“At the very least $2 trillion” was Elon Musk’s informal preelection response when requested how a lot a brand new Donald Trump administration may lower from the federal authorities. As a purpose for the brand new administration, $2 trillion in cuts is each completely cheap and politically unattainable. The federal authorities, now burning $6.8 trillion yearly, ran on $4.4 trillion simply 5 years in the past—hardly a time of fiscal restraint. However any ambition to curb authorities spending must take care of a political actuality that is not precisely primed for austerity—particularly underneath a second Trump administration, the place a potent mixture of government energy, cronyism, and get together infighting seems more likely to dominate.
Musk, together with one-time presidential aspirant Vivek Ramaswamy, has been tapped to move a brand new Division of Authorities Effectivity (DOGE), which can have a mandate to chop, however unclear standing and authority.
In the meantime, Trump returns to the White Home with an agenda fueled by outdated grievances and new entitlement. All through his first time period, Trump demonstrated an urge for food for government authority, bypassing Congress to impose tariffs, constrain immigration, declare emergencies, and unilaterally reshape coverage. These tendencies are more likely to take the lead in a second Trump administration, as he retakes the Oval Workplace with a contemporary record of targets he perceives as enemies inside the federal institution.
Whereas a Muskian imaginative and prescient of downsizing might align, on the floor, with Trump’s antibureaucratic rhetoric, Trump’s second time period appears extra more likely to favor selective funds changes aimed toward punishing sure companies quite than reaching broad fiscal self-discipline.
With a slim Republican majority within the Home, the prospects for reining in Trump’s costlier ambitions are sophisticated. A slim majority means Home Republicans will likely be juggling competing priorities inside their very own get together, together with calls for from the tiny cadre of remaining fiscal hawks and Trump-aligned members with an urge for food for selective spending. Any real try at oversight or restraint is more likely to be hampered by these inner divisions and the tendency to keep away from cuts in areas that straight profit Republican constituencies, resembling protection. Reasonably than delivering significant cuts, a narrowly Republican Home is extra more likely to rubber-stamp Trump’s ever-changing priorities, with out regard for the value tag.
To make an actual dent in spending Musk must begin with one of many clearest targets: federal grants to states. These grants, which give states incentives to observe federal coverage on every part from training to transportation, amounted to $721 billion in 2019 and have surged for the reason that COVID-19 period. Slicing again on federal help to states couldn’t solely ease funds pressures however would additionally reinforce federalism by permitting states extra freedom to allocate sources with out chasing federal {dollars}.
However Trump’s observe report does not imply he is eager to unwind these packages wholesale. Whereas he could also be prepared to tackle sure grants as symbolic gestures, an entire rethinking of the federal-state relationship would possible conflict together with his penchant for rewarding allies and punishing enemies. Musk’s strategy would wish to keep away from this selective focusing on and advocate for a broader rollback of federal help to states, shifting accountability again to native governments with out utilizing it as a political weapon.
Subsequent on the chopping block may very well be federal subsidies for personal companies. From agriculture subsidies to tax incentives for producers, company welfare has develop into a fixture of U.S. funds coverage, permitting sure firms to profit primarily based on political clout quite than market success. Ideally, Musk’s proposed cuts would finish enterprise subsidies, forcing them to compete primarily based on benefit quite than handouts. Musk’s Tesla is a beneficiary of such largesse, in fact, together with loans from the Division of Power, tax credit for electrical automobiles underneath the Inflation Discount Act, and emissions credit. And his SpaceX advantages from authorities contracts with NASA, although these nearly actually save the area company cash (and heartache) in comparison with different potential distributors.
Trump, alas, appears extra concerned with utilizing subsidies as leverage, favoring firms or industries that align together with his political targets or constituencies. A real push to get rid of company welfare would require a dedication to impartiality, one thing that does not align neatly with Trump’s “America First” model of financial interventionism. To make significant cuts stick, the administration would wish to undertake a constant coverage of lowering company welfare no matter business or political affiliation—a dedication that will not sit nicely with Trump’s intuition for rewarding loyalty.
One of many largest sources of presidency spending—and a tempting goal for reform—is well being care. Medicare, Medicaid, and federal help for personal insurance coverage price lots of of billions yearly. The present system is affected by subsidies, tax incentives, and regulatory necessities that drive up prices whereas obscuring worth transparency, leaving sufferers and suppliers with out clear alerts for price management. If Musk is critical about cutbacks, addressing this spending could be essential.
However Trump’s first-term makes an attempt at reining in well being care prices fell quick. His stance on well being care has largely concerned tweaking across the edges—repealing mandates, selling worth transparency—with out basically rethinking the federal government’s position in subsidizing the business. For Musk’s plan to work, any cuts to well being spending would have to be accompanied by structural reforms to allow a extra market-driven system, one thing Trump has up to now proven little curiosity in pursuing.
For Musk’s imaginative and prescient to develop into actuality, Trump would wish to put aside his desire for expansive government authority and focused, cronyist spending. In keeping with the Committee for a Accountable Federal Finances, Trump’s proposed insurance policies would add an estimated $7.7 trillion to the debt over the subsequent decade. Whereas a few of Trump’s concepts, like extending tax cuts, might spur financial progress, others, like tax credit for homebuyers or sure commerce tariffs, symbolize the very sort of special-interest giveaways that should go.
All of this presumes that the Division of Authorities Effectivity attains a extra strong type than a press launch on Reality Social—and that the famously risky Musk even makes it to Inauguration Day in Trump’s good graces.
This text initially appeared in print underneath the headline “Trump’s $2 Trillion?.”
