Elon Musk, Tesla’s billionaire CEO, co-leads the newly formed Department of Government Efficiency (DOGE) with Vivek Ramaswamy under the incoming administration of ‘crypto-president’ Donald Trump.
The goal is to cut $2 trillion from federal spending. That’s almost the size of the US government’s projected deficit for 2024. But here’s the thing: This project might not simply fail: it might collapse the entire US economy.
The chimera
DOGE is not even a real government department. It is an advisory group. He can’t implement anything without approval from Congress or Trump. But Elon’s name carries weight. Your participation alone has turned this into more than just a theoretical exercise.
The plans are aggressive: mass layoffs, dissolution of agencies and destruction of regulations. While Trump and his allies applaud it, skeptics sound the alarm about the possible consequences.
Elon and Vivek predict a government workforce reduction of up to 75%. Three-quarters of federal employees could be shown the door if DOGE’s vision is realized.
But how realistic is this? Not much, experts say. Here’s why: About 75% of the federal budget is mandatory spending. Programs like Social Security and Medicare are untouchable without causing a massive political backlash.
That leaves only discretionary spending (about $1.7 trillion) for cuts. Half of that amount goes to defense, which Trump and his allies are unlikely to affect. What remains are pennies compared to the grand ambition of $2 trillion.
Even the proposed savings by reducing inefficiencies (between $150 billion and $200 billion) are a drop in the bucket compared to the deficit. The math doesn’t add up.
Clash over government shutdown
Elon is already flexing his political muscles, and that’s actually making Trump a little nervous. Just a few weeks ago, the eccentric billionaire torpedoed a bipartisan agreement to avoid a government shutdown. His fiery social media posts prompted Republican lawmakers to block the deal.
He called the allocations excessive and called them unnecessary spending. This has raised fears of a government shutdown as the holidays approach. If federal operations were paralyzed, the economic impact would be catastrophic.
The 2018-2019 shutdown cost the economy $11 billion. Experts warn that a new shutdown could be even worse, especially now that the inflation and interest rate outlook for 2025 already creates a fragile economic environment.
And Elon’s influence isn’t even official yet. Imagine what will happen when Trump takes office and DOGE starts pushing its proposals more aggressively. The risk of prolonged gridlock in Washington is growing and the economy will suffer collateral damage.
A debt crisis in the making
For all the talk of efficiency, DOGE could actually worsen the national debt. The United States is already in trouble. The national debt exceeds $36 trillion and the Congressional Budget Office (CBO) projects it will reach 166% of GDP by 2054. DOGE proposals, if they fail to generate real savings, could accelerate this trend.
Here’s how it could play out. First of all, DOGE’s $2 trillion savings goal seems unattainable. If they miss the mark, the government will have no choice but to continue borrowing. That means higher interest payments on the debt, which is already consuming $880 billion a year: 13% of the budget.
Second, Trump has asked Congress to eliminate the legal debt ceiling. While this could prevent debt crises in the short term, it could lead to uncontrolled borrowing in the long term.
Then there’s the wild card of tax cuts. If Elon’s ideas include cutting taxes without corresponding spending cuts, deficits could explode. Trump’s first term added nearly $8 trillion to the debt, in part because of tax breaks. If DOGE follows a similar playbook, the debt problem would get out of control.
The markets are on the limit
how we have done it reported In the past, financial markets are not immune to DOGE’s big plans. Investors are watching nervously, and rightly so. Analysts say Elon’s cuts could create a “deflationary shock.” Bond yields are already rising, making borrowing more expensive for both businesses and the government.
Yields have jumped from 3.6% in September to 4.46% today. This creates a liquidity crisis. Companies struggling to access cheap capital may cut back on investments, leading to slower economic growth. Stock markets could take a hit as investors shift to bonds, which are considered safer in times of uncertainty.
Of course, that would also affect the cryptocurrency market, especially Bitcoin, which remains stubbornly correlated with US stocks, and Dogecoin (DOGE), which shares a name with the so-called department.
There is also fear of reduced consumer spending. If DOGE cuts target entitlement programs like Social Security, millions of Americans could lose disposable income. That would hit the economy, hurting everything from retail sales to housing markets.
