In this illuminating discussion, Budget Watchdog host Steve Ellis and TCS Director of Research and Policy Josh Sewell examine why the Department of Government Efficiency (DOGE) approach to federal budget cuts is misguided and potentially counterproductive.

Transcript

Steve Ellis:

Welcome to All American Taxpayers Seeking Common Sense. You’ve made it to the right place for 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 on the political spectrum, no one wants to see their tax dollars wasted. It’s late February, 2025 and dear podcast listeners, I want to be very clear. Accidentally firing workers handling issues like Avian Flu at the Department of Agriculture are those responsible for nuclear weapons? Safety at the National Nuclear Security Administration is not efficient. It is also not yielding meaningful savings for American taxpayers. Doge needs to hunt for real budget savings. Joining us to amplify this budget, watchdog Battle Cry is TCS Director of Research and Policy. Josh Sewell. Welcome back to the Hunt, Josh. Hey, super happy to be here. Alright, Josh, we all know the Silicon Valley mantra is move fast and break things, but that doesn’t translate effectively to the federal government. Why?

Josh Sewell:

So in Silicon Valley, they are trying to come up with new things, new ways of doing old things. And so with the federal government, I’m not going to tell you it’s the most efficient thing in the world, but it actually does things that have an impact in the real world and that people, taxpayers rely on. And when you break things firing the wrong people, canceling the wrong contracts, just moving too fast without seeing the consequences of your actions, then it has real world implications in a way that a Twitter blackout just does not.

Steve Ellis:

Exactly. So then looking at what the Doge is doing, just thinking about it, the old bank robber, Willie Sutton, was asked why he robbed banks to which he replied because that’s where they keep the money. So to that extent, is Doge even targeting the right spots?

Josh Sewell:

No, not even close.

Steve Ellis:

Okay. Care to elaborate for our podcast listeners. Josh.

Josh Sewell:

Do I? Yes. So mandatory spending and interest on the debt account for around 75% of federal spending. So three quarters of every dollar spent goes to those two big categories. So big parts of that side of the ledger include programs like social, which is 20% Medicare, about 15% interest alone, which is 12% Medicaid, more than 10%, the veterans military and the civilian retiree benefits, that’s more than 5%. And another around 5% comes from various safety net programs like food stamps. So none of that has been even touched yet. And some of it can’t be touched at all, like interest because we have to pay our interest. We don’t have a choice.

Steve Ellis:

But we’ve all heard about cuts to the federal workforce, Josh,

Josh Sewell:

But that’s not Willie Sutton’s bank, even though there’s a lot of federal employees estimates of spending on federal workforce, say about 290 billion in 2019, and that was about 6.6% of total spending that year. And the size of the workforce now is actually less by a little than it was 50 years ago, even though the US population dramatically increased in the last 50 years

Steve Ellis:

By about two thirds. But you could see that the workforce wouldn’t necessarily be the same scope or scale because there’s been computers, automation, and some of those things reduce the FTE, the full-time equivalent workforce needs.

Josh Sewell:

So in some ways the government is more efficient than it used to be, which is kind of the goal of department on government efficiency. But at the same time, there are some things where you can cut employees, but that work still has to be done, which has led in that same time to a dramatic increase in the number of federal contractors and actually contractors now double the federal workforce. Willie Sutton’s Bank. There you go. But the thing is with contractors, they’re just not as easy to vilify because they’re not federal workers unquote. And they have, let’s be honest, a built-in political constituency,

Steve Ellis:

Josh, thinking about these employees being let go and these changes. I wouldn’t be surprised if the number of contractors rise at the back end of this and that would be wasteful. They have to make a profit and their costs escalate over time. Not criticizing ’em for that, that’s their business model. But let’s dig into that a little bit.

Josh Sewell:

Well, that’s a real issue because if you still need the services to be performed, they’re going to still be performed. And so again, contractors almost always cost more money than a federal worker does, especially in the long run. That’s just the fact that we’ve seen in exploring budgets for a long time.

Steve Ellis:

Yeah, a lot of federal workers, and we’re going to have to see how this plays out in the long term, take the job because of a perceived security in working for the federal government and they’re discounted, they don’t get paid as much. And that’s been documented that federal employees, many of whom have advanced degrees don’t get paid what they would get paid in the private sector, but they feel a sense of job security that you wouldn’t necessarily have in a business that has been blown away by the doge and dismissing all of these employees. And you wonder how that’s going to affect retention and attracting federal employees in the future.

