Why DOGE Could Actually Increase the Deficit

Elon Musk has promised he would eliminate the nearly $2 trillion budget deficit in year one. Last night on Fox, he predicted he would get halfway there by the end of May. His critics have insisted that his goal is unrealistic, and that he won’t accomplish nearly as much deficit reduction as he claims.

The critics are understating the case. DOGE won’t just fall short of Musk’s deficit-reduction goals. It will, in all probability, increase the deficit. Probably by a lot.

Begin on the savings side. Despite wreaking massive havoc, Musk has accomplished little in terms of saving money for the government. Many of the impressive-sounding budget savings DOGE has posted, in a gesture of putative transparency, have turned out to be fake. And when the people in charge of the enterprise are relying on comical errors, such as taking credit for programs eliminated years ago and confusing million with billion, one should rightly question their basic competence.

Budget experts have had trouble verifying the actual savings, but they appear to be below the level of a rounding error. Jessica Riedl, a budget expert at the Manhattan Institute, recently estimated the savings so far at about $2 billion, or one-tenth of 1 percent of Musk’s original goal. Prediction markets, which less than two months ago expected DOGE to cut $300 billion in spending in the first year, are even more pessimistic than Riedl: They now expect a grand total of $1 billion in savings.

[Donald Moynihan: The DOGE project will backfire]

But those are just gross savings. Some of Musk’s haphazard cuts will produce tiny savings in terms of salary while forfeiting much larger ones down the road, costing the government money. One small example: Musk fired the technician who had been servicing the HVAC systems at a Veterans Affairs complex in Illinois. You can save money on upkeep in the short run, but eventually, the systems will break, and replacing them will cost a lot more money (unless DOGE is willing to let the government’s physical assets deteriorate to worthlessness).

The largest cost, by far, will come from Musk’s meddling with the IRS. DOGE has moved to fire nearly 20,000 employees in the agency, kneecapping the government’s ability to collect taxes. Worse, by advertising the change, it has alerted tax cheats that they face precious little chance of an audit. The IRS released a preliminary survey showing that it expects revenue to fall 10 percent, or $500 billion, short of expected levels. That would obviously be many, many times larger than the projected savings.

It’s certainly possible that the revenue shortfall will be less than $500 billion, or that the ultimate budget savings will be higher than $1 billion to $2 billion. But the prospect that the effect will net out a savings for the government is almost nil. Critics have been quibbling with the level of alleged fiscal savings when they should have been questioning the sign—whether it is a plus or a minus for the size of the deficit. “Unequivocally, they have the sign wrong,” Natasha Sarin, of the Budget Lab at Yale, told me. “The question is, how badly off are they?”

The failure of the enterprise was preordained. There isn’t anything close to $1 trillion in waste, fraud, and abuse in the budget, despite Musk’s repeated statements to the contrary. (“The government is not efficient, and there is a lot of waste and fraud, so we feel confident that a 15 percent reduction can be done without affecting any of the critical government services,” he said last night on Fox News.) What’s more, political constraints—Trump’s stated refusal to touch Social Security checks or Medicare, and his party’s proposal to increase military spending by $150 billion over the next four years—leave Musk concentrating on a sliver of the budget. Spending on programs other than social insurance and debt payments amounts to 26 percent of the budget, and almost half of that (12 percent) is defense. Firing tens of thousands of employees in departments that have a huge area of responsibility, yet account for a small share of the budget, is how Musk is managing to simultaneously incapacitate the government’s functionality in key areas without improving the government’s fiscal position.

[Jonathan Chait: Paranoia is winning]

Musk has repeatedly endorsed various conspiracy theories about the federal budget, and seems to believe it contains dark secrets that he can unravel. He has previously claimed that the American left would essentially disappear without the support of disguised payments from the government. More recently, he has begun claiming that the Democrats use systematic payments of fraudulent benefits to attract undocumented immigrants to cast illegal votes to keep them in power. (“By using entitlements fraud, the Democrats have been able to attract and retain vast numbers of illegal immigrants.”)

Because these schemes exist entirely in Musk’s fevered imagination, he is not going to save much money by ferreting them out. But this raises the question of whether he is really trying to save money at all, or whether he sees the deficit as a pretext to unravel various leftist schemes hidden in the wiring of the federal budget.

Whatever he is attempting to do, though, we can be fairly sure that a smaller deficit is not going to be the result.