Amid all the hype about DOGE, we should be watching closely

If you believe the hype, America’s new Department of Government Efficiency (or DOGE) has been tremendously efficient in rooting out all sorts of problems with government spending.

Headed by billionaire Elon Musk, DOGE was created by an executive order of President Trump. Its stated purpose is “modernizing Federal technology and software to maximize governmental efficiency and productivity”.

DOGE claims to have found millions of dead people receiving social security, thousands of employees loafing around at home instead of working and many millions of dollars in ‘aid’ programs that would horrify American taxpayers if the payments were made transparently.

Many small government types in America (and indeed in Australia) have cheered this initiative, and with good reason.

We should all be very watchful, given what governments would get up to with our money if the lights go out.

However, many fans are going too far. For example, some on social media are claiming the US social security system is not going bankrupt, the money is just being ‘stolen’. But the fiscal pressures in the US extend a long way beyond social security system fraud and corruption.

It would be a big mistake to assume that long-term fiscal sustainability can be achieved — either in America or Australia — by cancelling aid programs, firing a handful of bureaucrats or chucking some social security fraudsters in prison.

For a start, it is easy to underestimate the sheer scale of the problem in the US.

The US Treasury website notes that the US deficit in fiscal year 24 was $1.83 trillion. They also estimate that, so far this fiscal year (which began on 1 October 2024), the government has spent almost $840 billion more than it has raised.

That’s a heck of a lot of mid-level department salaries.

Even should DOGE find a trillion or two stashed in programs to secure land rights for gay whales, US debt is now more than $36 trillion dollars. For reference, that is almost 100 times the net worth of Donald Trump and Elon Musk combined.

Getting debt of that scale under control is the work of generations, not a dozen young MAGA hotshots sneaking into the US Treasury building under the cover of darkness.

In Australia, the scale of the fiscal imbalance is different; but so too are the savings. For example, the most recent budget contains just over $5 billion in total for foreign aid. It is worth noting that foreign aid spending declines across the forward estimates, falling by 20% next year.

Our projected deficit will be just under $30 billion this year, rising to $40 billion next year. Gross debt is projected to cross $1 trillion in 2025/26. Cutting foreign aid to zero wouldn’t even halve the increase in our deficit.

Obviously Australia’s fiscal position is nowhere near as bad as the US, but this hardly justifies passivity about the coming fiscal challenges. The Australian Treasury’s intergenerational reports have repeatedly warned about coming fiscal pressures from an ageing population.

So if the problem isn’t woke bureaucrats, then what is it?

In short, the problem both in the US and Australia is escalating entitlement spending.

Almost all the growth in the Australia budget since the 1980s has come in three areas: health, welfare and education. Projecting forward, these contain the programs most likely to increase the size of government in coming decades as well.

The NDIS is a very prominent example. it is projected to cost almost $50 billion this year — far beyond the initial estimates — and is growing rapidly. The government has committed to capping the cost rises but it is unclear how they can achieve this.

Nor is the NDIS the only area of concern. Between aged care and the age pension, the government is budgeted to spend almost $100 billion this year. Meanwhile, childcare spending has continued to balloon rapidly year on year despite a number of initiatives from both sides of politics to create a better system.

The increases in these areas have dwarfed any savings found by efficiency drives, such as Tony Abbott’s commission of audit in 2013. Australian Trump acolytes, pinning their hopes on finding similar examples of waste here to those unearthed by DOGE, would do well to heed this lesson.

Reforming entitlement spending is hard, especially for populists, as it involves serious trade-offs. It has become harder because of the regrettable tendency of some politicians to sell the fairytale that there are simple solutions (such as making the rich ‘pay their fair share’).

As Bastiat noted more than 200 years ago, the idea that everyone can live at the expense of everyone else is a fiction. It seems each generation must learn that lesson anew.

While it is flawed, DOGE is one of the few recent initiatives to improve value for money for taxpayers. But a DOGE alone will not solve the problem.

Ensuring fiscal sustainability for future generations will require us to tackle both waste and the growth in entitlements.

It is all very well to argue ‘if you look after the pennies, the pounds will look after themselves’.

The big risk of putting all the focus on a DOGE is that if you never look for the pounds, you will only ever find pennies.

Simon Cowan is Research Director at the Centre for Independent Studies