Get the reality check on America’s daunting fiscal challenges and why both parties must face hard truths about spending, taxes, and debt. TCS President Steve Ellis and Director of Research Josh Sewell dissect the bold claims of the new Department of Government Efficiency (DOGE) initiative led by Elon Musk and Vivek Ramaswamy. While fresh eyes on Washington’s spending problems are welcome, can Silicon Valley-style disruption work in the federal budget? Find out why eliminating “unauthorized” programs and firing federal workers won’t come close to the promised savings and why ignoring entitlements like Social Security and Medicare is a recipe for fiscal disaster.

Transcript

Announcer:

Welcome to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget spending and tax issues facing the nation. Cut through the partisan rhetoric and talking points for the facts about what’s being talked about, bandied about and pushed to Washington, brought to you by taxpayers for common sense. And now the host of Budget Watchdog AF TCS President Steve Ellis.

Steve Ellis:

Welcome to All American Taxpayers Seeking Common Sense. You’ve made it to the right place for nearly 30 years. TCS, that’s taxpayers for common sense, has served as an independent nonpartisan budget watchdog group based in Washington DC. We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are in the political spectrum, no one wants to see their tax dollars wasted in the last quacks of the lame duck are upon us, a Farm Bill extension, the National Defense Authorization Act, a pass of bills that have been lying around like the Water Resources Development Act, and most notably, a continuing resolution that will extend the government’s funding until March at fiscal year 2024 levels. So it’s time for a reality check on the daunting fiscal challenges facing the new hundred 19th Congress that will be sworn in January. And here to help us with that is TCS Director of Policy and Research. Josh Sewell. Hey, Josh.

Josh Sewell:

Hey Steve. Glad to be here for what I think is one of the last podcasts of the year.

Steve Ellis:

Yep. Budget Watchdog AF Faithful. We’re going to try to slip in another one before the end of the year and then we will kick off 2025, which will be the 30th anniversary of the founding of TCS. So Josh fiscal year 2024 brought us a nearly $2 trillion deficit and 36 trillion in debt. President-elect Trump has promised not to touch entitlements and trying and tackle these fiscal issues. Is it possible to tackle the deficit while ignoring entitlements?

Josh Sewell:

No, that Doge won’t hunt Steve. That would be like trying to fight blindfolded with both arms tied behind your back. You’ll probably land a few kicks, but you’re also going to fall on your face. An evaluation of everything has to be on the table. It’s just the sum total of everything government has done that gave us our $36 trillion and growing debt. So you got to look everywhere.

Steve Ellis:

So speaking of everywhere, I think it’s important to put the various things our government does in perspective because the numbers get huge. In 2024, we spent $6.75 trillion

Josh Sewell:

And that’s just money out the door federally

Steve Ellis:

And about 1.8 trillion of that money was on discretionary programs, a little more than half going to defense, the rest going to other agencies. And then you had 4.1 trillion on mandatory spending, most notably Social Security, Medicare, Medicaid.

Josh Sewell:

So also the deficit was 1.9 trillion. So Congress could take a year off of funding the entire government and we’d still have a deficit because of those mandatory entitlement programs

Steve Ellis:

And the 900 billion we paid in interest payments to service that debt. So what is on the table for Social security and Medicare?

Josh Sewell:

Honestly, Steve, a debate. That’s really what we want. Start with that. Actually look at the programs and identify if they are working. So does the current structure fit the current economy? That’s where I’d start.

Steve Ellis:

It kind of goes without saying it’s a much different world than when the program started. People on average live longer. Some people are capable of working longer in life and they have been adjustments made over time to accommodate these, but we haven’t done that in decades.

Josh Sewell:

I mean, these programs, they really started in the thirties in some respects, the seeds of them. And so you’re talking 75 years in full force, some of these programs and just structurally it is social security is a bit out of whack. So when Social Security ramped up and started paying out payments, there were four workers paying in for everyone, drawing benefits. This after a number of years where no one drew benefits, and now that’s down to 2.7 workers for every one person getting benefits, people also get a lot more out of

Steve Ellis:

It than they pay in taxes. Right?

