If Musk Can Return a Rocket to Its Launch Pad, Why Can’t He Cut $2 Trillion from the Federal Budget?
|in:Viewpoints
On Sunday, October 27, 2024, Elon Musk claimed that he could find at least $2 trillion of potential spending reductions in the federal budget if Donald Trump were elected in the upcoming November 5, 2024 presidential election. I assume he could find the same magnitude of budget cuts if Donald Trump were not elected. Well, if Musk can return a rocket to its launch pad, why wouldn’t we expect him to identify $2 trillion in federal budget cuts? After all, in Fiscal Year (FY) 2024, federal net outlays were $6.75 trillion. Surely, Musk could identify $2 trillion of “fat” to trim. Or could he?
Shown in the Chart below are net federal outlays in FY 2024 minus net outlays for national defense, interest payments on the public debt, Social Security, Medicare and veterans’ benefits/services. The amount remaining of net federal budget outlays after these subtractions is $2.3 trillion. That’s $2.3 billion for Medicaid, SNAP (food stamps), civilian retirement, earned income tax credits and the operating /capital costs of nondefense federal departments, including, but not restricted to, Justice, Agriculture and Transportation. So, if Musk had been able to identify $2 trillion of cuts in FY 2024 federal outlays, net of defense, interest, Social Security, Medicare and veterans’ benefits/services, that would have left him with $300 billion to fund the rest of federal outlays. Would you want to fly on commercial airlines knowing that airline regulations might not be enforced? You might want to start growing your own vegetables and raising your own animal protein, because the FDA might not be able to inspect food. Those Venezuelan gangs might be taking over more towns because of a lack of FBI agents to stop them. You get the picture. Unless Musk is going to cut spending on defense, interest, Social Security, Medicare, and veterans’ benefits/services, cutting $2 trillion from federal outlays would not leave enough to fund the rest of the government adequately. And if Musk, as part of a Trump administration, were to cut Social Security, Medicare and veterans’ benefits, the Democrats would likely win large majorities in the House and Senate after the 2026 midterms. So, although Musk can return a rocket to its launch pad, I don’t think he can cut $2 trillion from federal outlays in one year without causing severe political problems for a Trump administration.
Paul L. Kasriel
AuthorMore in Author Profile »Mr. Kasriel is founder of Econtrarian, LLC, an economic-analysis consulting firm. Paul’s economic commentaries can be read on his blog, The Econtrarian. After 25 years of employment at The Northern Trust Company of Chicago, Paul retired from the chief economist position at the end of April 2012. Prior to joining The Northern Trust Company in August 1986, Paul was on the official staff of the Federal Reserve Bank of Chicago in the economic research department. Paul is a recipient of the annual Lawrence R. Klein award for the most accurate economic forecast over a four-year period among the approximately 50 participants in the Blue Chip Economic Indicators forecast survey. In January 2009, both The Wall Street Journal and Forbes cited Paul as one of the few economists who identified early on the formation of the housing bubble and the economic and financial market havoc that would ensue after the bubble inevitably burst. Under Paul’s leadership, The Northern Trust’s economic website was ranked in the top ten “most interesting” by The Wall Street Journal. Paul is the co-author of a book entitled Seven Indicators That Move Markets (McGraw-Hill, 2002). Paul resides on the beautiful peninsula of Door County, Wisconsin where he sails his salty 1967 Pearson Commander 26, sings in a community choir and struggles to learn how to play the bass guitar (actually the bass ukulele). Paul can be contacted by email at econtrarian@gmail.com or by telephone at 1-920-559-0375.
Global