123% of its GDP. Interest payments to service this debt now account for 23% of government spending, pushing the government to issue more debt just to pay the interest on its existing debt. Conservatives see this as an unsustainable cycle that needs to be controlled.

Source: US Treasury Department

Finally, what most enrages deficit hawks is that US government spending is prone to wastage across its largest departments. In 2022, improper payments across federal programs totalled $250 billion, in which social security was paid out to dead people and fraudulent Medicare and unemployment benefits. The Department of Defence, which accounts for 14% of government spending, has failed its audit six years in a row since 2018, and 15 of its sub agencies that represent 68% of its budget could not properly account for their finances. Stories of egregious wastage abound: in the 1980s, the Pentagon was reported to have spent more than $280 on a screwdriver and more than $74,000 on an aluminium ladder.

DOGE’s Limited Progress

The first big issue we’ve seen so far is the lack of transparency and disclosure around what DOGE is actually doing. DOGE’s (rather basic) website claims to have cut $55bn from government spending so far through a mixture of contract cancellations, layoffs and asset sales. The 1,124 contract cuts that it has disclosed so far, however, only total around $7.2bn and are overwhelmingly focused on USAID, according to our analysis of their public data. USAID accounted for 72.8% of the cuts, with the Department of Education coming in second at 7%. 

Source: DOGE

The contracts slashed range from Bloomberg terminal access for the US Treasury to gender inclusion consulting services for USAID. It also claims to have cut 2.33m square feet of real estate from the government, for a saving of $145m. Taken together, DOGE has only disclosed 13% of the savings it claims to have made. 

And despite the chainsaw-wielding photo ops and frenetic media coverage, the $55bn DOGE claims to have cut so far remains a drop in the ocean compared to the USA’s current fiscal deficit. It is, admittedly, early days - but the savings it has reported in the first month currently represent only 3% of the US fiscal deficit. 

But even if DOGE has not yet made a dent in the deficit, it is still having an impact. Musk’s slash and burn approach risks doing significant damage to the function of important government agencies. Musk’s pledge to kill the Consumer Financial Protection Bureau, which was set up in 2008 to protect US consumers from scams, for example, will not make Americans financially safer, even if it does reduce government headcount costs. 

The effects of this are already being felt at USAID. Trump announced a 90 day freeze on all US foreign assistance on his first day in office, while Musk has pledged to “feed USAID into the woodchipper”. Thousands of USAID workers, both in the US and abroad, have been put on leave. The US is the world’s largest donor of foreign aid, accounting for around 29% of the $223 billion spent on overseas development assistance in 2023. America’s retreat from international development work under DOGE will have a dramatic impact on recipient countries - such as Ukraine and fragile states in Sub-Saharan Africa and South Asia. Regardless of how you feel about these regions or conflicts, the immediate cessation of funding could have wide-reaching outcomes that may not be in the US’ own national interest.

Source: The Guardian

Questionable authority

The big open question for DOGE is the extent of its legal power. DOGE has been hit by a wave of lawsuits that attack the agency’s right to make the cuts it claims to be making. As legal analysts and lawsuits against DOGE note, it is Congress rather than the executive branch that is responsible for making budget decisions, meaning that a decision to shutdown USAID or another government agency would require Congressional approval to move forward. Some legal challenges have also targeted Musk himself, alleging that his personal authority is unconstitutional as he does not hold an office confirmed by the Senate. It is also currently the subject of 11 lawsuits that dispute its right to access agency data on Americans, such as tax data or student loan applications. Musk has already been shut out of the Treasury database by a US district court. 

Musk’s more extravagant announcement on paying out DOGE savings checks to American taxpayers has also strayed into politically contentious areas with other Republicans. Deficit hawks such as House speaker Mike Johnson have already signalled they are uncomfortable with the idea, saying that the savings should be put toward paying down debt. 

The underlying irony of DOGE so far is that it is beset by many of the exact problems it is meant to address. It seeks to make the government more transparent, but operates opaquely and without oversight. It rages against a deep state staffed by unelected bureaucrats, but its own leadership is unelected and has uncertain constitutional authority. And it claims to make the government more effective, but is itself unable to prove its own achievements.

Click here to learn more about the state of US government finances