Josh Sewell:

Yeah, that’s how it’s designed. So I saw one analysis that showed an average person who reached retirement age and started drawing Social Security in 1990 could expect two and a half times as much in benefits as they’d paid in payroll taxes throughout their career. Even a decade ago, you could expect two times what you were getting. And that’s going down.

Steve Ellis:

That individual return is starting to slide down, and money going out will actually exceed payroll taxes and interest payments starting in 2035 according to the most recent estimates from the Social Security trustees.

Josh Sewell:

And at which point benefits will automatically be cut by law. So if you do nothing, you guarantee a cut in benefits at some point when that so-called trust fund, which is the payments that have exceeded what people have drawn out over time is exhausted. So let’s have that conversation now to figure out a program design that meets the needs of today, not of 20 years ago or 40 years ago, but of today.

Steve Ellis:

I think that’s a really, really important point. There are these people who are arguing that they are the protectors of social security that leave Social Security alone, but in fact, if you leave it alone starting in 20 35, 20, 36, people will be getting about 75% of what they should be getting according to the formulas.

Josh Sewell:

Yeah, it’s a problem you cannot avoid someday. And so let’s stop avoiding it now and again, the longer you have to fix a problem to meet a shortfall, the less severe the changes have to be.

Steve Ellis:

And we were talking here a bunch about social security, which was a program started in the thirties. Medicare started in the Great Society and Johnson in the sixties. That’s a program where it actually by design some of the provisions like the prescription drug benefit Medicare Part D were never designed to actually be paid for fully. And certainly now that program as a whole is significantly underwater and also needs reform. Right, Josh?

Josh Sewell:

Absolutely. And Medicare is a great example of an area where when we talk about looking at the entire federal budget is a question of figuring out what can we afford to pay for Now? Are the programs actually working to what we want them or not? Because what we could afford 10 years ago is not what we can do now. And so again, if you don’t make changes now you’re going to be forced to make changes later and they’re going to be a lot harder you, so you’re going to have these conversations. The sooner we do it, the easier it will be. Or maybe we should say the less hard it will be.

Steve Ellis:

Yeah, I think less hard is the way to go on that. And budget watch Talk AF Faithful, just to be really clear, we’re not talking about gutting social security. We’re not talking about gutting Medicare. We’re talking about putting these programs on a fiscally responsible trajectory so that you can save the program so that when you are retiring that there is going to be something there for you in Social Security that there is going to be a Medicare health benefit for you when you’re in your sixties and late sixties. I guess it would be okay, I don’t know if you all caught this, but Josh didn’t just mispronounce dog. He specifically said that Doge won’t hunt and he’s talking about the Department of Government efficiency, which is something that Elon Musk proposed and that he and Vik Ram Swami are the co-heads of and that are looking into government spending. So Josh, what can you tell me about the Doge?

Josh Sewell:

Well, I can tell you it’s either the scariest and worst thing to happen to Washington in a long time or it’s the solution to all of life’s problems. That seems to be the two reactions we’ve seen in dc. But basically what this is, is the Doge is the latest push for some kind of focus on the deficit. As you said, Mr. Ram Swami and Elon Musk have been tasked with this quasi, it’s not even not a governmental entity and it’s not even technically an advisory committee. It’s just this thing that’s out in the ether. It’s not a department. It’s definitely not a department and it’s not of the government. It’s near the government and it definitely, it has the ears of much of the government. Certainly the president elect has said he’s embraced this idea, but the idea here is that there’s some fresh voices and some fresh eyes to take a look at the government to look for.

Yes, as they say efficiencies, but also things where maybe you can have some cuts. Maybe they’re really going to talk a lot about regulations too and getting a better regulatory regime. But really, I actually find it interesting that having worked at TCS for 17 years, I think it is, it’s almost like we’ve had a couple of these deficit focus groups come about. And so this sometimes feel a little cynical but also a little optimistic that we have another round of commissions or you can call it what you want, but a new group of folks who look at the deficit and say, Hey, do you know what deficits matter and they’re going to have a problem in the future.

