I see a lot of discussion about what the government should do with the $1 trillion dollars that DOGE intends to save by reducing wasteful government spending. In fact, this is not a meaningful question, as even in the unlikely scenario where DOGE achieves $1 trillion in saving, there would be no money available to disburse. Of course the government can send checks to the public if it wishes to. But that’s not because it has “money” in the ordinary definition of the term, it is because it is able to borrow money. Assume the following data:
Federal spending = $6.2 trillion
Federal revenues = $4.4 trillion
Federal borrowing (budget deficit) = $1.8 trillion
If DOGE were able to reduce spending by $1 trillion, cutting the total down to $5.2 trillion, then the budget deficit would fall to $800 billion. But that would not mean that the government had $1 trillion dollars in cash that it could disburse as it wishes, rather it would mean the federal government was borrowing $1 trillion less than before.
The federal government could decide to go ahead and borrow the same $1.8 trillion that it was borrowing before DOGE made its savings, and they could then distribute $1 trillion to the public in transfer payments. But in that case, they’d merely be substituting one form of federal expenditure for another, essentially creating a new UBI spending program. Total government spending would remain at $6.2 trillion. What would that accomplish?
I recently saw Elon Musk give an impassioned speech to Trump’s cabinet indicating that the budget deficit was unsustainable:
Elon Musk takes aim at national debt, warns of ‘de facto bankruptcy’ without DOGE: ‘$2 trillion in deficits’
That may be a bit extreme, but he’s right that the budget deficit is a major problem. For that reason, it would make no sense to return the saving to the public, as the deficit problem would remain as large as ever. Of course the fact that something is illogical no longer has any implication in today’s America:
Trump, Musk float idea of $5,000 ‘DOGE dividend’ checks. Here’s what experts say
Again, there is no money to give back to the public. The federal cookie jar is empty.
OK, so what’s the counterargument to my post? How could someone defend the proposal to refund $1 trillion to the public? The argument would have several components:
1. First, you’d argue that the budget deficit is not a real problem, and that there’s no reason to reduce our current deficit of $1.8 trillion. You might cite some sort of MMT model. Obviously I think that’s wrong, but let’s go with this assumption for the moment.
2. Second, you’d have to argue that we’d be better off reducing spending on current programs by $1 trillion, and increasing spending on “transfers to the public” by $1 trillion.
As a practical matter, any $1 trillion reduction in federal spending is likely to almost entirely come from reductions in various entitlement programs like Social Security, Medicare and Medicaid. That’s because the GOP doesn’t want to cut defense, and interest payments are a contractual obligation than cannot be cut. The remaining programs are relatively small, and also unlikely to be cut—at least in aggregate, some will be cut (foreign aid) and some will be increased (border security.)
For this sort of plan to make sense, you’d have to argue that it’s better to give every adult a check for roughly $5000, rather than disburse the same amount of money to a subset of the adult population through various retirement, medical and welfare programs.
I hope you see the bizarre nature of this proposal. In order to advocate refunding $1 trillion to the public from DOGE savings, you must buy into not one but two controversial theories. Furthermore, these theories are from opposite sides of the political spectrum. The theory that huge deficits don’t matter is a far left idea associated with MMTers. The theory that programs like Social Security and Medicare are bad is associated with those on the far right.
I’ve met many people who hold one of these two views. But I don’t recall ever meeting a single person that holds both of these views. And yet to favor refunding this so-called “money” to the public, you’d have to simultaneously hold both views.
I find that people often have trouble thinking about two topics at the same time. One topic is the size of the budget deficit. The other topic is the proper role of government. Let me explain with the following example. Suppose someone argued that America would be better off replacing $1 trillion in federal spending on various programs with $1 trillion spent on a new $5000/person UBI program. Based on what I have said in the post above, you might assume that I’d regard this change as undesirable. Not necessarily. It’s very possible that a UBI program would be superior to current government uses of this borrowed money. But I would also argue that an even better solution would be to not borrow the money in the first place.
Suppose my wife told me that she had just gone to the bank and borrowed 1.8 million dollars. Then she asked me what we should do with the money. Should we buy stocks, bonds, Bitcoin, property? I would not respond to this question by considering possible uses for $1.8 million, I’d ask her why the heck did she decide to borrow $1.8 million?
Yes, a UBI program might be nice. But who’s going to pay for it? Cutting government spending by $1 trillion doesn’t free up money for a UBI program, it doesn’t even reduce our national debt. All it does is slow the rate at which our national debt is increasing. We are so deep in a hole that even painful sacrifices will provide little immediate benefit. The fact that policymakers hold out “visions of sugarplums” shows how deeply unserious our politics has become.
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