Josh Sewell:

And sometimes a federal job may be a little, when you look at all the benefits that come with it, it makes it a little more competitive perhaps in certain areas. But most of the studies show that even total compensation, counting health insurance and other things, many times these federal jobs fall short of the private sector counterparts. And I saw just, I think it was today when I was listening, they’re talking about at USDA, basically the farm loans programs. And so the people who operate the farm loans make about half as much as they could in a commercial lending facility oftentimes. But again, like you said, they will oftentimes take a job with USDA because it is a little more stable in the long run, and they might feel that they’re serving farmers better than at a private bank perhaps. And that’s just one anecdote, but there’s a lot of those across some of these agencies.

Steve Ellis:

I mean, there’s a public service element in this, and so I totally get it. I had served as an officer in the Coast Guard. I have people I went to the Coast Guard Academy with that continued on serving the Coast Guard and then later have worked in the private, worked in the private sector, but in others have actually gone into the federal service and are continuing to serve. And so there’s that aspect of it as well. So Josh, an estimated 7,000 IRS probationary employees are being fired. What do we know about this situation and what effect will it have on tax filing season, which is upon us right now?

Josh Sewell:

So these probationary employees were people who were brought on in the last year. And so in the federal government, like in a lot of other places, you typically have a probationary period for anywhere from one to three years. It’s basically an extension of your application process, make sure you can do the job and that you’re an adequate fit. And it gives you some flexibility too. It turns out if you don’t like it, you can leave with less consequences. And so the IRS has notably improved in its public service. I’m talking about basically people who are answering the phones, emails, and even we don’t like to talk about it, but conducting the audits because you do need people to respond to taxpayers when they have questions and you need people to adequately conduct the audits to make sure everybody is paying their fair share. And so the IRS is actually in many ways the one agency that we know pays for itself.

There have been lots of studies over time. The most recent one I saw says that for every dollar that’s invested in their service at the IRS, that generates about $6 in additional revenue. That’s not additional taxes, that’s just people paying the taxes that they are supposed to pay. And the flip side also is that those service agents at the IRS are also helping people access tax credits and tax breaks that they may not know how to access, whether it’s the child tax credit or the earned income tax credit, things that are complicated follow that you sometimes do need guidance. Not everybody loves to read the tax code and go through their forms like I do.

Steve Ellis:

This is a really good point and something that we’ve talked about before on the pod is that the IRS was starved of resources for years and there was a big investment in the IRS in the Inflation reduction Act. It’s been a target, it was $80 billion. They’ve gotten at least 20 billion out of that at 80 billion. But this is an agency that we all need to work effectively and efficiently. They have all of our social security information, they know more about us than probably most people’s spouses know about them, their partner. And for it to be running computer systems that are 60 years old that are programmed in COBOL is crazy. And so you have people who have been brought in talent that has been brought in. And Doge can’t say, I mean some of those 7,000 probationary employees may not have worked out, may not have been a good fit, but others, they didn’t distinguish high performers from poor performers or anything like that.

They just cut ’em all because they could. And to your point about the return on investment, the tax gap, the gap between what is owed to the government and what is actually paid was estimated in 2022 to be almost $700 billion, $696 billion. Well, that gets a long way towards Elon Musk’s revise target of a trillion dollars if you could just do that. To me, that is one of the things that somebody who’s a budget watchdog, somebody who’s been working on these issues that has pointed out some of the waste fraud and abuse and other things that the government shouldn’t be doing for two decades, to see them just come in and willy-nilly cut and slash without any thought, any real depth of knowledge seems like it’s just going to come back and bite us in the butt.

Josh Sewell:

And it’s actually, and right, we’re taping this now in the first quarter of the year and this is the height of tax filing season. So for this disruption to happen now, it also seems, I shouldn’t say it seems it is also unnecessary. Even if you feel this needs to happen, if you would’ve just waited two months, you’d have much less of a painful impact on some people.

Steve Ellis:

But you watch a faithful, to Josh’s point, just down the block from the TCS offices is an office space that just during tax season becomes an h and r block, has a big banner out front, has a sign, and then as soon as tax filing season’s over, it goes dark until January of the following year. Good point. Alright, Josh, stepping off that soapbox going to Doge. If you go to their website, they have this wall of receipts and let’s leave aside the errors like counting a canceled $8 million contract as an $8 billion one or counting canceled contracts multiple times and recognizing that a canceled contract doesn’t always save money, Steve, that’s a lot to leave aside. Okay. Okay. You’re right, you’re right. But let’s look how transparent are they

Josh Sewell:

Being? Alright, so looking at their wall of receipts versus our data transparency standard, we’ll do this checklist. So is it online check? Is the data downloadable? No. Sortable? No, not in any way that’s effective. Searchable, kind of, but it’s onerous. So you would think folks from Silicon Valley who talk about their online and tech bonafides could have done a much better job. And frankly, it’s having done a lot of data sets, a lot of agencies work with a lot of them. Frankly, it’s embarrassing.