Steve Ellis:

Well, and as Bostock AF Faithful podcast listeners, you remember back several episodes ago, we had Dear Elon and talked about this, and I’m sure that Mr. Musk is a very smart man, but he wasn’t the first person to come up with something like this. As a matter of fact, you can go back and there’s Teddy Roosevelt, there was the Hoover Commission that was under Truman that was former President Hoover led. That was very successful. There was the Grace Commission where you’re talking about social security. You had Greenspan, Alan Greenspan who helped save social security back in the eighties. I mentioned the Grace Commission. That was in the mid eighties as well. You had the reinventing government in the Clinton administration and certainly in the Obama administration you had Simpson Bowles and just even this congress, there’s been a proposal for a bipartisan bicameral fiscal commission that we’ve endorsed that was proposed by House Budget Committee chairman Jody Arrington.

So it’s not a new thing. They have some of these, and I don’t want to steal your thunder about the history of commissions, but I was a government major, the Coast Guard Academy, so I’ve kind of seen some of this. But one thing has been consistent that when we’ve seen these, whether it’s the Simpson Bowls or the Super Committee, that was another one, I forgot to mention that one. And this proposed fiscal commission, TCS has always stood ready to provide our ideas to push for it and to support it. And I don’t think we’re going to treat the Doge any different. Speaking of working with it, Congress’s reaction been to this so far, Josh?

Josh Sewell:

It is been mixed. Perhaps that’s an understatement, but surprisingly there’s been some bipartisan support for this. I think not only that, first of all, the House Committee on Oversight and Accountability has created a new subcommittee for the next Congress called the doge, delivering on government efficiency.

Steve Ellis:

We all love an acronym and just keep running with it. I think actually Doge, when it was the Dogecoin, which let’s face, that was part of the joke here, which was kind of a joke. Cryptocurrency, it was do only good every day. So lots of different doge out there.

Josh Sewell:

But this both the Doge subcommittee, the former one in Congress and also this ephemeral entity out in the world led by Musk and Ramas Swami, have members of Congress from both sides of the aisle have met with them or at least have said they would like to meet with them. And so on that house committee, you’re going to have Republicans and Democrats assigned to that subcommittee. And that’s important because ultimately, again, we mentioned the Grace Commission, that was an official commission in the eighties, an advisory committee essentially. So they had an official capacity, but they can’t force anything in Congress. The super committee you mentioned from Simpson Bowles after Simpson Bowles was basically a small group of members of Congress who had been legislated to say, you go find a package of deficit reduction and then Congress will vote on it. Well, they could never agree to it because they never agreed to.

The super committee never got along. They never, never came to agreement. So the DOH now is, it’s not of the government, but it’s got the ear of the government, of parts of the government. And so ultimately that’s what matters because Congress is the ultimate entity that’s going to implement these enduring cuts. I think one of the things that we’ve learned from these various commissions, they can have an impact, but enduring change, enduring progress only comes from Congress embracing these and the President working with them to actually make some of these cuts and revenue increases after you’ve accepted that. The reality is we have to do something and we have to do it now.

Steve Ellis:

And I think that also to your point on enduring change, it has to be bipartisan. And that’s something where we’re hoping that there’ll be more engagement from the Democrats. I think last I saw it was only representative Moskowitz from Florida was the only one that was a Democrat that was engaging, but he basically said, I want to be in the room when these decisions are being made. And certainly that’s part of the key thing is, is that you can make your point. You can advocate for it, but if you’re not in the room, then you’re outside by definition.

Josh Sewell:

And I think there’ve been a couple other folks sometimes anonymously quoted, but also who’ve said, yeah, I’m happy to be a part if it’s going to be real. And part of that is it can’t just be focusing on eliminating regulations that affect the aeronautical industry or it can’t just be about cutting the things that Democrats like and Republicans oppose. If you’re going to actually look at the whole of government, then yeah, we can have a conversation.

