It’s official. Elon Musk, along with biotech entrepreneur Vivek Ramaswamy, has been announced by Donald Trump as the head of DOGE – ‘Department of Government Efficiency’ – a body advising the White House and the Office of Management and Budget from outside government, with a plan to ‘dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies’. It has the potential to be, according to the announcement from the Trump transition team, the Manhattan Project of our time.
Musk wasted no time in posting on X that DOGE would publish an online leaderboard ‘for the most insanely dumb spending of your tax dollars’ and reiterated a call he made several times on the campaign trail asking the public for their input and suggestions about what (and what not) to cut.
Who could resist such a request? The publisher of CapX, the Centre for Policy Studies, was, after all, originally set up to provide just such a plan for the Thatcher Revolution following the mess of 1970s Britain. I, meanwhile, work at the Adam Smith Institute, the militant wing of the neoliberal movement.
So let’s think big about what ought to be on DOGE’s chopping block.
One possibility is simply to do what Trump promised before the election. Abolish income tax and fund the federal part of the US government through tariffs. It’s true, tariffs are bad. Peter Navarro doesn’t know what he’s talking about. But what would happen if this were done?
You’d be able to raise about 3–5% of GDP through such tariffs. No more than that, certainly: attempting to raise more would choke off all imports and produce no revenue at all. At any level, this would indeed be an economically destructive approach. On the other hand, it would reduce the federal government’s budget back to pre World War One levels. Social Security would continue – that has its own funding stream – but everything else the Feds do would have to be cut to suit. Since the Pentagon alone takes that big a slice of GDP (and possibly more), the Feds would find they could afford the US military – and nothing else. Which would neatly solve Musk’s quest for smaller government. It would also return to roughly the idea the Founding Fathers had of the federal part of the US government, which would be a nice present for America’s upcoming 250th birthday.
Perhaps even Trump’s tariffs would be worth it if the trade-off was lifting the burden of government spending by 20% of GDP.
At the other end of the possibility spectrum is PJ O’Rourke’s Principle of Circumcision: it’s possible to take 10% off the top of anything. It is possible to cut the federal budget. Or, perhaps, prevent it rising further. But O’Rourke’s metaphor cuts both ways – taking that 10% off the top is a difficult, even violent operation and the victim should be expected to kick up a fuss. The bureaucracy – the political system – isn’t going to lay back and think of limited government. Why would they? The officials in charge have fought their way through the entire US education system and all the right graduate schools in order to be able to spend everyone else’s money. Why would they meekly accept the poverty of only being able to spend their own?
Not only is this not easy, it’s also not enough. With the deficit running at 7% of GDP, a 10% cut in spending barely keeps the vast US national debt from growing any further. It’s also true that the true weight of government is not to be measured just in money flows, but also in money that doesn’t exist. It’s important to think about the economic growth and thus greater wealth of the nation that just isn’t there because of the weight of government and its regulation upon the economy.
It’s not going to be possible to kill that regulatory state, not by presidential administration alone. It’s too embedded in the law itself. Repealing the Clean Air Act and all such weights upon the economy just isn’t going to be possible, not in one term. It’s worth trying to kill the alphabet soups of enforcers but even that won’t work – too much of this is now embedded in the law itself.
It is though, perhaps sneakily, possible to reduce the effect. As Musk has pointed out, SpaceX has been forced to produce a study about rockets falling on sharks. When that one was done, it had to write another on the effects of its debris on whales. I’m fairly certain that Nasa has not been subject to the same importunities, but there we are. It’s also true that we’d probably not want to entirely kill off all environmental protections. We’re trying for a reasonable system instead.
To get there, two changes can be made. The first is to bring in the English costs rule. This does exist as a concept in US law but it’s rarely applied. The idea is that if you bring a lawsuit and then lose then you have to pay everyone’s lawyers. If you win then the loser pays your lawyers. Apply this to every intervention into planning and permitting. Sure, you want to complain about an oil licence killing the planet. Hey, do so. But if you lose that intervention into that licence then you are responsible for all the costs, on every side, of the investigation into and hearings about your complaint. This will, clearly, limit the number of trivial complaints. Big and important ones that actually have a chance of winning will become cheaper too – you’ve no longer got to pay your own lawyers.
The second is something common in both German and Portuguese planning law. A filed application is assumed granted if not rejected within a time limit. One recent licence application of mine to a Portuguese local authority came though approved seven days, to the hour, after filing, as soon as the period for objections had lapsed. Further, if they do reject an application then they’ve got to provide a legal justification for doing so. More time needed, further studies, is not acceptable. It has to be some justiciable, legally appealable reason.
