What to know about Trump's Department of Government Efficiency, led by Elon Musk and Vivek Ramaswamy

Trump's "Government Efficiency Department"

Donald Trump is promising to cut unnecessary federal spending by enlisting the help of two wealthy individuals—Tesla's CEO, Elon Musk, and businessman Vivek Ramaswamy. He plans to lead this effort through a new initiative he is naming the Department of Government Efficiency, or DOGE.

The recent appointments made by Trump on Tuesday have sparked numerous concerns regarding the initiative. A key issue is whether Musk and Ramaswamy will be able to influence federal spending, considering that Congress holds the power to approve the country's budget. Additionally, it's unclear where the two business leaders might decide to reduce expenses. It's also important to note that DOGE is not recognized as an official government agency, which raises questions about its authority and operational procedures.

The news comes just a week after Trump secured a second presidential term, as voters showed their discontent with the current state of the economy under Biden. In his campaign, Trump committed to reducing government expenditures. Musk's profile on X, the social media platform he acquired in 2022, has been updated to say, "The public has called for significant government changes."

"Honestly, it’s something that should be revisited periodically. Every few decades, it’s essential to reassess everything," said Elaine Kamarck, a senior fellow in governance studies at the Brookings Institution, who oversaw the Clinton Administration’s National Performance Review aimed at reducing government expenses in the 1990s, in an interview with CBS MoneyWatch.

Kamarck has some concerns regarding the approaches of Musk and Ramaswamy, particularly after Musk recently claimed he could uncover over $2 trillion in potential savings. This figure represents nearly a third of the federal government's annual budget of $6.7 trillion. It's important to note that a substantial portion of this budget—about two-thirds—is tied up in mandatory programs like Social Security and Medicare, with discretionary spending mainly allocated to defense.

"This is the initial indication that this operation is heading for failure," Kamarck remarked. "It's unbelievable."

The Trump campaign did not promptly reply to a request for feedback.

Here's what you need to understand about the Department of Government Efficiency.

Understanding The Department Of Government Efficiency

On Tuesday, Trump revealed the DOGE initiative, calling it a move to "reduce unnecessary regulations, eliminate wasteful spending, and reorganize federal agencies."

The name pays tribute to Musk's backing of a cryptocurrency known as dogecoin, which was initially developed as a joke by two software engineers and features the image of a cheerful Shiba Inu dog. (In the past month, dogecoin's value has increased more than threefold, and it is currently priced at 38 cents.)

Trump mentioned that the efforts of Musk and Ramaswamy are expected to be completed by July 4, 2026, which marks the 250th anniversary of the Declaration of Independence.

Trump provided a general overview of the initiative but did not reveal details about how it will be staffed or financed. The Trump campaign did not respond when asked for information regarding the funding of the DOGE initiative or whether Musk or Ramaswamy will receive compensation for their involvement.

Can DOGE Really Reduce Federal Spending?

Right now, it seems improbable since the DOGE isn't an actual government agency, which would require approval from Congress to establish. Federal spending has to be authorized by Congress, and senators and House representatives might be reluctant to endorse reductions in significant programs like Social Security or Medicare, which are favored by millions of voters, or to the military budget.

It's still uncertain how the organization will function. It might be subject to the Federal Advisory Committee Act, which outlines the rules for how outside groups that provide advice to the government should operate and remain accountable to the public.

Trump characterized the contributions of Musk and Ramaswamy as offering "insight and direction from outside the realm of government."

"That's not significant," Kamarck remarked.

"They lack any real power," she remarked, emphasizing that having the president's support can persuade legislators to endorse initiatives aimed at improving efficiency.

Musk And Ramaswamy On Federal Spending Insights

Elon Musk, who is currently the wealthiest person in the world with $319 billion, as reported by the Bloomberg Billionaires Index, has criticized the U.S. government, calling it overly large and stating that its expenditures cannot be maintained. The founder of Tesla also expressed his desire to cut the number of federal agencies from over 400 to just 99.