Steve Ellis:

Well, and before we get to sort of the whole of government and where they all look need to look, we certainly have heard things from Mr. Ram Swami that was saying, we’ll get rid of regulations, and then you get rid of the government employees that actually are the ones who implement the regulations. So you don’t need them anymore. Well, the thing is, is that math matters. And in fiscal year 2024, all the federal employees compensation, so both salary and benefits was $290 billion, which is a lot of money, don’t get me wrong. But they’ve said that the Doge wants to save $2 trillion in one year. So that doesn’t even get you to 15% of the total if you eliminated every single federal civil servant. And that’s 60% of that money went to employees at Department of Defense, department of Veterans Affairs and Department of Homeland Security, all things where I don’t think there’s a lot of appetite to cut and to eliminate these people. So these are areas where it’s going to be really difficult to actually make those cuts, particularly if you just kind of throw things out there arbitrarily because it’s what you believe, not where the numbers direct you.

Josh Sewell:

Absolutely. And this is why one of the, I guess the tagline we included in our as an organization is tax space for common sense making government work. And at least my reasoning behind that was government has a role in our lives. Some of us want more government, some of us want less, but all of us want something. And clearly, Congress, successive congresses, and many presidents, no matter how much they’ve said, deficits matter, they continue to spend because voters want us to do stuff, right? Voters want something from the government. And so the key navs to say this, doge is not going to make any more progress than any of these other commissions unless they do something a little different. And you can’t just come in and break everything. Disruption isn’t for disruption’s sake. It’s not going to do it because a lot of these programs are long lived.

They’re either serving problems or serving a need that people have identified and have wanted for a long time. And so to really reform them, if we’re going to keep them, to reform them, you got to engage for the long term and you got to understand where people are coming. That’s why we talk about bipartisan. You got to understand from both sides of the aisle what the different angles are and ultimately have that conversation to figure out is the government working? And if it’s not, let’s lean into that efficiency part of it. This isn’t just about cutting stuff, it’s about making it work better. There may be some places where you can do a lot of good by reforming, and let’s be frank, that might mean less personnel in some areas it might mean more personnel in others. So we got to look at that,

Steve Ellis:

Right. Well, certainly that was one of our arguments about the investment in the IRS is that you’re going to get a better service for the taxpayer if you actually have people there to answer the phone and respond to the emails. One of the other things that Mr. Ramaswamy was talking about was cutting things that were not authorized. And so what is that about Josh?

Josh Sewell:

Oh, man. So there are a lot of programs doling out money providing services in the federal government that are not technically authorized. So Congress at one point authorized a program to do something and that authorization has lapsed. So I think it’s about 500 billion at least a year in programs that have an expired authorization. So they still get money. We still appropriate money, and they deliver these programs, but they technically don’t have an authorization. And so Ms. Ram Swami has looked and said, Hey, look at these programs that aren’t authorized. We should get rid of them. Well, you’d be getting rid of entire agencies in some, so NASA isn’t authorized. The parts of the Department of Justice has lots of programs that aren’t authorized. Most of the National Weather Service like noa, the national NOAA isn’t authorized. So you would be small business administration, small business, tons of agencies would just disappear overnight. Well, I mean that’s another thing where if you don’t have experience with government, you don’t understand that well, there’s a budget that Congress creates an annual budget resolution, then they create appropriations. They also have to have an authorization for various programs, maybe an agency and then programs, and then you dole out money. It is a complicated beast. It needs a lot of reforms, but it’s not as simple as saying, well, this isn’t authorized so we can close it or We don’t like you, so you’re fired. That’s not how it works.

Steve Ellis:

Well, and it’s a good example of that here, a little bit of knowledge is a dangerous thing. And that Mr. Ramaswamy picked up the government accountability office report, which is the investigative oversight arm of Congress that documented all these unauthorized programs that were basically defacto getting authorizations because Congress kept approving appropriations forum and said, well, those must not be that important. In reality, you’re going to have to dig in a little deeper and you’re going to have to lean in. And I think some of that too is relying on government and other expertise. And so certainly they bring a certain knowledge and a certain skillset. They’ve both been very successful in their businesses, and that’s great, but you got to recognize that there’s a lot of knowledge and a lot of baseline information here that is there. And it’s not to say just give up, walk away. It’s more to say, alright, let’s do this in a constructive manner that is actually going to make government work for taxpayers more effectively.