It would even be possible to – rather sneakily – combine these two. Make the bureaucracies responsible for the costs of the studies they demand. If the budget for the bureaucracies remains fixed then that would hugely lessen the weight of them on the economy. The major costs here are not paying for paperpushers, they’re paperpushers demanding more studies that keep productive projects in limbo. And we know, because this is the way bureaucracies work, that they’re not going to use the budget to pay for studies when there are their own pay packets to protect.
One way to describe this is not to kill the bureaucracy so much as to align the incentives properly. It’ll be amazing how much gets approved when bureaucrats save bureaucratic budgets by approving stuff.
But back to that larger question. Just how do we shrink government? The lesson from our experiences in Britain is twofold. Firstly, that this is a constant battle. It’s not something where it’s possible to say we’ve won, we’re done. Because that political and – again – bureaucratic impulse to expand budgets, spending and power is a near irresistible force. It has to be constantly opposed in order to even hold the line. The second is that cutting the budget, or enforcing productivity gains, is the difficult way to do it. The real way is to stop government doing certain things.
Here the much-contested Project 2025 ideas have some weight to them. The idea of killing the Department of Education has been around since mere hours after its foundation. Project 2025 says this is a good idea, and Trump said he’d do this on the campaign trail. Great, let’s do it. Funding of education comes at the level of the school board, the county, and that’s the appropriate level for it too.
We might go a little further. The federal provision of student loans, even guarantees for student loans, has been soaked up by an increase in the prices charged by colleges and the growth in the bureaucracy at said colleges. Abolish the subsidy, and gape in amazement as college returns to sensible pricing levels.
How much further can we go? What’s next after axing the Department of Education? To be off howling in the woods about what should, but won’t, happen: abolish the Department of Energy, and fold its nuclear weapons remit into Defence. The American economy has cheap energy because it’s about the only place in the world that hasn’t regulated fracking for oil and natural gas. That’s a useful example of what happens when capitalism and markets are allowed to apply. Or, if you prefer, when human greed and ingenuity are unleashed. Save the money instead.
Here’s one that’s definitely not going to happen, not with red state support the way it is. Take the Farm Bill out behind the woodshed and chop that head off. Kill the entire Department of Agriculture, in fact – along with the biggest grift in American politics, the corn ethanol and sugar support programmes. We have evidence of how this would work out, from New Zealand. The environment has improved, food is cheaper, farming incomes and profits have risen. Simply by killing all subsidy, direction and support for farming.
As further inspiration for DOGE’s rampage through the federal budget, it’s even possible to point to one of those icy social democracies that the progressives so adore – Denmark. The national income tax rate there starts at 3.76% and rises, for the really high income folk, all the way to the dizzy heights of 15%. That’s because the national government doesn’t do very much. A bit of general oversight and defence, really. The big taxation – that progressive stuff – is done at the level of the commune. Something akin to the range, in the US, from county to state. Local taxes pay for local services.
And why not? My explanation for why this approach works is what I call the Bjorn’s Beer Effect. Danes – and Swedes and so on, who have a similarly local system – tend to know who Bjorn is. The laddie who collects the local taxes and also allocates it to local spending. Locals also know where Bjorn has his Friday night beer – and more importantly, Bjorn knows that the locals know where he has his Friday night beer. Under such a system, the taxes get allocated to what the locals desire at least somewhat efficiently. Rather than, say, 360 million people sending 20% of everything to Washington DC (which just, by the way, voted 96% Democrat) for allocation back to those local issues. Danish government housing certainly seems better than the vertical slums that the US Department of Housing and Urban Development tends to build.
Amazingly enough, this is what the Founding Fathers seem to have had as a vision for the newly United States. They concluded that most things in life are local problems to be solved locally. Only those that absolutely cannot be local, like defence, need to be taxed for and provided nationally.
So perhaps Musk can find a way to keep all sides happy: it’s possible to substantially reduce the federal government, while also providing that progressive dream of something like a Scandinavian model. Go local.
But here’s the thing I’d really like to get across, on behalf of all veterans of the Thatcherite revolution. Yes, it’s possible to take a slice off the top of government. That cut, however, will last as long as the pressure is maintained and no longer. Repressing bureaucratic budgets does not work long term. Yes, it’s also possible to change the incentives of the bureaucrats themselves. This makes government work better where we must have government – but it’s also not enough.
In order to cut government, it’s necessary to kill off what government does. The tasks it attempts to undertake, the things it considers within its remit. As with New Zealand, kill the federal connection to agriculture. Take the lesson of fracking and fossil fuels and kill the Dept of Energy: US energy success came from the one thing the DoE wasn’t involved with. Education is a local issue – return it to being such.
Don’t attempt a long march through the institutions. The correct answer is to kill the institutions. Gut the federal government by abolishing most of what it does so badly. That is my simple advice for Musk and Ramaswamy as they ready their chainsaws. Kill functions of the Feds and the budgets will follow.
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