"There are countless [agencies] that most people are unfamiliar with, and many of them have similar duties," Musk stated earlier this month.

During his campaign tour alongside Trump, Musk claimed that he could reduce the annual budget by "at least $2 trillion." He stated, "Your money is being wasted, and the Department of Government Efficiency will address this issue."

Musk is recognized for reducing expenses at his companies, having laid off a significant portion of X's employees after acquiring the company two years ago and prioritizing production costs at Tesla. However, the outcomes of these strategies have been inconsistent. Since his acquisition, X's worth has dropped by roughly 80%. In contrast, Tesla's stock has risen by 48% over the past year, pushing its market value over $1 trillion.

Ramaswamy, reportedly worth around $1 billion according to Forbes, exited the presidential race in January after campaigning against "woke" culture. He also pushed for government budget cuts by proposing the elimination of the Department of Education, a notion that aligns with President-elect Trump's objectives.

Have Administrations Attempted Cost-cutting Before?

Certainly! Presidents from both the Republican and Democratic parties have made attempts to reduce government expenditures.

In 1982, President Ronald Reagan established the Grace Commission, headed by J. Peter Grace, a successful businessman and CEO of W. R. Grace & Company, a chemical firm. Approximately 150 entrepreneurs offered their time and skills to the commission, which ended up proposing around 2,500 changes, as noted by the Ronald Reagan Presidential Library.

The library points out that many of the suggestions, particularly those needing congressional action, were never put into practice. Nonetheless, the Commission's efforts served as a foundation for various conservative criticisms of the federal government.

In the 1990s, President Bill Clinton launched the National Performance Review to improve government efficiency and reduce costs, according to Kamarck. The team consisted of civil servants who were familiar with the bureaucratic system and had their own frustrations with it, she noted.

The organization achieved several accomplishments in improving efficiency and reducing expenses, ultimately eliminating over 300,000 positions, as reported by a study from the Congressional Research Service. Kamarck mentioned that the team also concentrated on incorporating technology into various departments during the early days of the internet, which resulted in new efficiencies like the ability to file taxes online.

Where Can The Trump Administration Save Money?

Although experts doubt Musk's assertion that he can reduce spending by $2 trillion, they also acknowledge that there are possibilities for improving efficiency.

According to Citizens Against Government Waste, a nonpartisan organization focused on government expenditures, one way to save money is by tackling Medicare fraud. Their suggestions also involve cutting back on the U.S. financial support for the United Nations and eliminating certain subsidies for agricultural items such as dairy and sugar. They estimate that these actions could lead to savings of $377 billion during the first year, which represents roughly 19% of the $2 trillion that Musk is considering.

However, Kamarck pointed out that efficiency involves more than just reducing expenses. It also requires a grasp of how the bureaucratic system functions.

"Everything in the federal government is vast and intricate, with numerous layers of complexity," she observed. "Al Gore and I depended on the insights of many knowledgeable civil servants to understand the system. If they don’t take this approach, which I doubt they will since Musk tends to be quite arrogant, they're likely to run into trouble."

Is Musk Facing Conflicts Of Interest?

Indeed, SpaceX, owned by Musk, collaborates with both the Department of Defense and NASA. Last year, the federal government committed $3 billion to support his ventures, as reported by the New York Times. On the other hand, Tesla has faced scrutiny from the National Highway Traffic Safety Administration and other regulatory bodies.

Federal employees typically need to reveal their financial interests and connections to prevent conflicts of interest, and they must sell off major investments related to their job. However, since Musk and Ramaswamy would not be official federal employees, they wouldn't have to adhere to these rules or ethical constraints.

This report includes contributions from the Associated Press.

Aimee Picchi serves as the associate managing editor at CBS MoneyWatch, focusing on topics related to business and personal finance. Before joining CBS, she worked at Bloomberg News and has contributed articles to various national publications such as USA Today and Consumer Reports.