As a fiscal conservative, the columnist David French held some hope for Elon Musk’s Department of Government Efficiency before President Trump took office. Those hopes were quickly dashed. In this conversation with the Manhattan Institute’s Jessica Riedl, French reckons with what Musk and his department have wrought on the government and argues that DOGE will do little to ameliorate the proposed tax cuts in the budget resolution recently passed by the House.
This conversation was recorded on Friday, Feb. 28.
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David French: I’m David French, an Opinion columnist at The New York Times and a fiscal conservative.
At first glance, you might think I would be excited for an initiative like Elon Musk’s DOGE, but I’m not. Even though I believe the federal bureaucracy could use some efficiency, I’m actually pretty appalled at what I’m seeing out of Elon Musk and the Trump administration. So is my friend Jessica Riedl. Jessica is a fellow at the Manhattan Institute and, like me, is a fiscal conservative.
Jessica might be one of the nation’s foremost experts about the federal budget and about America’s fiscal realities, and she has taught me an enormous amount about those issues. So I am delighted that Jessica is joining us for this conversation.
Jessica Riedl: Thank you for having me.
French: You worked on Republican presidential campaigns in 2012 and 2016. You’re at a conservative think tank now. You would think that if there was a Department of Government Efficiency announced to get the budget and the growth of spending under control, you and I would both be really excited.
When you heard that Elon Musk was going to be forming and running DOGE, what was your first reaction? What were you hoping it would be? What were you fearing it would be?
Riedl: I was hoping that this would be the biggest war on government waste in decades. There’s no shortage of spending to go after. We have a $1.8 trillion deficit, and spending is growing. And I knew going in that DOGE was not going to be able to negotiate the grand deal on Social Security and Medicare and taxes — that’s going to be a bipartisan effort in Congress — but there is a lot of waste. There’s $191 billion a year lost to payment errors.
The hope was that Elon Musk would use his technical expertise to open up the hood, dive into waste and overpayments, and finally focus us there. That was the hope.
French: Few big-ticket initiatives have been more opaque than DOGE. There is a lot of energy, there is a lot of activity, a lot is happening. But we’ve even had judges even ask government lawyers, who runs DOGE? Who is the administrator? How is this set up? And they don’t have the answers. So what is DOGE actually doing?
Riedl: You’re right, it’s a challenge. For all the talk about transparency, they’ve taken offline parts of the federal budget, and a lot of what they’re doing we’re learning by tweet rather than true government reports and tracking.
There is a website that supposedly shows $55 billion in cuts so far. However, anyone who has looked into the wall of receipts has realized that most of what is claimed to be spending cuts are just accounting errors. The real cuts are smaller.
So we’re trying to piece together what they’re doing and we’re all kind of guessing. But it’s the most real for the people in Africa who aren’t getting U.S.A.I.D. aid and for the federal employees being laid off. It’s very real for them. For the rest of us, it’s piecing together information from different sources.
French: Let’s take a minute and back up, because I had said at the beginning, I identify with the term “fiscal conservative.” That is not a term that is widely used much these days. So when I say fiscal conservatism, how do you define that?
Riedl: I have long defined fiscal conservatism as wanting a smaller government that spends less money, focuses on the primary objective of government, tries to keep taxes down, but high enough to fund the government and not push up deficits. So, small limited government, less spending and no large budget deficits.
French: That’s exactly how I see it myself. But I’ve never known someone to convincingly describe Donald Trump as a fiscal conservative. He’s purely a populist. He’s going to do the things he believes will be popular.
How would you describe the fiscal approach of the Trump administration? What is their overall fiscal philosophy?
Riedl: I agree with you. The word I use is “populism.” I think Donald Trump is a big government populist who reflects where the Republican Party is today. Today’s Republican Party is older, lower income, more dependent on not just Social Security and Medicare, but programs like Medicaid and SNAP. It also includes a lot of veterans who want veteran spending and a lot of people concerned about defense.
So, overall, you have a big government populist party. But what’s interesting in this populism is, while they’re definitely more comfortable with government spending than past Republicans, they’re also accelerating the tax cut rhetoric. And as an economist, I look at that and say something’s got to give.
If you’re going to make the Republican Party a populist, big-spending party, you can’t also be the party of bold tax cuts or you get what happened in Trump’s first term, which is $8 trillion in new borrowing just from the legislation he signed in four years. Something’s got to give.
French: Why do these deficits matter? Why do they matter to an average everyday American?
Riedl: In the short term, soaring borrowing will push up inflation and interest rates. In 2021 we all saw how the American Rescue Plan that Joe Biden enacted pushed up inflation that was already on track to be a little high coming out of the pandemic. That plan added about three more points to the overall inflation number. That also pushes up interest rates.
In the long term, it’s even worse. With our debt reaching levels higher than we’ve ever seen in the developed world, you will eventually get to the point where Washington can’t even borrow enough money to pay for its spending. That will then force the government to go to the printing press, and then you have all sorts of problems. We want to stop the train before we get to that point.
French: So, what is your best estimate about the DOGE savings right now?
Riedl: Perhaps $2 billion, which they claim is $55 billion. Even that $2 billion may not ultimately happen because technically speaking, DOGE cannot impound and unilaterally reduce federal spending. Any spending cuts legally have to be reprogrammed elsewhere unless Congress goes in and reduces the spending levels. So right now I would say DOGE has saved $2 billion, which, to put it in context, is one-thirty-fifth of 1 percent of the federal budget, otherwise known as budget dust.
