How Donald Trump and Elon Musk Could Cut $2 Trillion in Government Spending
Elon Musk has thrown down a $2 trillion gauntlet, claiming he can slash federal spending by that amount. While the billionaire’s proclamations on X often generate more heat than light, one can only hope he will succeed.
The real question isn’t whether we can cut $2 trillion from a bloated $6.8 trillion federal budget—we absolutely can. After all, the government managed to function at $4.4 trillion five years ago, and American civilization didn’t collapse. The economy was humming, wages were rising, and poverty was falling.Â
The fact that it’s feasible, however, does not mean Musk will actually succeed. Before Washington’s army of spending defenders, many of them Republicans, starts wailing about draconian cuts, let’s discuss the actual question: how to trim the fat without harming the muscle.Â
Theoretically, one of the most straightforward budget-cutting approaches is an across-the-board or uniform-reduction rule. There is plenty to cut everywhere in the budget, including the large slice that funds the Department of Defense. The Congressional Budget Office’s biennial Options for Reducing the Deficit lists reductions to the Pentagon’s budget that would save $995 billion over ten years.Â
The best way to cut $2 trillion out of the budget is to ax everything the federal government does that it shouldn’t be doing in the first place. It’s time we rediscovered the exercise of thinking critically about government and the role it should or shouldn’t play in our lives. Questions like, “Is that the role of government?” or “Should the federal government pay for that?” haven’t been seriously considered in years. The muscle of fighting for first principles has atrophied among Republicans as it’s no longer in style to call for small government.Â
Once you ask these questions, it’s obvious that most of what the government does, it shouldn’t. For instance, there’s a lot of spending that goes to activities that are supposed to be the states’ responsibility under our federalist model of government. Thus, federal grants-in-aid to the states are the first programs I would cut. These grants assault federalism, create perverse incentives, and reduce state and local government efficiency and accountability.
Take, for example, federal grants to state education departments. Federal aid incentivizes schools to shift their priorities to meet federal grant requirements rather than local educational needs. Schools also waste time and money complying with these complex federal requirements. Another example is federal transportation grants, which prompt states to build mass transit systems to get federal matching funds when roads might better serve their communities. There are plenty more examples.Â
The Cato Institute’s Chris Edwards calculates that “federal aid to the states totaled $721 billion in 2019.” That number exploded during COVID-19 and, like everything else, has remained elevated. According to the National Association of State Budget Officers, federal funds accounted for 35 percent of total state spending in fiscal 2023. If I were in charge, I would end most federal subsidies to the states and, at the very least, suggest serious reforms, such as block-granting Medicaid
Article from Reason.com
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