Almost no one believes that government waste is a good thing. But the devil is in the details when it comes to deciding what actually constitutes “waste”. Suddenly, no one wants their pet project cut. The Government Accountability Office (GAO) lists thirty-seven government programs that are considered highly vulnerable to fraud, waste, abuse, and mismanagement. 26 of them have been designated as high-risk for at least 10 years. Five programs (like Medicare and NASA acquisitions) have been on the list since the list was first created in 1990.
With the Creation of the Department of Government Efficiency, we’ve already seen a split between the two leaders of DOGE, with Musk and Vivek going their separate ways and Vivek leaving the team.
Another problem is that any sort of change initially involves some sort of painful adjustment. Today we are going to look at the short-term vs. long-term effects we could possibly see if Musk is actually able to do what others in the past haven’t been able to accomplish.
There is an old saying that no government program actually dies, it just gets shuffled to the side. A perfect example is the Rural Electrification Administration (REA), created in 1936, to help bring electricity to rural areas. In 1949, it expanded to include telephone service. In 2008, G.W. Bush expanded it again to promote access to the rural broadband telecommunications network and in 2012 Obama used it to promote high-speed broadband. But now that we have cell towers and solar panels, couldn’t private companies do this without government interference/assistance? (And probably cheaper and more efficiently).
Short-Term Effects of Cutting Government Waste
If the government lays off a bunch of useless employees, in the short term, unemployment would skyrocket. Since GDP perversely includes government spending as 40% of its current makeup… If government waste/spending is cut, even if private productivity increases, the GDP number will fall. This could spook Mr. Market and cause a recession and other economic shockwaves such as a decline in the U.S. Dollar on world markets.
Long-Term Effects of DOGE
Of course, the long-term goal of government cost-cutting is to lower government expenses and a balanced budget. Since inflation is primarily caused by the government printing excess currency to pay bills that taxes and other revenues didn’t cover, eliminating the excess expense would eliminate the need for printing that extra money, thus drastically reducing inflation.
Other Effects of Trump Policies
- Tariffs: In the long run, Tariffs can reduce taxes, although prices may be higher in the interim until domestic supply is created.
- Foreign Investment: Foreign AI and Saudi investment should create more jobs driving unemployment down.
- Deportation: Deporting illegals should lower unemployment by decreasing the workforce. This should also raise wages, but increased wages can also increase prices. Fewer illegals should also increase the available housing supply, making it more affordable for young people. For illegals who aren’t working, deportation should reduce government welfare and housing costs. Deporting criminal aliens should also reduce crime, and policing costs while simultaneously improving citizen safety.
- Foreign Aid: Less foreign aid can also reduce the budget deficit and actually prevent funding of questionable foreign dictators and programs like gender studies in Pakistan. It has been said that in the long run, despite good intentions, Foreign Aid actually does more harm than good. Whether it is through distorting local economies, graft, or simply unintended consequences.
A Simple Way to Reduce Waste
One major source of government waste is year-end spending. It is common for government agencies to try to spend their entire budget every year or risk getting their budget cut the following year. This often results in wasteful spending on unnecessary items. Two economists, Assistant Professor Neale Mahoney and Harvard’s Jeffrey B. Liebman, have developed a solution: allow agencies to roll over unused funds into the next fiscal year and not let Congress use the funds as a gauge by which they reduce future budgets.
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