Today, Explained - Can DOGE cut $2 trillion?

Episode Date: December 4, 2024

Elon, Vivek, and the Department of Government Efficiency want to cut $2 trillion from the federal budget. A libertarian says the only way to do that is to eliminate aid programs altogether. This episode was produced by Haleema Shah, edited by Amina Al-Sadi, fact-checked by Kim Eggleston, engineered by Patrick Boyd and Rob Byers, and hosted by Sean Rameswaram. Transcript at vox.com/today-explained-podcast Support Today, Explained by becoming a Vox Member today: http://www.vox.com/members A photo illustration of Elon Musk's X account and a Dogecoin cryptocurrency. Photo by Jakub Porzycki/NurPhoto via Getty Images. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Elon Musk is a funny guy. You can tell because his favorite cryptocurrency is based on a cute dog? A Shiba Inu, which inspired the Doge meme, which inspired Dogecoin. I'm sorry if I'm losing you, the point is it's Elon's fave. In 2021, he hosted Saturday Night Live and plugged it over and over. And lately, prices have been soaring for cryptos like Bitcoin, Ethereum, and especially Dogecoin. Oh, right! prices have been soaring for cryptos like Bitcoin, Ethereum, and especially Dogecoin. He also said he would fund a moon mission entirely with Dogecoin and incessantly tweeted about the crypto. And for a minute, Tesla was accepting Dogecoin. In 2022,

investors got tired of the antics and sued Elon Musk for manipulating the price of the coin. They lost, Elon won, and then Kamala lost, so Elon won again, and now our future president has rewarded Musk's loyalty with an entire government agency named for his favorite meme coin. And, as you've probably heard, it's called the Department of Government Efficiency, or DOGE, on Today Explained. Support for Today Explained comes from WebRoot. WebRoot believes in cybersecurity. Made smarter, creating software that harnesses the cloud and AI to stop threats in real time.

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BetMGM operates pursuant to an operating agreement with iGaming Ontario. This is Today Explained. The first thing you need to know about the Department of Government Efficiency is that Trump's put two people in charge of it, so it's off to a great start. Elon is one of them. The other is Vivek Ramaswamy. No relation. We asked Vox's Dylan Matthews to help us understand what they intend to do, but first we asked him where he stands on the federal government. Any sufficiently large organization is going to have inefficiencies, and there are definitely inefficiencies in federal spending. But almost everything that the federal government spends money on is pretty non-controversial, which is why we keep spending money on it.

But that's not how Elon and Vivek feel. No. It's no secret that it is a fourth branch of government, the administrative state that makes most of the rules, that creates a federal bureaucracy that's hampering our economy. If the current trend of strangulation by over-regulation is not turned around, we will never get to Mars. It just will be illegal. I mean, they're private sector guys, right? Like, they're all about arguing that old sectors are inefficient and need to be disrupted.

How much do you think we can rip out of this wasted $6.5 trillion Harris-Biden budget? Well, I think we can do at least $2 trillion. Yeah! I'm skeptical. There's an old saying in Washington that the U.S. federal government is an insurance company that has an army attached to it. And I think this is a good way to broadly think about what it spends money on. And how much does this insurance company with an army attached to it cost? You say they want to eliminate $2 trillion of the budget.

How many trillions is the budget? So in fiscal year 2023, we spent $6.1 trillion on various things. Of that, a little under $700 billion was interest. So that's just debt we had and we had to pay interest on it. So for actual programs for people, it's more like $5.4 trillion. So $2 trillion out of that is over a third. It's a really, really big number. Okay, and so a huge chunk of it is just debt service.

But what is the actual spending? What's the largest share of that six-ish trillion? So biggest single share is social security. That's 1.3 trillion. That's benefits for retirees, survivors, people with disabilities that they've paid into. And so 1.3 out of 6.1 total trillion. And that's the biggest single program. And it's one that Trump has promised not to cut. And we will always protect your social security. And when you think about what this doge outfit wants to do, they're not talking about getting rid of social security, are they? No, they're very insistent that they're not and that they're not trying to aim for Social Security and Medicare, which is the second biggest program. Aha.

