Context and Overview

In his second term, President Donald Trump launched an ambitious fiscal reform initiative known as the Department of Government Efficiency (DOGE). This initiative aims to significantly cut federal spending, deficits, national debt, and interest obligations, while also modernising and streamlining government operations. A central element of this initiative is the reduction of the number of federal agencies from over 400 to 99, with Elon Musk appointed as an advisor to help lead this overhaul.

The initiative''s flagship legislative proposal, known as the One Big Beautiful Bill (OBBB), has become the focal point of debate. It promises sweeping budget reform but is now facing political and economic obstacles, particularly due to its tax-cut-heavy structure and the risk of escalating long-term debt.

The Root Problem: Low Revenue Collection Driving Debt and Deficits

Despite efforts to shrink the size of government, the core fiscal issue in the U.S. remains persistently low revenue collection, rather than excessive spending alone. Between 2001 and 2024, U.S. public expenditure averaged just 36.49% of GDP, the lowest among major advanced economies (MAEs). Nevertheless, the U.S. ran a fiscal deficit of 6.0% of GDP and held a debt burden of 119.5% of GDP in 2024, both of which exceeded MAE averages.

This mismatch between low spending and high debt arises mainly from chronic revenue shortfalls. Between 2001 and 2022, U.S. government revenue averaged 30.55% of GDP, ranking lowest among peer nations. Its tax-to-GDP ratio of 19.27% significantly lags behind countries like France, Italy, and the OECD average. Without substantial revenue generation, any effort at deficit control risks being undermined, regardless of spending reductions.

DOGE’s Cost-Cutting Strategy and Structural Reforms

The DOGE initiative has implemented sweeping cost-cutting measures, delivering substantial reductions in federal expenditures. These reforms include cancelling underutilised leases, terminating wasteful contracts, and recovering misallocated funds. DOGE has also focused on shrinking the federal workforce, using a combination of hiring freezes, voluntary buyouts, layoffs based on performance metrics, and automation.

In addition, DOGE has slashed overseas humanitarian aid and eliminated overlapping or inefficient departmental functions. Artificial Intelligence (AI) tools have been introduced to monitor productivity and identify redundancies in government roles. Regulatory rollback has been another key priority, with DOGE repealing or amending numerous federal rules, achieving savings of $30.1 billion and removing 1.8 million words from the federal rulebook.

A significant structural change has come through workforce downsizing tools like the “Workforce Reshaping Tool”, which has contributed to the exit of around 260,000 federal employees. DOGE claims to have generated $190 billion in savings, translating to $1,180 per taxpayer.

The initiative also promotes transparency and accountability by making data on grant recipients, workforce size, and cost savings publicly accessible through dedicated digital portals. Moreover, DOGE tracks the disproportionate influence of bureaucracies on policy through its “Unconstitutionality Index” (UI) — a unique metric showing that for every law passed by Congress in 2024, 19 rules were introduced by federal agencies.

Challenges to Long-Term Fiscal Sustainability

Despite its early accomplishments, DOGE’s long-term viability is now being questioned, especially following Elon Musk’s withdrawal of support for the One Big Beautiful Bill (OBBB). Musk''s objection stems from the bill’s removal of electric vehicle tax credits, a move seen as politically and economically regressive by climate advocates and clean tech investors.

More concerning, however, is the fiscal structure of the OBBB itself. While it extends DOGE’s cost-cutting approach, it also introduces broad tax cuts that heavily outweigh the planned expenditure reductions. Projections estimate the bill will add $3.2 trillion to the national debt over the next ten years.

This trajectory is further complicated by America’s already low corporate tax rates, below-average effective tax rates for the wealthy, and financial secrecy laws that enable tax evasion. Without major revenue-side reforms, especially targeting tax compliance and equitable contribution, deficit reduction will remain elusive.

Ultimately, unless revenue collection is substantially increased, President Trump’s vision of debt reduction through DOGE-style austerity may be unsustainable. The initiative’s success hinges not only on cutting costs but also on strengthening the government’s ability to generate revenue — a factor that remains largely unaddressed in current policy.