President-elect Donald Trump announced he would create a Department of Government Efficiency, spearheaded by entrepreneurs Elon Musk and Vivek Ramaswamy, to find ways to save taxpayer dollars. Say what you will about the ability of Musk and Ramaswamy to build successful businesses, but it is likely that they have never encountered a challenge as difficult as downsizing the federal government.
To avoid falling into the dustbin of history like previous efficiency efforts, Musk and Ramaswamy will need to do more than carry a sink into federal agencies. They must take the kind of dispassionate approach they would to an ailing business put into receivership.
To put the U.S. government in perspective, its $6.8 trillion budget is larger than the GDPs of Germany and Japan. Its roughly $2 trillion annual deficit is larger than the GDP of Mexico. And it has 441 agencies that employ more than 2.8 million civilian employees.
Not to mention, the federal government is in dire fiscal straits, with $28 trillion in publicly held debt and more than $73 trillion in unfunded liabilities.
Previous efficiency commissions have achieved mixed results, often based on the unwillingness of Congress to implement their recommendations. President Herbert Hoover led two efforts to identify inefficiencies and reorganize federal agencies. Congress reportedly approved 70% of the first panel’s 273 recommendations.
Later efforts, though, were not so successful. President Ronald Reagan established the President’s Private Sector Survey on Cost Control in the Federal Government, more popularly known as the Grace Commission, after its chairman, J. Peter Grace, the CEO of W.R. Grace and Company. The commission was staffed by more than 150 business executives and generated hundreds of recommendations for streamlining government functions. Few were adopted because Congress failed to pass them into law.
President Bill Clinton put Vice President Al Gore in charge of the National Performance Review, with the goal of “creat[ing] a government that works better and costs less.” Gore’s “reinventing government” effort had little lasting effect on the size or scope of government because it focused on how government should do things, not the more important question of what government should do.
Efficiency is a noble goal, but taxpayers should not expect obsolete government programs to waste their money more efficiently.
If we’re serious about trimming down government spending, the first step is to eliminate obsolete and outmoded programs. The federal budget is more of a museum of American history than the Smithsonian. Name an era in American history, and there is an obsolete agency or program that has long outlived its original purpose. Depression-era programs such as the Export-Import Bank, Commodity Credit Corporation, Davis-Bacon Act, and Rural Electrification Administration continue today in one form or another.
Musk and Ramaswamy should work through the sedimentary layers of government programs to identify ones that have outlived their usefulness or original mandate.
Next, Washington must consolidate or eliminate redundant programs. In a 2011 report, the Government Accountability Office identified 44 federal employment and training programs, 15 agencies involved in food safety, 80 programs involved in economic development, and 100 programs involved in surface transportation. Ironically, GAO also identified 56 programs spanning more than 20 different agencies involved in financial literacy, yet policymakers are still incapable of balancing the budget.
While many governments around the world have privatized their state-owned enterprises, the U.S. federal government owns some very poorly run businesses, including two Depression-era electric companies, the Tennessee Valley Authority and the Power Marketing Administration. Since the 1970s, Uncle Sam has been running a highly subsidized passenger railroad called Amtrak. And at a time when people can stream music, TV, and movies on their cellphones, the federal government is still funding a 1960s-era TV and radio network called the Corporation for Public Broadcasting.
Third, we must acknowledge that corporate welfare is widespread, too. For a nation that prides itself on being a beacon of free enterprise, both the tax code and the federal budget are chock full of subsidies for corporations. The Inflation Reduction Act alone expanded or created 24 tax subsidy programs that personify corporate welfare at an estimated cost of $1.2 trillion over the next decade.
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Finally, Musk and Ramaswamy will have to tackle the sensitive task of fixing our major entitlement programs. Entitlement spending makes up 55% of federal government spending, which means it’s mathematically difficult to resolve overspending without tackling entitlements. The looming “depletion” of the Social Security and Medicare trust funds is an accounting fiction because these programs are currently spending more on benefits than they collect in revenues, effectively draining general revenues away from other programs.
Rightsizing the deficit will take deliberate changes across all areas of the federal budget. Musk and Ramaswamy may be confident they can complete this task, but that effort will be wasted if members of Congress don’t display the same courage and adopt deliberate changes into law.
Scott Hodge is president emeritus of the Tax Foundation and author of Taxocracy: What You Don’t Know About Taxes and How They Rule Your Daily Life (2024, Post Hill Press).