Those are big programs for seniors. We're not touching Medicare. We want to keep Medicare. We're not touching Social Security. unusual about Donald Trump, both in 2016 and 2024, is he promised not to cut them after you had Paul Ryan talking about like very serious plans to cut them. Do you consider it possible to arrive at a fiscal policy and plan that reduces the deficit without touching Medicare and Social Security or military spending? No, you can't. It's just a mathematical impossibility. And so Trump wanted to be this different kind of Republican who wouldn't threaten these programs. The reason that people like Paul Ryan wanted to cut them is that together they make up about a third of the overall budget. And it's just very hard to make serious cuts while declaring them off limits. If you do not tackle the drivers of our debt, which are entitlements,

you cannot balance the budget in the future and pay down the debt. It's just not possible. And just to help people understand the full picture here, what are we spending on Medicare as a country? So 2023, we spent $839 billion. So less than Social Security, but a lot. And Social Security is increasing in its costs just because the population is aging. More people are retired and taking benefits. Medicare is growing both because of that and because medical costs tend to grow quicker than other costs. And so it's smaller than Social Security now. It might overtake Social Security as we get new treatments, we get new kinds of surgeries, new ways to extend people's lives that are great, but cost money. Okay, so now we're into the hundreds of billions of dollars of expenditures.

You mentioned that debt service was in this company. What about defense spending? Isn't that a huge chunk? Where does that fall in? Defense spending is huge. That was $805 billion in 2023. So just behind Medicare in terms of total expenses. But almost no Republican wants to cut it outright. And so they might talk about, you know, finding areas of waste, defense contractors that charge $30 for a wrench, that kind of thing. But it's unlikely to be a major target.

Okay, so then what are we talking about? So we've gone through, you know, Social Security, Medicare, defense, debt service, things that sound sort of untouchable or not really of much interest to Trump, Elon, and Vivek. What's left? So I think the biggest category is programs for poor people, bluntly. So the most important here is Medicaid, which is our program for people in poverty and many disabled people. That's about $616 billion in federal money. It's a federal state program, so states kick in a lot on top of that. But that's the next biggest chunk after sort of security, Medicare, and defense. And it's historically been a big target of cut proposals. When Trump was trying to repeal and

replace Obamacare in 2017, most of Obamacare is an expansion of Medicaid. And so what he was talking about were very serious Medicaid cuts. And I would expect something similar. His budget chief is this guy named Russ Fott, who has been putting out budgets sort of during the Biden years of what he wants to do. And those budgets include a third cut to Medicaid. He wants to slash the whole program by a third. I don't know if Trump is going to go that far, but his own budgets last time around included very serious Medicaid cuts.

And I would expect the same this time around. And after Medicaid, we spend about $450 billion on what are called income security programs. These are things like food stamps, tax credits like the child tax credit and the earned income credit. Broadly, a lot of programs that support low-income people's incomes. It also includes some things for veterans, which are unlikely to be cut. But that broad category of income supports for poor people has been a major target as well. And food stamps in particular, Trump tried to cut repeatedly last time and are likely to be a major target again this time. So I would say they're

not politically easy things to cut because advocates for poor people, the whole Democratic Party, are going to fight you tooth and nail on this. But they're historically easier to cut than Social Security or Medicare or defense spending. And so I think are likelier to be top targets. And if the spaceman and the young man figure out some, you know, huge cuts to welfare programs in the federal government, do they have the power to slash spending? I do not think that the White House on its own has the power to cut federal spending. Congress has the power of the purse. Traditionally, the way this has always worked is that the president will put in a budget request outlining what he wants the budget to look like. Congress will completely ignore that and pass what they want to pass. And then what ultimately is enacted is much closer to what Congress wants than what the president wants. However, Russ Vought, the budget director who Trump recently reappointed, has been pretty vocal that he thinks the president has what's called an impoundment power,

