Doge - American Style

Doge - Venetian Italian for Duke - the highest official of the Republic of Venice.  Spanning the 8th to 18th centuries, more than a thousand years, the Doge was the sovereign ruler of the Venetian State.  

The palace of the Doge is famous for its flamboyant gothic architecture and its Great Council Chamber which houses possibly the largest oil on canvas painting in the world:  The Glory of Paradise by Jacopo Tintoretto.  As the primary residence of the Doge of Venice the palace was the physical manifestation of this supreme sovereign authority.

It is fitting that billionaire oligarchs Elon Musk and Vivek Ramaswamy have been appointed sovereigns of the incoming Trump administration's Department of Government Efficiency or DOGE.  Of course, lacking the authority of a real government department there is no supreme authority.  

Sigh. 

Trump's transition team tells us that Musk and Ramaswamy are going to solve our country's debt problem. The DOGE is going to reduce the government's power, slash its workforce and crack-down on waste, fraud and abuse.  The sovereign oligarca announced they intend to reduce the federal budget by nearly thirty percent ($2 trillion).  So far, the chatter has been largely about cuts without much bandwidth devoted to a single ducat of additional revenue or investment in efficiency.  

Sure, I know it's early in the game and the president elect has yet to be sworn into office.  As a consequence I am resigned to the notion that for the present I will be subject to random dictum from Ramaswamy and Musk highlighting: The Usual Bill Of Fare.  Pledging to battle waste, fraud and abuse in Washington is as old as the hills.  Having been trotted-out with incessant frequency as a campaign promise by both sides it has become tread worn.  This spent refrain has become wearily uninspired.  It is tiresome.

Where to begin?  Try to stay with me as we take a deeper dive in the numbers. 

I've taken a run at this stuff before and it all comes down to money coming in (revenue) and money going out (expenses).  Nuanced by what is non-discretionary versus discretionary.  With a dose of old-fashioned politics thrown-in for good measure. 

The revenue side of the ledger includes a couple of large contributions; namely individual income taxes (about $2.2 trillion) and payroll taxes (about $1.6 trillion).  Smaller are corporate income taxes (about $420 billion) and various duties and tariffs, sales, estate and excise taxes (roughly $228 billion).  For the 2023 fiscal year money-in totaled $4.4 trillion+.

The president-elect has promised to reduce individual and corporate income taxes by at least $5 trillion over 10 years; reducing the money coming-in.  He has also promised substantial new tariffs on imports; although no estimates have been revealed for these tax increases.

Social Security and Medicare would be difficult to cut as Trump has promised he would not.  Nevertheless, both programs are living on borrowed time.  Without additional revenues and changes to the retirement formula, the Social Security and Medicare trust funds are already under stress from an aging population.  They will run out of money in 2033 and 2036 respectively.  This means that current retirees will experience a significant cut to their benefits anyway.  Trump's promise to end taxes on Social Security would accelerate the arrival of these cuts.

On the expense side of the ledger the three largest non-discretionary expenditures include the fore-mentioned Social Security and Medicare, federal civilian and military retirement and veteran benefits.  Total non-discretionary spending for 2023 was $3.8 trillion. 

There is an additional $659 billion of net interest (give or take) on the outstanding national debt.  It stands alone; but added to the non-discretionary component of the federal budget gets us to a grand total of $4.5 trillion.

What's left?  Discretionary spending of $1.7 trillion.  Included in this category is defense and roughly $9 trillion in non-defense spending.

Non-discretionary and discretionary explained

Non-discretionary programs are deemed mandatory spending which means funding doesn't require passage of an annual appropriation by Congress.  By example: if the DOGE Bros want to reduce Social Security, Medicare, federal retirement benefits (military and civilian) Congress would have to pass legislation reducing or defunding these benefits.  

There is net interest on the national debt -  almost $700 billion.  The credit-worthiness of our nation hinges on our promise to pay our debts.  I don't believe the DOGE Bros would recommend defaulting on the debt or devaluing our currency putting their own wealth at great peril.

On the discretionary side of the spending ledger the DOGE Illuminati have tweeted about unsupported billions upon billions of defense payments that cannot be tracked or audited. I'll not argue there isn't waste, fraud and abuse or other similar leakage in the defense budget; but not enough to reduce the federal budget by 30 percent.  I suppose Musk and Ramaswamy might recommend that Congress kill the F-35 program.  Alas, there is that nagging matter of Congress, national security and jobs. 

What's left? 

That leaves a grab-bag of leftovers the DOGE can submit to Congress and the President for elimination and defunding.  In the grab-bag is found Assistance to Individuals (namely nutritional and healthcare programs), transfers to states (Medicaid coverage for poor people, education, roads, bridges, highways, ports, airports and other infrastructure), National Parks, the National Weather Service, arts funding (public broadcasting); you get the drift.  

Of course, in the grand scheme of things, this grab-bag of leftovers doesn't even come close to scratching the surface of reducing the federal budget by thirty percent.  And here's the catch; a considerable portion of the grab-bag is decidedly popular with much of the public.  Defunding it would result in a cascade of serious budget shortfalls for the states leaving all the governors and the people very grumpy.  

The challenge for Trump and the DOGE is that a 10,000 foot view of the discretionary side of the federal budget reveals that it is just two things - military and defense; including a vast health and social insurance program that comes with it; and everything else.  Compared to defense, the rest of the discretionary budget is much more transparent because average Americans are witness almost on a daily basis to weather forecasting, highways, air traffic control, public broadcasting, national parks and monuments.  They cost relatively little money in a ginormous federal budget and are generally liked.

I readily admit I struggle with coming-across as slightly snarky about quirky oligarchs like Musk and Ramaswamy; they're billionaires after-all.  Who among us actually believe they are sincerely empathetic to the needs and wants of ordinary Americans?  How many of you think they relish the attention of the Trump reality show?   These juxtapositions mean they have to work harder at candor and authenticity if they want to be taken seriously and actually add value to the incoming administration.

If the DOGE only looks at cutting the budget their task may become virtually impossible as it would result in a significant disruption of services average Americans have come to expect from government.  The DOGE must explore creative initiatives that require investment in efficiencies and alternative sources of revenue and think big.  They need to go after the big money to make a historic splash. 

I'll let you in on a secret:  They need to shift that thing we refer to as an 800 pound gorilla.  They need to look to Social Security and Medicare - the root cause of our budget woes.  The subject politicians are so loathe to speak-of that they tip toe and shrink from it like timid sissies.   

I am not being snarky - if Elon and Vivek put their thinking caps on and put their minds to meaningful reform of both of these programs with a view to securing their future for the next couple of generations it would be earthshaking and enshrine their boss in history.  Who knows, I might even become a believer.

To be clear this would be a heavy lift.  Politically-fraught too.  The last president to pull it off was Ronald Reagan.

I wish them well as President-elect Trump will be a lame duck president; with effectively only a couple of years to implement meaningful change.   Which may partially explain why only a few days ago the richest man in the world is now walking-back his boast of $2 trillion budget cuts.    

There is enough meat on this bone there is a high probability of another couple-three blog posts to do it justice.  And since it is very early in the game there is ample time for bonafide policy to evolve and unfold.  Detailed policy which will improve your and my prosperity and general lot in life.  And perhaps make the world a safer place.

Of course, There is time for additional hedging and moving of goal posts; so stay tuned.

Cheers!