Josh Sewell:

And I’d say in my experience here is some of the people who are the most frustrated with the way an agency works and who would like to see it reformed are sometimes the people that actually work at those agencies and they know where the inefficiencies are, but they’re also the folks who need to be there to show you how to get those efficiencies into the government.

Steve Ellis:

And I think one other thing that we’ve talked about Josh on this is that, and this is going to be tricky because this is not a legislatively created, it’s not an authorized entity, the Doge. And so then it’s like how does those recommendations translate into actual legislation that’s going to make these decisions? And I think that there’s sometimes a mistaken thought that the president can just do whatever they want, that they can just recommend it, and he can shut down agencies and can make some of these wholesale changes. But in the reality, there’s the law and that as long as these are being appropriated funds, those funds have to be spent and that you can’t just shut down the agency. So some of it is, I think that this committee, the subcommittee, is to think about how do you translate these proposals into legislative packages.

When you saw the Simpson Bowls, when you saw the Super committee, they all had mechanisms there that would force the vote that essentially once they submitted the package, if it was approved by a super majority in the case of Simpson Bowls, or if it was an agreement between the members of the super committee that then the house had to vote on the package and the Senate had to vote on the package, you couldn’t filibuster it in the Senate. And so those are some of the challenges that they’ve got to overcome. And so we still don’t know the structure of this entity. A lawmaker could in the beginning of the hundred 19th Congress introduce legislation that establishes this. But right now all we have is Elon Musk, Vek Ramas, and somebody else that they’ve named as Chief of Staff, and that’s the structure that we know of. And they’re having meetings and there’s been a Doge committee or Doge conference, and I think Senator Ernst, she’s the head in the Senate, and then there’s one in the house, and you mentioned the subcommittee, and that’s Congresswoman Marjorie Taylor Green. And so there is movement, and then it’s a question of what is the structure and put it on the bones. And then I think I saw that the idea is to at least release this report on July 4th, 2026, which would be the 250th anniversary or the sesquicentennial or by sesquicentennial of the founding of the United States.

Josh Sewell:

And I look forward to seeing that report. I’m sure it’s going to be a great report. Well beach read, but we also, between now and July 4th, 2026, we’re going to have to finish fiscal year 2025 approaches. Then we’re going to do the 2026 budget process, and we’ll be into the 2027 budget process. And so there’s a lot of opportunities between now and almost two years from now to make some of these decisions, to do some of this oversight and to get Congress, because ultimately this is Congress’s job. It’s not the Doge and it’s not even this or a future president, it’s job to get our spending under control, the ones that control the purse strings. So I am an optimist because I’m always an optimist. Anyone who’s ever met me knows I’m an optimist, but I’m also a realist. And so I feel like this is something that we as budget watchdogs want to embrace, but it’s not just us.

It should be anybody who wants to, wants their government to work more efficiently and to get their deficits under control, but also to have that flexibility in the future to where we’re not forced to pay more than a trillion dollars just to service our debt already there. We’re at $900 billion and it’s going to go up unless you think interest rates are going to go down magically pretty soon. And even if they do, it’ll go back up eventually. And if we want that flexibility to be able to respond to needs, we got to get our spending under control. And again, this is making sure we’re getting out of the government what we truly need and not just what we want. That’s part of the decisions. And I’ve got self-interest in this. I’m much farther away from Social security than some people like me. So I have a self-interest as well.

And so there aren’t a lot of easy decisions in Washington. And what I really want from members of Congress is to not use the Doge as a get out of jail free card and say, well, look at it. They’re just doing this because Congress has to make these decisions. And no matter what the Doge proposes, the president may try to do some things through executive action, and some of those may stick, some of those may not because again, there will be a different president and that president can reverse a lot of executive actions. And so if we really want things to stick, you got to engage, get some buy-in from both sides of the aisle and really be straightforward and honest with the American people.

