Table of Contents
- 1 Discretionary funds at the heart of the budget process
- 2 Social Security and Medicare, priorities
- 3 Last target, the American tax system
- 4 **Critics argue that DOGE lacks the authority to enact meaningful change. What strategies could DOGE employ to influence policy decisions and ensure its recommendations are seriously considered by lawmakers?**
Elon Musk and Vivek Ramaswamy want to bring order to the American government. On November 14, their newly formed Department of Government Effectiveness (DOGE) announced that it wanted to hire “high-IQ small government revolutionaries” to tackle cost reduction. It’s easy to ridicule the company. M. Musk has talked about removing $2 trillion from the federal budget, an amount that, if achieved in one year, would exceed the government’s entire discretionary spending. Additionally, Donald Trump gave DOGE less than two years to do its job. Additionally, it is a small advisory body, not a real department, whose name is inspired by a fanciful cryptocurrency.
But it would be a mistake to take DOGE’s mission lightly, because it touches on two essential truths. First, America’s fiscal trajectory is unsustainable. The national debt is approaching 100% of GDP, up from 35% in 2007. With a federal deficit of 6% of GDP – a level once associated with wars and economic recessions – the debt cannot only increase, which increases the risk of a possible crisis. Second, the situation is not hopeless. In theory, U.S. officials have plenty of ways to clean up the country’s fiscal situation (although getting Congress to pass budget cuts is a different story).
Discretionary funds at the heart of the budget process
Musk and Ramaswamy mainly have general spending cuts in mind when railing against government waste. However, the problem is obvious. Take for example the $6.8 billion spent by the federal government this past fiscal year. If we exclude interest on existing debt as well as mandatory allocations to pensions and health insurance, only 25%, or $1.8 trillion, remains. These are discretionary funds that are at the heart of the annual budget process. Nearly half goes to defense, which Mr. Trump is reluctant to cut. That leaves about $900 billion allocated each year by the federal government for transportation, education, science, national parks and law enforcement.
However, reducing discretionary spending should be part of the solution. They have increased by almost a third since 2019, driven by sharp increases recorded during the avian flu pandemic. Rather than making outright cuts, DOGE could call for hard caps on future discretionary allocations, a simple budgetary technique used intermittently since the 1990s. If, for example, growth in discretionary spending were capped at 2% by year (in line with expected inflation) through 2035, this would represent a savings of about $500 billion over the next decade compared to the Congressional Budget forecast Office (CBO), a nonpartisan agency responsible for evaluating spending. That would be a good start.
Next, we must recognize that America cannot fix its finances without tackling Social Security and Medicare, two gigantic programs that together eat up more than a third of the budget. Mr. Trump promised in his campaign platform that he would not reduce them. This should not stop DOGE from weighing options. America is experiencing the same demographic pressure as other wealthy countries: People are living longer and the assets intended to support them in retirement are being stretched to cover more years. One solution would be to raise the age of entitlement. Certainly, this would not be politically easy, as shown by the outcry caused in France by Emmanuel Macron’s raising of the retirement age. But Mr. Trump is no stranger to controversy.
The Penn Wharton Budget Model research group examined the effects of raising the age of Medicare coverage from 65 to 67. This change would be introduced gradually, two months per year, so that it would take around twelve years to fully implement it. The savings would be around $50 billion per year. Similarly, Penn Wharton modelers considered raising the age at which one can receive full Social Security benefits (effectively, a national pension) from 67 to 70. The measure would also reduce the state’s obligations by about $50 billion a year. Over the next decade, the combined savings from these two delays in starting the programs would amount to about $1 trillion.
DOGE could then address broader state health spending. States design and manage Medicaid – health insurance for low-income Americans – but the federal government funds about two-thirds of it. The result is an imbalance of incentives: the federal commitment is not time-limited, so that if state spending increases, federal spending also increases. The CBO has reviewed possible changes. One would be to set a federal cap on payments per enrollee. If this cap increased at the rate of inflation, it would reduce the federal deficit by nearly $900 billion over the next decade.
