Elon Musk Implausibly Claims 'Competence and Caring' Can Cut the Federal Budget Deficit in Half
The DOGE director wildly exaggerates what can be accomplished by tackling "waste, fraud, and abuse" in government spending without new legislation.
Speaking to reporters for the first time since he took charge of the Trump administration's cost-cutting initiative, Elon Musk yesterday portrayed the project as an effort to restore democracy by disempowering "a large unelected bureaucracy" that defies "the will of the people." Musk, who delivered comments and took questions alongside President Donald Trump in the Oval Office, also presented the efforts of his so-called Department of Government Efficiency (DOGE) as both necessary and sufficient to address the nation's looming fiscal crisis. As became clear when Musk got into the details of what DOGE is trying to do, both of those characterizations are highly misleading.
The main thrust of Musk's efforts is applying sound business practices to federal expenditures, which is laudable and long overdue. But that has very little to do with confronting a "fourth, unconstitutional branch of government," as Musk put it (although that spin may appeal to Trump, given his longstanding complaints about a "deep state" conspiracy against his agenda). And contrary to what Musk claimed, tackling "waste, fraud, and abuse" cannot possibly generate enough savings to eliminate the annual budget deficit, which was nearly $2 trillion in fiscal year 2024, let alone reduce the ever-climbing national debt, which currently exceeds $36 trillion, including $29 trillion in debt held by the public.
"We've got a $2 trillion deficit," Musk said. "If we don't do something about this deficit, the country's going bankrupt….Interest payments alone on the national debt exceed the Defense Department budget, which is shocking [because] we spend a lot of money on defense. And if that just keeps going, we're essentially gonna bankrupt the country….It's not optional for us to reduce the federal expenses; it's essential. It's essential for America to remain solvent as a country. And it's essential for America to have the resources necessary to provide things to its citizens and not simply be servicing vast amounts of debt."
That assessment was sound and sobering. But as Musk delivered it, he was standing next to a president, seated at the Resolute Desk, who added an estimated $8.4 trillion to the national debt during his first term and has proposed policies that could add another $7.8 trillion. Nor was that the only reason to doubt that the Trump administration can achieve the sort of spending cuts that will be necessary to address the challenge that Musk described.
Musk emphasized that DOGE is trying to correct sloppy payment practices that make it impossible to know whether taxpayer money is being properly spent. The Treasury Department, he said, lacks "basic controls" such as "making sure that any given payment has a payment categorization code" and that "there is a comment field that describes the payment." He said departments (including the Pentagon, he noted) "can't pass audits" because "the payments don't have a categorization code" and "you can't reconcile blank checks." For "many payments," he added, the comment field that is supposed to describe what the payment is for "also is left blank."
Musk also repeatedly noted problems with the federal government's "do not pay" list, which includes "dead people, terrorists, [and] known fraudsters." He complained that it takes unreasonably long—"up to a year"—to update the list, and even then departments do not necessarily pay attention to it, which he said is "crazy" and "mind blowing." He said his team had identified "thousands of transactions" in which individuals or organizations on the "do not pay" list were paid anyway.
Trump, who jumped in at several points to amplify the importance of Musk's work, referred repeatedly to "corruption" and "kickbacks." But Musk himself offered another explanation for improper payments that probably applies more often. "When you understand that really everything is geared towards complaints minimization," he said, "then you understand the motivations…..If people receive money, they don't complain, obviously. But if people don't receive money, they do complain. And the fraudsters complain the loudest and the fastest."
Musk wants to counteract those incentives. "We are really just talking about adding common-sense controls," he said. "It's not draconian or radical."
While Musk thinks the modesty of his expectations should reassure Americans who might be worried about "draconian or radical" spending cuts, it undermines his broader argument about the potential impact of the changes he has in mind. He claimed DOGE can "cut the budget deficit in half" simply by insisting on "competence and caring."
Notably, that goal is half the size of the cuts that Musk envisioned during the presidential campaign, when he breezily estimated that the Trump administration could eliminate "at least 2 trillion" from annual federal spending. "The idea that waste & fraud in the federal budget totals $2 trillion(!) is so absurd as to be utterly disqualifying," says Manhattan Institute budget expert Jessica Riedl. She notes that "items like payment errors, duplication, & cost overruns have long been quantified in reports" from sources such as the Government Accountability Office (GAO), inspectors general in various departments, and the Office of Management and Budget. The total is "miles from $2 trillion," she says. "Get real."
What about $1 trillion, the amount Musk now claims could be saved by attacking "waste, fraud, and abuse"? Last April, the GAO estimated that "the federal government could lose between $233 billion and $521 billion annually to fraud." If we assume that something like $500 billion a year could be saved by attacking fraud and other improper payments, that would get Musk only halfway to his goal. But even that assumption is overly optimistic for several reasons.
