DOGE Reform and the Challenge of U.S. Fiscal Consolidation

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Context:

The Department of Government Efficiency (DOGE) initiative under the Trump administration, aimed at downsizing the U.S. government and reducing fiscal deficits, faces challenges due to conflicting revenue policies in its legislative extension, the One Big Beautiful Bill (OBBB).

Fiscal Background and Rationale

Persistent Fiscal Deficit and Debt:Despite having the smallest government size among major advanced economies (36.49% of GDP in 2001–2024), the U.S. has maintained higher deficits (-6.0% of GDP) and debt (119.5% of GDP) compared to peers.
Low Revenue Base as Root Cause:The U.S. has the lowest average government revenue-to-GDP ratio (30.55%) among the MAE, with a tax-to-GDP ratio of just 19.27% during 2001–2022, far below OECD averages.
Need for Structural Reform:The fiscal gap is driven by insufficient revenue mobilisation rather than excessive expenditure alone, necessitating both spending cuts and tax reforms.

DOGE’s Reform Measures and Achievements

Expenditure Rationalisation:DOGE has implemented lease cancellations, contract terminations, workforce downsizing, AI-based efficiency monitoring, and consolidation of overlapping departmental functions.
Quantifiable Savings:The initiative claims $190 billion in savings ($1,180 per taxpayer) from cost-cutting measures, along with $30.1 billion from reduced regulatory compliance and deletion of 1.8 million words from federal regulations.
Transparency and Monitoring Tools:DOGE introduced portals for grant payment tracking, agency workforce data, and a “Workforce Reshaping Tool” that streamlined layoffs of 2,60,000 employees, guided by performance and seniority metrics.

Policy Extensions and Emerging Challenges

The OBBB Proposal:The One Big Beautiful Bill aims to integrate DOGE reforms with broader fiscal priorities, but includes large tax cuts, risking a $3.2 trillion increase in national debt over the next decade.
Conflict with Key Advisers:Elon Musk, a DOGE adviser, opposed the removal of electric vehicle tax credits in OBBB, highlighting internal contradictions between fiscal consolidation and sectoral incentives.
Revenue Side Neglect:Persistently low corporate tax rates, lenient effective taxation on the wealthy, and secrecy laws enabling tax evasion undermine deficit-reduction goals despite expenditure reforms.

Practice Question:

“Expenditure reforms alone cannot resolve a structural fiscal imbalance without corresponding revenue measures.” Discuss in the context of the U.S. Department of Government Efficiency (DOGE) initiative and its legislative extension, the One Big Beautiful Bill (OBBB). (250 words)

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