Spending fight shows limits of Trump’s power to change fiscal path

WASHINGTON — When Elon Musk and Vivek Ramaswamy, the businesspeople whom President-elect Donald Trump tapped to lead his new Department of Government Efficiency, met with lawmakers in early December, they laid out their plans for cutting federal spending and eliminating waste.

Less than two weeks later, they helped topple a 1,500-page spending bill and brought the federal government to the brink of a shutdown over objections to the billions of dollars of so-called pork spending in the legislation. But the streamlined package that lawmakers ultimately passed failed to offer spending restraint.

During the negotiations, Trump even called for abolishing the nation’s statutory debt limit, which Republicans have long used as a tool for forcing painful budget cuts.

The frenzy demonstrated the clout Musk and Ramaswamy have as they establish their new waste-cutting enterprise. But the outcome also underscored the limits the initiative will face as it tries to curb spending. In recent decades, the federal government has become increasingly sprawling and Congress has become more fractious, making it difficult to put a dent in a national debt that has topped $36 trillion.

In under a month, Trump will assume the presidential megaphone with Musk and Ramaswamy as his spending enforcers. But budget experts see little hope that the three will be able to meaningfully shift the nation’s fiscal trajectory. The Congressional Budget Office projects that the national debt will reach 166% of gross domestic product by 2054, up from about 99% of GDP at the end of 2024.

“They have no authorities whatsoever,” said Douglas Holtz-Eakin, who served as chief economist in President George W. Bush’s Council of Economic Advisers. “They don’t control the scope of government. They don’t control the size of government.”

Holtz-Eakin, who also served as the director of the Congressional Budget Office, noted that Congress has the power of the purse and suggested that the Department of Government Efficiency would be little more than a think tank.

“They have the bully pulpit, but that’s truly it,” he said.

Musk and Ramaswamy have said that they want to cut $2 trillion of federal spending over an unspecified period of time by shrinking government agencies and eliminating fraud and waste. That is nearly the size of the 2024 fiscal year deficit alone and just a sliver of the $20 trillion that the U.S. is projected to borrow over the next decade.

House Republican leaders have floated a pledge to cut $2.5 trillion in “mandatory” spending, which typically goes toward programs such as Medicaid and food stamps, and to raise the debt limit in separate legislation next year.

The United States spent $6.7 trillion in 2024, including more than $800 billion on the military. But the bulk of the country’s spending comes from mandatory programs including Social Security and Medicare, along with soaring interest expenses. Those costs are expected to continue rising as the population ages and more people begin claiming retirement and health care benefits.

Trump has pledged not to cut entitlement programs, and Republicans are loath to slash military spending. That leaves scant space to scale back the biggest drivers of the debt.

“While it’s good to improve the efficiency and effectiveness, to the extent that you are not focusing on the 50% of the federal spending, which is entitlement programs, you’re not really going to make a big dent in our debt and deficits,” said William Hoagland, a senior vice president at the Bipartisan Policy Center.

Hoagland recalled that fiscal commissions had been tried before and often with only limited success. In 1982, for instance, President Ronald Reagan created the Grace Commission, in which a group of business leaders were asked to work like “tireless bloodhounds” to root out inefficiency. Most of the group’s recommendations never came to fruition, however, because Congress would have been required to change laws.

A slew of fiscal reform commissions have been formed and disbanded over the past 40 years as the national debt as a share of the economy has only continued to grow. The United States has not had an annual budget surplus since 2001.

The Department of Government Efficiency is not an official government agency and will have no formal power to cut federal spending. The group intends to work with lawmakers in Congress and the Office of Management and Budget to look for federal rules that can be changed to reduce spending. Trump has also discussed “impounding” funds that were allocated by Congress for certain programs and redirecting the money to pay down debt. And Musk and Ramaswamy have been combing through Government Accountability Office reports as they seek out parts of the government that they believe are mismanaging taxpayer money.

Groups that promote fiscal restraint such as the Committee for a Responsible Federal Budget have suggested as much as $700 billion of deficit reduction measures, but many of them would be politically arduous to enact.

Some of the policies of Trump and Republicans are at odds with the public mantra of belt tightening and eliminating fraud.

The president-elect has made clear that he wants to weaken the enforcement powers of the IRS, which would make it harder for the agency to track down tax evaders and to efficiently collect tax revenue. Rescinding more of the $80 billion the IRS was allocated in 2022 to crack down on tax cheats and modernize technology is projected to add to deficits.

As lawmakers talk about spending cuts and deficit reduction, they are preparing an expansion of the 2017 tax cuts that could cost more than $4 trillion over a decade. That would far surpass the $2.5 trillion of spending cuts that House Republicans pledged during the latest spending fight to enact early next year.

“I do worry that they’re going to talk about government efficiency and trying to lower spending and then use that money to pay for things like tax cuts,” said Keith Hall, who served as director of the Congressional Budget Office from 2015 to 2019.

Despite Trump’s recent interest in shrinking government, the self-described “king of debt” has not shown a propensity for fiscal restraint.

The national debt grew by nearly $8 trillion during Trump’s first term as a result of tax cuts and increased government spending, including two rounds of pandemic aid. In 2018, Trump called for a return to earmarks, the practice of stealthily stuffing funding for pet projects into legislation, to help ease gridlock in Congress. The Committee for a Responsible Federal Budget estimated that his policies could add as much as $15 trillion to the debt over a decade.

During the most recent spending fight, Trump broke with conservative orthodoxy on the debt limit. The borrowing cap has long been a prized source of leverage for Republicans to exact spending cuts from Democrats, but Trump urged his party to suspend the cap beyond his term or do away with it entirely.

“For years Congress, and everyone else, wanted to terminate ‘the Debt Ceiling,’ and this is the time to do so!” Trump wrote on social media.

Fiscal hawk Republicans rebuffed that idea this time, but Trump could in the future try to work with Democrats, who have for years called for abolishing the debt limit, to eliminate it.

Bharat Ramamurti, who was deputy director of the National Economic Council in the Biden administration, said the outcome of the fiscal showdown showed that Musk and Ramaswamy would have minimal influence to force Congress to spend less. The changes that they helped impose on the legislation, he added, did not actually lower its cost.

“I wouldn’t be surprised if you see largely a repeat of Trump Term 1, where at the end of the day, it’s a bunch of spending increases, tax cuts and a large increase to the debt,” Ramamurti said.

This article originally appeared in The New York Times.

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