Steve Ellis:

Tech bros. More like Technos. Alright, shifting to other doze related issues our listeners might’ve seen mention recently of the Impoundment Control Act. What is it and has the new administration violated it?

Josh Sewell:

So the Impoundment Control Act is one of the reforms that Congress and the president adopted in the wake of the scandal plagued Nixon presidency. It was part of a number of issues, a number of bills that created the budget process that we currently have and created processes to handle money in a more transparent and more effective way. The big part of the Impound and Control Act is that it creates procedures for how a president can impound, which is temporarily not spend and ultimately rescind money. Congress has appropriated as long as you follow the right processes. And so

Steve Ellis:

What we’ve seen is that this administration has canceled contracts, tried to pull back funding that has been approved by Congress, which violates then this Impoundment Control Act. And this is certainly something that the new OMB director Russ V has said that he believes the Impoundment Control Act is unconstitutional. And so this is certainly something where this administration is going to challenge that going forward and it is going to work its way through the courts and certainly up to the Supreme Court.

Josh Sewell:

And so your question of have they violated it, the answer is yes intentionally and with brute force because as you said, the OB director doesn’t think it’s a constitutional law. And so they are setting themselves up to challenge this at the Supreme Court. But I think also it’s a little concerning. Again, downplaying, it’s very concerning because there are processes to not spend money. And the whole point of impoundment was that it takes a back and forth between the president and Congress. There are many people in Congress who don’t want to spend money if it’s no longer needed. And that’s what you can do. You can impound money and say, Hey, the intention that you guys gave us money for, we don’t need it anymore. If it was disaster response, maybe that money was there and all the people who need it, there’s no longer a need.

And so same thing, if you can finish construction projects faster, this pool of funds is no longer needed. We don’t want to just come to the end of the year and say, oh, we have to spend the money because Congress gave it to us. No, if they don’t need it, if the intention is no longer pressing concern, let’s not spend the money. But again, there’s 50 years of process of doing this and every other president has followed this. And even for the most part, president Trump and his last administration, he pushed the envelope on some of these issues. But ultimately the money that was appropriated was spent.

Steve Ellis:

And kind of going back a bit in history here, Congress passed the line in Vito that gave the line in Vito to President Clinton. President Clinton used it and was sued by members of Congress. Not sure if McConnell was one of ’em, but I think he might’ve been. And actually it was overturned by the Supreme Court, including a majority opinion that included Justice Clarence Thomas. So then in the Bush administration, and I’m sorry for this divergence budget, watchdog a F Faithful, we supported basically what the Bush administration was calling the constitutional line item veto, which was really enhanced rescission authority. And what I mean by that is as Josh pointed out, the president can propose Rescissions to Congress where we don’t need to spend this money or did you really want to spend this money on this particular item and it goes to Congress. The problem is Congress could just ignore it, which is what they typically do.

They can approve it, but they can also just ignore it. And the enhanced rescission authority, all it did was it said one time a year, the president can push forward this rescission package. The Congress has to vote on it, that’s all they have to vote on it, the up or down. They can’t just ignore it. And so in that respect, it’s kind of almost a do over to Congress on some of these provisions saying, did you really want to spend this money and highlighting some of these spending provisions? And that is something that taxpayers for common sense strongly endorsed and still endorses and is the right way to go about this rather than just impounding funding that you don’t like.

Josh Sewell:

Okay. Let’s go off the second soapbox that you’ve had today.

Steve Ellis:

Yes, exactly. Exactly. It’s one of the things I testified on, I met with the Bush administration and talked about with them. So it’s something I think that TCS we have strongly endorsed. But let’s shift gears a little bit, Josh, and go back to last week’s podcast where we were talking about dueling reconciliations and a lot has happened since then. Catch up our budget watchdog Faithful

Josh Sewell:

Well House Republicans have now cleared a procedural hurdle on their budget plan and adopted their budget resolution and that their particular bill calls for their particular resolution calls for four and a half trillion dollars in tax cuts and potentially $2 trillion in spending cuts.

Steve Ellis:

So Josh, is this going in the right

Josh Sewell:

Direction? Not if you care about the debt and deficits.

Steve Ellis:

So speaking of that, what about the debt limit?

Josh Sewell:

So that resolution in the house also includes a $4 trillion increase and the debt limit.

Steve Ellis:

Alright, so the house has spoken previously, as we talked about in the pod, the Senate also did their package, which was more limited. It was part one of a two-parter. So doesn’t the Senate have a say in what the House package is?