Last target, the American tax system
Many other steps can be taken to further reduce medical costs. There is ample evidence of waste in parts of the fiendishly complex U.S. Medicare system. The Ministry of Economy and Finance would do well to familiarize itself with MedPAC, an independent commission that advises Congress on how to manage the health care system. Among its many recommendations, it called for greater scrutiny of billing, more competitive bidding among providers, and a requirement that the same medical service cost roughly the same in each facility (currently, hospital outpatient departments charge more than clinics). The Committee for a Responsible Federal Budget, a nonpartisan group, collected several such ideas and concluded that they would save the federal government about $550 billion over a decade. And if Mr. Trump builds on the Biden administration’s efforts to negotiate lower prices for prescription drugs, there would be another $200 billion in savings.
If DOGE was truly brave, its final target would be the US tax system. Given that Mr. Trump has often said he wants to cut taxes, it is completely unrealistic to expect him to raise them. But it would be irresponsible to examine America’s fiscal health today without asking whether and how to raise more revenue. The good news is that the government has options other than simply raising taxes. According to the CBO, reducing tax deductions for employer-purchased health insurance plans could reduce the deficit by at least $500 billion over a decade. Covid-era tax credits for businesses that retain employees are, surprisingly, still being processed; removing them would save an additional $80 billion. Finally, arguably the best investment the government can make in terms of potential returns is modernizing and strengthening the Internal Revenue Service (IRS) to combat fraud and make filing taxes less expensive.
Implementing the various proposals outlined above would save the government approximately $4.5 trillion over the next decade.
I would love to help you with that!
## World-Today-News.com Interview: Can Elon Musk and Vivek Ramaswamy Really Fix America’s Finances?
**Introduction:**
Welcome to World-Today-News.com. Today, we delve into the ambitious goals of the newly formed Department of Government Effectiveness (DOGE), led by Elon Musk and Vivek Ramaswamy. Critics have labelled it a publicity stunt, while others see potential for real change. Today we’ll unpack their proposals and analyze their potential impact. Joining us today are [**Guest 1 Name**, Title, Expertise] who will argue for the feasibility of these reforms, and [**Guest 2 Name**, Title, Expertise] who will offer a more critical perspective.
**Section 1: The Urgency of Reform – Is the Situation Really That Bad?**
* **Moderator:** The article paints a stark picture of America’s fiscal trajectory. Gentlemen, do you agree that America’s national debt and deficit pose an existential threat? Mr. [Guest 1 Name], what specific evidence makes this situation so alarming? Mr. [Guest 2 Name], do you believe the urgency is exaggerated?
* **Moderator:** Let’s delve further into the drivers of this financial pressure. Mr. [Guest 1 Name], the article mentions the rapid growth of discretionary spending. Can you elaborate on this trend?
Mr. [Guest 2 Name], are there alternative explanations for this financial pressure, potentially stemming from other policy decisions?
**Section 2: Cost-Cutting – What Can Be Done Without Sacrificing Essential Services?**
* **Moderator:**
DOGE proposes sweeping cuts to discretionary spending. Mr. [Guest 1 Name], can you outline what areas DOGE believes have the most room for reduction?
* **Moderator:** Mr. [Guest 2 Name], are these proposed cuts realistic? Will they inevitably lead to the dismantling of vital social programs that millions of Americans rely on?
**Section 3: The Big Two –Tackling Social Security and Medicare**
* **Moderator:** The article notes that roughly one-third of the federal budget is swallowed up by Social Security and Medicare. Mr. [Guest 1 Name], why does DOGE feel these programs deserve targeted attention, even if it means controversial changes like raising the eligibility age?
* **Moderator:** Mr. [Guest 2 Name], is there any alternative to changing these programs?
What’s the potential social impact of delaying eligibility for seniors depending on their financial needs?
* **Moderator:** Mr. [Guest 1 Name], how can changes to these crucial programs be implemented fairly and equitably?
**Section 4: Innovations and Governance: Asking the Right Questions
* **Moderator:** Mr. [Guest 2 Name], some critics have dismissed DOGE as a short-term publicity stunt. What is it about this initiative that makes you skeptical about its long-term impact?
* **Moderator:**
Mr. [Guest 1 Name], the article states that DOGE is more of an advisory body.
How impactful can they truly be without the authority to enact significant concrete change?
* **Moderator:** gentlemen, the article mentions the potential need for tax reform. How crucial is tackling the revenue side of the equation to address America’s fiscal woes?
**Conclusion:**
Our guests have provided insightful perspectives on the challenges and opportunities presented by DOGE’s ambitious plans.
While there are concerns about the feasibility and potential impact of these proposals, the debate they have sparked is vital for the future of America’s financial health. Thank you for joining us today on World-Today-News.com.