or the power to refuse to spend money that Congress has appropriated. If they're right, and if they assert this power and it goes all the way to the Supreme Court, then Trump on his own would have the power to just ignore spending bills from Congress. And if he, say, wanted to cut Medicaid by some number of billions of dollars, he could just withhold spending for the programs that he doesn't want to fund there. That would be a quite radical expansion of presidential power. And I bring it up only because senior members of Trump's team have been very vocal that they think he has this power. But it will require a pretty dramatic assertion of authority, a very long court battle before anything like that

comes up. So what do you think that means for Doge and their goal to cut $2 trillion? They are not going to cut $2 trillion. I will bet any amount of money. If Elon wants to sort of set up a crypto deal with me and say, I bet $5 million that I for sure don't have, but I bet you $5 million that we're going to pass $2 trillion in annual spending cuts. I will sign that and, like, take out whatever loan shark loan is necessary because I will win that bet. I think they will come up with a list of smaller appropriations that they think are wasteful or ill-advised. They'll come up with government contracts that they think are for too much money or wasteful. I will say this for Elon, that he does have a lot of experience with government procurement through SpaceX. I would guess that the quantity of cuts we're going to be looking at is in the

tens of billions rather than hundreds or trillions. But one thing I have learned is that I felt like I was able to predict what Joe Biden would do. I felt like I was able to predict what Barack Obama would do. I felt like I was able to predict what Paul Ryan would do. I have been wrong again and again about what Donald Trump will do and his team. And so while $2 trillion I'm ruling out, there's a wide range of possibilities here. You can read Dylan Matthews at Vox, I certainly do. When we're back on Today Explained, someone who is, the company that likes to keep it simple. Thank you. plan with Mint Mobile. They say you'll pay just $15 a month. That's it, they say. No strings attached, they say. No sneaky fine print, they say. Just a great deal. All Mint Mobile plans come with high-speed data and unlimited talk and text delivered on the nation's largest 5G network. You can even keep that same phone, those same friends, that same number. You can get this new customer offer and a three-month premium wireless plan for just $15 a month by going to mintmobile.com

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I say Doge double E, perhaps. Doge double E. You know, Elon Musk and Vivek Ramaswamy, you know, they proposed their Department of Government efficiency. Well, to solve the $2 trillion federal deficit problem, we not only need more efficiency, we need eliminations. So while people might, you know, envision the federal government and the 2 million federal civil servants we have working more efficiently, that's great and fine. They do need to work more efficiently. We also need to eliminate programs. You seem to believe that there are eliminations here. They may not get us to $2 trillion, but if you pull a bit from here and pull a bit from there, you're going to start making progress.

Tell us where you want to pull from. Well, Trump unfortunately has said he wouldn't cut the two biggest programs in the federal budget, Social Security and Medicare. He's probably not going to cut defense either because his party traditionally supports big defense spending. So those are the three biggest programs in the federal budget. So what else can you cut? Well, the next biggest pot of money in the federal budget is aid from the federal government to state and local governments. That's $1.1 trillion of spending every year. So this is aid for highways, K-12 education, Medicaid, housing, community development, that sort of stuff. I think that stuff can be cut. I think it should be cut.

I think state governments can pick up the slack. State governments are actually in a very strong budget position these days with large rainy day funds. So I think the federal government can and should cut this flow of money from the federal government down to state government. So then the states can respond as they please. They can raise taxes. They can cut other spending. State governments are required to balance their budgets. So that's a good thing. The federal government will cut the subsidies. Then state governments can handle the fallout and figure out how they want to reorganize their budgets. How much would these cuts be felt by people across the the country by by voters by americans you know

cuts to housing community development highways i mean i i realize that states have their own budgets and can fund these things but not all states are created equal not all states have surplus funds to use to pick up the slack for the federal government, right? No, that's right. And every state would respond in a differential source of ways. Diversity, I think that's a good thing. You know, if the federal government cut a welfare program like public housing, you know, New York might decide to fund its own public housing,

but say Texas might decide, hey, we're going to privatize our public housing. But I think that those differential kind of responses by the states would be a good thing. I think that when the federal government cuts aid to the states, it should phase it in. It should phase it in over, say, five years to give state legislatures the time to plan how they're going to respond and whether they're going to cover the funding for these programs themselves. But currently, the federal government has 1,300 different federal aid to state programs. This is a massive web of programs that has grown particularly since the 1960s. I don't think these programs have worked particularly well.

