Context

• The Department of Government Efficiency (DOGE) initiative, launched in Donald Trump’s second term, seeks to cut U.S. federal spending, deficit, debt, and interest burden while streamlining operations.
• Elon Musk was appointed as an advisor, aiming to create a leaner government by reducing the number of federal agencies from over 400 to 99.
• This article highlights the U.S. DOGE initiative under Donald Trump’s second term, its cost-cutting measures, revenue challenges, and the fiscal risks threatening its long-term success, especially with the proposed One Big Beautiful Bill (OBBB).

Low Revenue Collection as the Core of U.S. Deficit and Debt

• The Trump administration’s push for a smaller government stemmed from persistent high spending and deficits.
• Although U.S. public expenditure averaged 36.49% of GDP between 2001 and 2024 — the smallest among major advanced economies (MAE) — its fiscal deficit (6.0% of GDP) and debt burden (119.5% of GDP) in 2024 exceeded MAE averages.
• The key reason is chronically low revenue collection.
• From 2001 to 2022, U.S. government revenue averaged 30.55% of GDP, the lowest among peers, and its tax-to-GDP ratio of 19.27% lagged far behind countries like Italy, France, and the OECD average.

DOGE Reforms Deliver Major Cost Savings and Workforce Reduction

• The Department of Government Efficiency (DOGE) has implemented extensive expenditure reforms, including:
  • cancelling unused office leases and wasteful contracts,
  • recovering misallocated funds,
  • reducing the federal workforce through hiring restrictions,
  • voluntary buyouts,
  • performance-based layoffs, and
  • cutting overseas humanitarian spending.
• AI tools now monitor employee productivity, detect inefficiencies, and identify overlapping departmental functions.
• DOGE also repealed or modified several regulations, saving $30.1 billion and removing 1.8 million words from federal rules.
• Its transparency measures include publishing savings updates, revealing grant recipients via a payments portal, and sharing workforce size data.
• Layoffs have been streamlined with the “Workforce Reshaping Tool,” leading to about 2,60,000 staff exits.
• Overall, DOGE has achieved an estimated $190 billion in savings — $1,180 per taxpayer.
• As per the unconstitutionality index (UI), for every law passed by Congress in 2024, there were about 19 rules created by the bureaucracy.
  • DOGE publishes a unique UI measuring the extent of bureaucracy’s role in shaping federal policy.

Fiscal Risks Threaten DOGE’s Long-Term Goals

• DOGE’s future faces uncertainty after Elon Musk opposed the One Big Beautiful Bill (OBBB), a legislative extension of DOGE reforms, over its removal of electric vehicle tax credits.
• More critically, the OBBB’s tax cuts far outweigh its spending cuts, projected to add $3.2 trillion to U.S. debt in the next decade.
• With the U.S. already having the lowest corporate tax rates among major economies, below-OECD-average effective tax rates for the wealthy, and secrecy laws aiding tax evasion, deficit reduction is unlikely without boosting revenues.
• Without addressing this, President Trump’s plan to cut debt through DOGE-style spending reforms may fall short.