The Department of Government Efficiency (DOGE) has sparked controversy with its plumbing for fraud and “waste” in the federal government. Tesla dealerships have been attacked, and various protests have been coordinated across fifty states. Many of its vocal critics called it the beginning of a plutocracy—as everyone knows that plutocracy involves former business owners trying to make government smaller. That aside, Musk recently threw in the towel and gave up on DOGE’s ability to get $2 trillion in cuts. Musk posted on his X:
I have come to the perhaps obvious conclusion that accelerating GDP growth is essential.
@DOGE has and will do great work to postpone the day of bankruptcy of America, but the profligacy of government means that only radical improvements in productivity can save our country.
It does not appear that Musk is confident that his team can resist the spending habits of Congress and the inefficiency of government. In the wake of the “Big, Beautiful Bill” that did not formalize any DOGE cuts, Musk seems to be disillusioned by the prospect of reform within the government.
Musk is not the first (nor will he be the last) person to try and bring about change in Washington. I have seen it widely remarked—and even in earlier days—that the reason some voted for or supported Donald Trump in 2016 was because “a businessman is needed to fix government.” DOGE could not beat the political machine precisely because government cannot be run like a business, an insight that Ludwig von Mises described in his book Bureaucracy.
Mises writes of the stark differences between management of a business, which he calls profit management, and government management:
In the field of business creative leadership manifests itself in the adjustment of production and distribution to the changing conditions of demand and supply and in the adaptation of technical improvements to practical uses. The great businessman is he who produces more, better, and cheaper goods, who, as a pioneer of progress, presents his fellow men with commodities and services hitherto unknown to them or beyond their means. We may call him a leader because his initiative and activity force his competitors either to emulate his achievements or to go out of business.
He contrasts this image of business leadership with the idea of a businessman leading or trying to reform bureaucracy:
It is vain to advocate a bureaucratic reform through the appointment of businessmen as heads of various departments. The quality of being an entrepreneur is not inherent in the personality of the entrepreneur; it is inherent in the position which he occupies in the framework of market society. A former entrepreneur who is given charge of a government bureau is in this capacity no longer a businessman but a bureaucrat. His objective can no longer be profit, but compliance with the rules and regulations. As head of a bureau he may have the power to alter some minor rules and some matters of internal procedure. But the setting of the bureau’s activities is determined by rules and regulations which are beyond his reach.
Private enterprises are successful because they make use of the market price mechanism to determine efficiency through profit and loss. It can segmentize business and gauge profitability of a manager or employee. Bureaucracy operates without market prices, at best it charges fees, and thus, it lacks a profit-loss mechanism to gauge efficiency for the allocation of resources.
Government is an entirely different beast for an entrepreneur like Musk. Musk has been successful in private enterprise, in part, because of his ability to create value for others and cut costs. But a mass bureaucracy like the United States federal government is bound by millions of codes and regulations. It does not operate on free exchange and private ownership, so there is no accurate measure of whether the technological changes Musk and DOGE have made will have a significant impact. Identifying fraud is a useful rhetorical tool but the amount found is a rounding error for the federal budget.
Spending increases and the debt skyrockets, as the iron law of American fiscal conservatism tells us. Much of Musk’s identified cuts—such as to USAID, the Department of Education, and the like—have been refunded thanks to the reconciliation bill that recently passed the House. Musk and his team of young techies stood face-to-face with a class of bureaucrats and congressional staffers that made it nearly impossible for any serious spending cuts to occur.
Congressmen have an incentive to pack large legislation with clauses and spending that will return directly to their districts. This tactic—called pork-barrel legislation—wins votes from constituents and buys votes from representatives who wish to be reelected. It is not only these representatives but their partisan staffers, whose jobs and salaries rely upon their representative being in office. The bureaucrat class in Congress has an incentive to fund a similar class of bureaucrats in the civil service. The managerial revolution marches on to the beat of the drum, that is, the federal debt clock.
Term limits for these staffers and representatives are not likely to be a solution to this problem, as it just shortens the time horizon for their looting of productive society. Shorter times for being in office are likely to accelerate the growth of debt and spending as congressmen and their staffers cash in their checks sooner rather than later.
The root of the problem is the government itself. Government has expanded to such a size that it encompasses all aspects of life. Like an addictive drug, government money has reached into the most intimate parts of people’s lives: healthcare, education, food, banking, etc. Cutting it off certainly would have beneficial long-term effects but it would have short term shocks that are compounded by other government interventions. These short-term consequences are not conducive to the reelection of those who advocate for them. This is why entitlements and defense spending are not touched by GOP lawmakers. What is needed is a figure who can gut the problem and take the brunt of the temporary fall.
It is not because of a lack of genius or passion on Musk’s part that DOGE has not been as successful as he wished. The very system of government and bureaucracy have incentives stacked against his mission. It cannot be steered even by the most competent businessman in the world. It is a slow-growing behemoth and begins to collapse of its own inner contradictions. Politics is not a game of efficiency, it is a game of parasitism that isn’t welcoming to cost-cutters like Elon.