French: Wow. The House very narrowly passed a version of a budget resolution last week. How much will that increase the deficit? And what is in it?
Riedl: The budget resolution mostly consists of $4.5 trillion in tax cuts over 10 years.
They’re also indicating they’ll offset this with cuts to Medicaid, SNAP and other nutrition spending, and likely student loans. I’m skeptical that Congress can actually pass this. If they don’t, it will be a $4.5 trillion cost over 10 years.
The budget also promises discretionary savings far into the future, but there’s nothing enforcing that and there’s no reason to take it seriously. The budget also assumes a huge growth in tax revenues from economic growth. That is more of a gimmick. It’s not going to happen.
French: It’s been a while since I’ve had a math class, but it sounds like what you’re saying is they’re cutting $2 billion for savings but they’re adding $4,500 billion in deficit. It’s $2 billion versus $4,500 billion. Those are very, very different numbers.
Trump and DOGE have been focused on reducing the number of federal employees. What would the impact be on the federal deficit of, say, cutting 300,000 or 400,000 federal employees?
Riedl: Here’s one way to look at it: There are 2.3 million civilian employees. If we eliminated one quarter of them — which would be remarkable, that would be laying off nearly 600,000 workers and not replacing them — you would save 1 percent of federal spending.
The savings aren’t large. You’re not going to fix the deficit, even if you eliminate a quarter of federal employees. And I want to be careful because yes, we should reduce federal employment if we have extraneous employees or if they’re not doing a good job or if the agency should be shut down. Even one dollar in waste and unnecessary spending is too much.
But if the goal is to reduce spending, you’re not going to get there by firing federal employees. Most government spending goes to benefits to us, not to administrative costs.
French: The implication of what you’re saying is that DOGE is causing an awful lot of disruption to federal operations without doing anything material to address the long-term fiscal challenge America is facing.
Riedl: I would call what DOGE is doing “government spending-cut theater.” The targets they’re going after are not where the money is. D.E.I. contracts, Politico Pro subscriptions, federal employees, foreign aid. Some of it is essentially a rounding error, but they are targets that hit a lot of cultural touchstones for a lot of conservatives. DOGE is really a distraction from the spending increases and tax cuts Congress is really doing right now.
French: Suppose you wanted to be serious about cutting the deficit. Where does federal money go? And as a corollary to that, what has to be cut or what kind of revenue has to be raised to meet these obligations?
Riedl: When I explain where the money goes, it’ll be clear why we’re not cutting it.
Seventy-five percent of all federal spending goes to six items: Social Security, Medicare, Medicaid, defense, veterans and interest. That is 75 cents of every dollar. Everything the government does besides that — education, health research, housing, justice, homeland security — that’s all the other 25 percent. But Social Security, Medicare and Medicaid are the big drivers. That’s really the ballgame.
French: Is there anything you like about Trump’s policies so far? Is there anything that you’re pleased by?
Riedl: Some of the talk Trump offers on reducing red tape is welcome. In the first Trump administration, there was a rule that for every regulation we add, we’re going to repeal two regulations. I think that was a good guideline.
French: Is there anybody in the political world right now, Republican or Democrat, that you look to and say, this is a serious person talking about these issues? They get what’s happening.
Riedl: Not many come to mind, to be honest. I work with a lot of lawmakers. It’s funny because there are certain members that I work with on these issues, but I’m actually not supposed to mention them because they’re working quietly on them behind the scenes, and they don’t want me outing them as actually trying to solve problems.
I have been invited to bipartisan Social Security working group dinners, where you have Republican lawmakers and Democratic lawmakers getting together in the back room of a restaurant, inviting some experts and talking about bipartisan ways to address Social Security.
And one of the rules of attending this is that this dinner never happened. None of us were here. Everything is off the record. Do not tell anyone that these meetings took place. And on the one hand, you’re heartened that these conversations are happening behind the scenes in a bipartisan fashion. But what does it say for the state of our democracy that they don’t want anyone to know they’re trying to solve a really important challenge in a bipartisan way? It’s backward.
French: Let me wind down the conversation by asking you maybe the hardest question: I’m going to ask you to put on your prophecy hat. Where do you think the American economy is headed over the short to medium term and how much do you think Trump’s current policies are going to impact it positively or negatively?
Riedl: It’s early, and economic predictions have a history of making fools of people.
French: I won’t hold you to it. This is informed speculation.
Riedl: There are headwinds right now. Consumer confidence is falling, consumer spending is falling in preparation, and in some instances reaction to the tariffs. Interest rates have been inching up, housing starts are starting to slow down. I would think that right now it’s more likely we see the economy declining over the course of the year than growing. I hope I’m wrong.
As critical as I am of Trump’s policies, I’m never going to stop rooting for the economy or rooting for America. I hope I’m wrong, but it really looks like investment spending is getting spooked. Consumers are getting spooked. And this is pretty scary because Republicans keep budgeting on the hope that economic growth is going to skyrocket immediately. And I think we might be heading a little further downward instead.
French: Jessica, thank you so much for joining me.
Riedl: Thank you. It’s been a pleasure.
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