The Department of Government Efficiency (DOGE) is a U.S. federal initiative established by President Donald Trump on January 20, 2025, aimed at reducing government waste and improving operational efficiency. Elon Musk was appointed as a senior advisor to the president in this endeavor.
The DOGE is claiming to have saved up to $105 B until now, mostly canceling federal contracts and job cuts
- Some of the job cuts have already been evident on some released data, but still very minimal and not to have any significant impact yet on a macro level
- Analysts say DOGE cuts will be insufficient and minimal because DOGE cannot cut spending authorized by Congress, and that DOGE’s true savings are likely around $2 billion–$10 billion, or 0.03%–0.2% of the federal budget.
- Broader Fiscal Challenges:
- Cutting 25% of federal employees would save only 1% of the budget
- Eliminating USAID would save just 0.6% of spending
- Payment error reductions* could yield *$100 billion
- Social Security and Medicare are major cost drivers, as demographic shifts reduce the number of workers supporting retirees.
Elon Musk told Trump he excepts DOGE cuts to be $150 billion in 2026 during a cabinet meeting on April 10.
This is substantially less than the original $2 trillion and then revised $1 trillion goals.
Assessment
While this is not good news for the budget deficit it is certainly good for the economy to not face another massive headwind on top of tariffs in the nearterm. That said even $150 billion is a large number and numbers could grow over time.
I did not dig or investigate deeper what kind of impact (if any) this could have on the economy.
@Magaly are you currently considering it in your projections?
No, I did not consider DOGE cuts being meaningful in my scenarios because I had already concluded the amount of spending DOGE can cut is very minimal.
Outlays for the government were in FY2024 $6.7 trillion (11% y/y), $150 billion is 2.2%.
But, as of March 2025, the 1H FY 2025 is still growing by 7% (317 b). So in my projections, I am only forecasting a slightly lower growth rate for gov spending than 2024, but still positive (2% vs 3%)
Is still a negative headwind for the economy, especially the economy being used to very high growth for the government, but not to the extend DOGE was saying.
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