Josh Sewell:

Yes, they have to agree. And so at some point for the House and the Senate to come to a reconciliation package to make spending changes and to make these tax changes, they will have to come to an agreement. They’re also going to at some point have to agree to an increase in the debt ceiling or some other way of handling the debt limit. And so this may be part of that whole motivation to do a two bill strategy. I think part of the theory is if you can implement some of these spending changes and you gain some political momentum and you show you’ve got a win for the president and a win for Congress, and then you can tackle the harder to do stuff arguably, which is the tax reform, I shouldn’t call it reform, the tax extension part of it, especially because the math around the taxes is getting harder and harder because just extending the tax cut and job tax which is expiring, would cost around four and a half trillion dollars I believe just extending it.

And so if you want to add in a bunch of other stuff that the president keeps apparently deciding, we should add in there, exempting taxes on tips, exempting from taxation, social security payments, exempting overtime, all kinds of other things, adding in new tax breaks for everything from, I think I saw interest that you pay on a car loan is one of the things that he wants to add back in. And who knows what else. I haven’t checked today to see if there’s a new idea, but the math is getting really, really difficult to keep it under four and a half trillion dollars. It actually, I don’t think it’s possible at this point.

Steve Ellis:

No, it’s certainly not possible. I mean, just extending the tax cut and Jobs Act provisions almost is more than four and a half trillion, closer to 5 trillion. And then the thing is, is that you’re adding all this other stuff and it’s going to get more and more expensive. And as we flagged, we’re in a very different, it was not a great debt situation back in 2018 when the tax cut and Jobs Act kicked in. We had $20 trillion in debt, but now we have 36 trillion in debt. And you have Doge firing workers saying that they’re trying to save a trillion dollars at the same time that you’re foregoing almost $5 trillion in this budget resolution. And you are increasing the debt limit in that same provision, which we all recognize we have to do, but the optics of it is not very good and it doesn’t play well.

And so I do agree that that was part of the sentence thought was that we would do this one thing, then forget about that. Now we’ll turn to this other thing that is completely different to try to make it go through. But the one beautiful bill strategy is what’s leading. And it’s definitely going to draw out the process just because giving the Pentagon 150 billion more as the Senate viewed, or a hundred billion dollars more as a house viewed or putting few hundred billion more into border security. That’s all kind of easy. But writing tax provisions is complicated and it is hard to get right and minor changes can have big impacts. And so it’s certainly going to slow down the process of having to deal with this. The other thing is is that the TCJA provisions that are expiring don’t expire until the end of 2025, but that means they are effective through tax year 2025, which means when you’re filing your taxes in 2026, all those provisions are still going to be effect. So you wouldn’t feel the impact of any changes or the failure to enact extension of the TCJA until the end of 2026. And even at that point, they can retroactively adjust it or change it. Sorry, podcast list. There’s a lot going on and that’s the reason why we’re touching on all of this. So moving on to the looming government shutdown on March 14th, that’s when the continuing resolution funding government at fiscal year 2024 levels expires. Is this shut down a mirage or is it the real deal, Josh?

Josh Sewell:

Well, I don’t do predictions well, but I don’t see how it can’t shut down. I mean, all sides are dug in pretty hard Democrats. They really want some assurances that the administration will spend the money that is appropriated. And so far Republicans have refused to do that. So I’m just not really sure, frankly, how they can come to an agreement because typically every shutdown has been avoided in the past by a bipartisan agreement between some number of Democrats, sometimes a majority, sometimes not. And so it just sure seems real. The last time I predicted there, a hundred percent chance of a shutdown didn’t even come close. So maybe I’m right again, a hundred percent chance, hopefully I’m wrong. But Josh Republicans

Steve Ellis:

Control the house and they control the Senate. So why don’t they just make a deal amongst themselves?

Josh Sewell:

Well, Steve, the divisions amongst at least a few Republicans seem to be just as severe as between Democrats and Republicans. And so most notably, this probably doesn’t come as a shock. A number of folks are insisting on greater spending cuts in exchange for a spending deal. So some of these deficit hawks are true to their word of wanting to see significant cuts in exchange for any sort of increase, not even increase in spending, but any agreement for spending. And it’s the same dynamic we’ve seen in the last Congress and under the previous speaker, but now with even thinner margins. It’s a new Congress and a new president, but some things are

Steve Ellis:

Awfully familiar. Josh Sewell, a real budget watchdog, thank you for being with us for this important conversation. Happy to keep talking about this. Well, there you have it, podcast listeners. It’s all about results and we ain’t seeing them yet. Doge, 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 spend our money and shift 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.