They're extremely bureaucratic when you involve two or three levels of government in funding programs. I think we'd have a much more efficient government at all levels if we got the federal government out of these properly state activities. We know you libertarians love to eliminate programs. Are you envisioning a United States that maybe doesn't have programs that support public housing, maybe doesn't have, you know, a federally funded transit, or maybe doesn't have a corporation for public broadcasting? Is that what you'd really like to see? I would like to see that. And over the last century, power has become centralized in Washington, in my view, for no particular reason. And I'll give you a story about that, Sean. So I grew up in Canada. Canada is a high-income democracy. It's a much more decentralized federation than United States. In rough terms, government spending in United States is two-thirds federal and one-third state. Canada is the flip. Canada is only one-third federal and two-thirds provincial. As an example of that, Canada has no federal department of education. And on

international test scores, Canadian students do substantially better than American students. So I don't believe you need to centralize some of these activities to have well-functioning government. And I think Canada, it's not a great model for some things. I think the current prime minister has had lots of problems. However, I think the basic governmental structure of being a decentralized federation is a good model for us to look at. And you heard Dylan say that the one thing he's always expecting with Trump, and let's say now Doge, is the unexpected. Does the unexpected factor here mean that these business-minded, drain-the-swamp,

let's-go-to-Mars types could actually pull something out of the bag to get rid of these programs, to even maybe eliminate things that have so far seemingly been political third rails in this country. There is a tradition of Congress putting together big fancy blue ribbon commissions, writing big reports, and then the reports end up on shelves collecting dust. That is true. However, I think the debt problem is much bigger than it was 10 years ago. I think something that's changed as well is the threat of inflation. You know, we found out during this last election how incredibly unpopular bouts of inflation are.

And, you know, Republicans have spent the last two years blaming all the inflation on Biden's spending. When you spend trillions of dollars, you cause inflation. For many of my constituents, this is a choice in some cases between putting food on the table and staying warm. This could not be a more challenging problem confronting America. Only three in 10 Americans approve of the way that Joe Biden is handling inflation. Only three. Whether or not, you know, you buy that as an economic argument, I think going ahead, Republicans will be scared that if the deficits are too big and the spending is too large, they risk a bout of inflation leading up to the midterms. I think they should be scared of that.

And I do think that that should be, you know, an impetus for them to start making some spending reforms to encourage financial markets that, you know, there will be a problem to these massive deficits in Washington. So, I think there is a political opening here. Presidents have their most legislative leverage in their first year, and I think they need to start cutting in the first year, again, in order to ward off inflation as well as to actually the corporate welfare that is going directly to Elon Musk to fund programs like SpaceX. Well, Elon Musk is an interesting example of someone. You can't deny his incredible entrepreneurial success. But it is also true that he's got a lot of corporate welfare over the years, both at the federal level and at the state and local level. One of the problems with our giant government, with its octopus tentacles into everything these days, is that every business gets subsidized.

And it's hard to run a business without going to Washington and pleading for subsidies. So, you know, that is true about Musk. I wish, you know, he's got a great car company there. He should wean himself off those federal subsidies. Your money is being wasted and the Department of Government Efficiency is going to fix that. Chris Edwards, Cato Institute, Sean Ramos from Today Explained. Our show today was produced by Halima Shah.

She was edited by Amina Alsadi, mixed by Patrick Boyd and Rob Byers, and we were fact-checked by Kim Eggleston. Hasta mañana. Thank you. you