First, $521 billion was the GAO's high-end estimate of fraud. Second, completely eliminating fraud is an unrealistic goal. Third (and relatedly), preventing fraud costs money: The Congressional Budget Office, for example, assumes that each dollar spent on measures to prevent health care fraud generates $1.50 in savings.
"We're finding tremendous fraud and tremendous abuse," Trump said yesterday. "We've already found billions of dollars of abuse, incompetence, and corruption." Even if that is true, "billions" is a long way from a trillion.
"When you get down to it, it's gonna be probably close to a trillion dollars," Trump suggested. "It could be close to a trillion dollars that we're gonna find." Probably not, judging from all the reports that Riedl cites, and it is notable that Trump is already hedging.
Riedl thinks "DOGE can potentially save taxpayers hundreds of billions of dollars by reducing government waste and improving program efficiency." That is nothing to sneeze at, but it is far short of cutting the deficit in half, let alone eliminating it.
What about DOGE's attempt to reduce the federal workforce by paying people to quit? So far, the Trump administration says, about 65,000 people have accepted that offer. That represents less than 3 percent of civilians working for the federal government, who together cost about $300 billion a year in salaries and benefits. That suggests the savings from this initiative might amount to something like $8 billion.
To illustrate what could be achieved by "competence and caring," Musk said a "cursory examination of Social Security" found that "we've got people in there that are 150 years old now." It is not clear whether he meant checks had actually been issued to those presumably dead individuals or just that their Social Security numbers were still active. Such errors obviously should be corrected, but the potential savings are infinitesimal in the context of the Social Security system, let alone the $7 trillion federal budget.
During a 2016 presidential debate, Trump said he would "save Social Security" by attacking the "tremendous waste, fraud and abuse" within the program. "We have in Social Security right now thousands and thousands of people that are over 106 years old," he averred. "Now, you know they don't exist."
The Committee for a Responsible Federal Budget (CRFB) noted that "ending benefit payments to thousands of beneficiaries would barely move the needle on solvency," adding that "there would need to be almost 10 million ineligible 106-year olds in order to save Social Security solely by ending fraudulent and mistaken payments." In any case, according to a 2013 report from the Social Security Administration's inspector general, "there were just over 1,500 deceased individuals still receiving benefits in total, including many below the age of 106 and accounting for about $15 million in additional improper benefit payments." A 2015 report "did find 6.5 million active Social Security numbers for people over the age of 112—but only 13 of them were being used to receive benefits."
Those numbers, the CRFB said, suggested that the problem described by Trump involved "between 13 and 1,500 recipients," which would cost "between $200,000 and $15 million annually." Stopping all of those payments therefore "would reduce program costs by between 0.00002 and 0.002 percent."
Misleading anecdotes like these cannot paper over the gap between Musk's methods and his avowed goal of cutting the budget deficit in half. He wildly overestimates what can be accomplished by imposing "common-sense controls." And when it comes to the other half of the deficit, he resorts to more wishful thinking.
With the help of "deregulation," annual economic growth could reach "3 [or] 4 percent, maybe 5 percent," Musk said. "If you can get a trillion dollars of economic growth and you can cut the budget deficit by a trillion between now and next year, there is no inflation. There's no inflation [in 2026]. And if the government is not borrowing as much, it means that interest costs decline. So everyone's mortgage, their car payment, their credit card bills…their student debt—the monthly payments drop. That's a fantastic scenario for the average American. I mean, imagine they're going down the grocery aisle and the prices from one year to the next are the same and…all their debt payments dropped. How great is that for the average American?"
That rosy scenario depends on several questionable assumptions. But let's focus on Musk's suggestion that an additional $1 trillion in economic growth would somehow eliminate $1 trillion from the federal budget deficit, which makes no sense unless all the additional wealth is collected as taxes—a policy that would hardly be conducive to expanding the economy.
More generally, as Riedl explained in a Reason essay last week, Musk's projections of the economic growth that can be expected as a result of Trump's policies are utterly unrealistic. Politicians' "promises of aggressively accelerated economic growth are a lazy, longstanding gimmick meant to avoid the hard choices of restraining deficits and paying for their expensive proposals," she wrote. "They are based on little more than politicians' wishful thinking and over-exuberant faith in the brilliance of their own policy agendas."
Even if Musk succeeds in curtailing "waste, fraud, and abuse," there is only so much he can accomplish by focusing on "driving change through executive action based on existing legislation," which is how he described his agenda last November. Any serious attempt to reduce federal borrowing will require new legislation that addresses the main drivers of federal spending, including Social Security, Medicare, and the military budget. But the platform on which Trump ran takes all those things off the table while promising pricey policies that will only exacerbate the problem that Musk decries.