Steve Ellis:

Right. Well, and you were saying that, we were talking about that that’s supposed to wrap up in 2026, and we’ll have a lot more discussion about this in future podcasts, but in 2025, the 2017 Tax Cut and Jobs Act, a lot of those proposals or provisions that were for the individual tax breaks expire. And so that’s already a huge debate that’s going to go on, that’s going to have trillions of dollars of implications in either increased deficits or reduced deficits even before we get to the doge.

Josh Sewell:

Yeah, just extending the existing, the tax cuts as they are, because most of the individual tax cuts expire, like you said. So just extending those is going to cost one and a half to $2 trillion.

Steve Ellis:

Oh, I think it’s going to be more than that.

Josh Sewell:

Oh, sorry. Just for the next four years if you didn’t for the thing called the baseline. So if you adjust the baseline, so to actually extend ’em for 10 years, you’re talking $4.6 trillion. And so if you think that’s a good investment, make your case, but it’s going to add $4.6 trillion according to that official budget estimate. So you need to have that conversation. And revenue generating it or not is what caused the super committee to fall apart. And so they basically came to mostly agreement on some cuts that they can make, but then when the choice was all cuts or some cuts in a little bit of revenue, Congress couldn’t agree. And again, that brought us, that was 10 trillion in spending ago, I think. And so here we are, we have to have all options on the table, including revenue because if we have a spending appetite, we need to have a taxing level to cover that as well.

Steve Ellis:

And so mentioning all options on the table, there’s one other large entity that we mentioned at the top of the show that we haven’t gotten back to, and that’s defense spending, which we mentioned is more than half of the discretionary budget. So more than 800 billion, not quite as much as we’re spending on interest for the first time, but still a huge amount of cash.

Josh Sewell:

And many of the individuals who will be leading some of these committees in the new Congress have actually said, we need to increase defense spending while talking about cutting everywhere else. And that just doesn’t fly. And so we’ve produced reports over the years talking about all kinds of things that have bipartisan support in reforming such as the F 35 acquisition. That’s a pretty easy thing.

Steve Ellis:

Speaking of not flying

Josh Sewell:

And just the massive amount of government contracting that goes through the Pentagon, another issue is to the point of you can cut all the government employees you want, but if everything’s going through contractors, you’re actually not going to save much money or might cost even more money. And so again, it’s one of these areas where 800, 850 billion is a lot of money, is a lot of programs, but that means there’s some real efficiencies in there if you’re honest about it. And don’t just look at it and say, oh, we need to have a certain percentage of our government, of our GDP has to go to defense, or we have to always spend more every year on defense. Well, only if we need to. But again, I do think the Doge is a real opportunity because new to Washington, they pointed out some of these things. Can you imagine the Pentagon has never passed an audit? Some of these other new things that those of us who’ve worked on this understand very well, but new voices, new ideas, it’s a fresh opportunity,

Steve Ellis:

Certainly. And Mr. Musk tweeted about the F 35 as well and about how it was a bad acquisition, which we’ve known for more than a decade, and that they have to think about how to go for the next generation. And that’s we’ve talked about is maybe you don’t do a sixth generation or you do something different. But I do think that those are some of those questions that really need to be asked and that they are asking, which I think is a positive sense if you are going to take on that white whale that is clearly in need of spearing TCS, director of Research and Policy, Josh Sewell, thanks for the reality check.

Josh Sewell:

Always glad to provide it. You can take that check to the bank

Steve Ellis:

And I will. Well, there you have a podcast. Listeners, lawmakers and taxpayers alike must confront reality and be honest about the tough decisions we have to make. This is the frequency. Mark it on your dial, subscribe and share and know this taxpayers for common sense has your back America. We read the bills, monitor the earmarks, and highlight those wasteful programs that poorly spent our money and ship long-term risk to taxpayers. We’ll be back with a new episode soon. I hope you’ll meet us right here to learn more.