Elon Musk and Vivek Ramaswamy, co-chairs of President-Elect Donald Trump’s Department of Government Efficiency (DOGE) initiative, intend to reduce federal spending by $2 trillion (over an undisclosed time period), along with a substantial reduction in the federal workforce. Musk, Ramaswamy, and their army of unpaid volunteer cost-cutters will likely fall miserably short of their admirable goals—for reasons that have been developed among public-choice economists over decades. To those who doubt my pessimism: Good Luck!

One of Must and Ramaswamy’s most formidable challenges is to identify $2 trillion in cost savings from total projected outlays for fiscal 2025 of $7.3 trillion—with two-thirds of the total devoted to entitlements and interest payments, likely to be off-limits to DOGE’s cost cutters. But maybe DOGE’s cuts will be spread over serial annual budgets.

Cost cutters will face other formidable challenges that could prove insurmountable, not the least of which is the political construction of “waste,” even though “waste” in federal spending is (seemingly) an obvious source of bipartisan support in an polarized polity. Even U.S. Senator John Fetterman has admonished his fellow Democrats to embrace DOGE goals. Who can be, and should be, against expenditure “waste” reduction, he asks (seemingly the fiscal equivalent of apple pie and motherhood?)

No doubt, some government “waste” is the result of incompetence and fraud (the proverbial completed bridges to nowhere [overpasses and exchanges] that dot the country) but much of the “waste” is driven by rankest of rank politics, designed to serve special interests that are willing to pay (and have paid) politicians for the democratically approved “waste,” meaning overpayments embedded in federal contracts (dubbed rents by economist Gordon Tullock in the 1960s) intended to offset special interest groups’ campaign contributions to their well-placed political advocates.

The notorious hammer that the Pentagon (supposedly) bought decades ago for $700 has long been the poster child for excessive rent seeking by a host of special interests. Critics presume that the Pentagon could and would have bought hammers at Home Depot, but that’s hardly the case for Pentagon-procured hammers ordered with precise specifications, made by companies compliant with a host of government regulations and need to recover their political contributions—with all of the rent seeking often hidden from public scrutiny in massive reconciliation bills that can run thousands of pages to obscure the “political pork” designed to pay back a hosts of special interests (as most recently defeated reconciliation bill that was defeated in December 2024 and trimmed to a hundred pages).

Moreover, as economist Dwight Lee observed decades ago, government budged “waste” can—and does—serve much the same purpose in politics that profits serve in business: Government waste (or rents) can move people to produce public goods (defense and CO2 reductions, for example) that might otherwise have gone underproduced. DOGE enthusiasts should remember that many identified dollars of “waste” will be dollars of political “profit” to interests groups.

Understandably, Musk and Ramaswamy will face a multitude of special-interest lobbyists, many of whom may have likely already booked additional flights to D.C. with the intent of marshalling their political connections to protect their rents from DOGE, perhaps sending out dire PR warnings that cutting their waste (rents) is an “existential threat” to national security—not to mention their stock prices![i]

Many “waste” beneficiaries will now feel entitled to their rents on the grounds they have “pre-paid” for them with past political contributions. They likely will object for much the same reason Tesla owners would protest DOGE efforts to claw-back their already-received and spent Tesla subsidies. Why? Perhaps because a new study emerges that shows conclusively that they were an ineffective climate-change boondoggle!

Even if Musk and Ramaswamy are (partially) successful, their success (such as their recent efforts to can the continuing resolution loaded with $200 billion in “pork” spending) could be short-lived, mainly because DOGE backers’ now vocal commitment to government cost cutting will likely be short-lived (with their unpaid volunteers understandably committed to only a few months of service). Sooner or later, the cost-cutters will need to return to managing their businesses and wealth portfolios and earning a living. Special interests’ incentives, on the other hand, for maintaining and increasing their rents will be . . .well, enduring.

I hear the objections: “The public will rise up in arms to press for cost savings and tax reductions.” The political problem? Members of the public may want cost savings, but they have precious little incentive, individually, to actively promote them. Special interests (Boeing, GM, and unions), however, have concentrated interests in maintaining their rents for their firms and industries. The politics of DOGE’s efforts will obviously be lopsided—with considerable pessimism warranted.

My pessimism has been fortified by a recognition that the Trump/Musk/Ramaswamy coalition, now seemingly bolted together by their shared interest in cost-cutting, could fray early by their different orientation: Trump has to be interested in the politics of cost-cutting, given his broad agenda goals (beyond waste cutting). He needs congressional supporters (and can’t lose more than a handful of votes) on a series of agenda items.

Musk and Ramaswamy are likely more intensely focused in achieving DOGE goals, not on Republicans winning the 2026 or 2028 elections. They won’t be judged for long on the fall-off of the entry of illegal immigrants. Expect political tensions to fray their coalition, if not cause it to dissolve in terms of achieving cost-cutting goals (beyond face-saving cuts with PR value). I fear that the best that can be achieved will be a slight reduction in the growth rate of waste.

 


Richard McKenzie is a professor of economics emeritus in the Merage School of Business at the University of California, Irvine and author of Reality Is Tricky: Contrarian Takes on Contested Economic Issues.

 

[i]At this writing December 2024, Coke, Pepsi, Mountain Dew and other soda producers have already started a campaign to prevent the Trump administration from taking sugared sodas off the approved list for purchased by food stamp recipients.