Apparently unbeknownst to my Republican friends, the effort to cut ‘government waste’ has a long, bipartisan, history in the US. While Republicans point to Ronald Reagan as the original budget chide, the Federal budget deficit doubled under Reagan (graph below). It was Democrat Bill Clinton who last ‘balanced the budget,’ a feat that was rapidly followed by a deep and lasting recession. And Joe Biden dedicated his career to cutting Social Security, Medicare and Veteran’s benefits.

Over the years, US Presidents Nixon, Carter, Reagan, H.W. Bush, Clinton, W. Bush, Obama, Biden, and now Trump, have all paid fealty to the canard of ‘living within our means.’ Note the partisan bias in this list of names: there is none. Bill Clinton even hallucinated an entire ‘market’ theory of fiscal austerity, the ‘bond vigilantes,’ suggesting that God, via markets, is deeply concerned about American fiscal probity.

The term ‘efficiency’ reeks of moral fiber, of rectitude, of a capacity to do basic budgetary arithmetic. It appeals to Max Weber’s Protestant ethos of capitalism, to modesty, thrift, and decency toward the world. However, as with the inexorable logic of arithmetic, what is counted is a matter of what gets counted, and not ‘the math’ per se. When bodies start to pile up from this policy or that, the social violence soon enough becomes difficult to contain.

Through siloed discourse, few political conservatives know that Barack Obama structured his signature program, the ACA (Affordable Care Act, Obamacare), using the same capitalist principles that Elon Musk is currently espousing. Mr. Obama’s goal was to make the American healthcare system better by making it ‘more capitalist.’ With health insurers currently in the news for denying legitimate claims at rates suggestive of looting, the ACA is indeed capitalist. One’s view on whether this is a good thing likely depends on whether one is an insurer, or the insured.

What ‘efficiency’ has meant in the case of the ACA is that executive compensation has been raised through health insurers denying legitimate claims— nearly without restraint. The rollout of the ACA has been accompanied by a catastrophic rise in ‘excess deaths,’ of Americans dying from preventable causes that wouldn’t have if the ACA ‘worked.’ That Democrats consider the program a success suggests that making executives rich by killing large numbers of Americans was their intent.

In practice, capitalist efficiency is treated as an optimization problem dependent upon a chosen goal. If efficiency means getting more from less, the question becomes: more of what? While the concept of efficiency implies a physical optimization, e.g. producing four toaster ovens using the same quantum of inputs previously used to produce three toaster ovens, in practice, the capitalist goal is to maximize corporate profits, a monetary measure. And here is where it becomes political.

Suddenly the problems of physical optimization, of optimizing around physical constraints, is broadened to include capitalist social organization in its method. If a five-percent rate of profit can be earned from producing toaster ovens, but a ten-percent return is expected from buying a stock index fund, the optimal solution based on the goal of maximizing profits is to stop making toaster ovens and invest the proceeds in the stock index fund.

However, if every manufacturer of toaster ovens does this, toaster ovens will soon be hard to come by and stock prices overvalued. Further, selling off the assets of a toaster oven manufacturer to raise the money needed to buy the stock index fund is expensive, cumbersome, and time consuming. And if enough manufacturers follow this strategy, the market for toaster oven manufacturing equipment will be flooded and prices will plummet.

The question then is: how does the common-sense view of efficiency as frugality, as producing as much as one can within the limits of what one has, shift to the realm of social relations where frictions and the set of available opportunities are both changeable and moveable? The ‘innovation’ of money renders liquid, or transactable, the social aspects of economic production in a way that physical quanta will never be.

The pushback against DOGE here isn’t reflexive. Many Americans likely share the view that much of what the Federal government does shouldn’t be done. For instance, why are the FBI and CIA interfering in US elections? Why is the US funding and arming Israel? Ukraine? Why is the Federal government militarizing the police by producing military ‘surplus’ to supply them with? And why is oligarchy the only choice on the ballot?

In terms of national accounts, one person’s ‘waste’ (e.g. Pentagon budget) is another person’s paycheck. What this means is that 1) budget battles produce winners and losers and 2) the gains go to the winners, and not to ‘the nation.’ And Elon Musk is a poster child for dependence on Federal handouts. Not only do ‘his’ companies receive direct transfers from the Federal government (link below), but much of Musk’s wealth comes from two Federal bailouts of Wall Street.

Historically, austerity policies have found industrialists arguing that Federal subsidies to nominally private enterprises (such as Tesla and SpaceX) are ‘efficient,’ while social spending is ‘waste.’ This view is based in / on the web of related theories that constitute capitalist economics. As with earlier efforts, fans of austerity leap from local examples to global conclusions without apparently understanding that the economic logic doesn’t tie to the political conclusions drawn.

Soon after entering office, Ronald Reagan cut taxes and social spending while increasing military spending. Assessments of the policy are complicated by Paul Volcker’s, Jimmy Carter’s Chair of the Federal Reserve, effort to strangle the economy with sky-high interest rates. What Reagan did manage to prove was John Maynard Keynes’ theory that increasing Federal spending in an economic downturn (military Keynesianism) would boost the economy (top graph in this piece).

Note: this is not how Reagan and his supporters explained their results. The theory that cutting both taxes and social spending raises economic output was born. However, this conclusion is roughly analogous to writing a review of the play at which Abraham Lincoln was assassinated without mentioning the assassination. The facts come in pieces here. Cutting taxes and social spending work in opposite directions economically, not the same.

The theory that cutting taxes boosts economic output has empirical support, but not for the reasons that proponents claim. Cutting taxes boosts consumption, depending on the ‘propensity to consume,’ by leaving more money in the hands of consumers, and not by shifting economic production from government to ‘private’ enterprise. By analogy, Medicare is more ‘efficient’ than private health insurance in terms of both managing costs and producing good health outcomes. Medicare is a program of the Federal government. The point: the question of ‘efficiency’ isn’t answered by ‘government versus capital’ framing.

(MMT— Modern Monetary Theory, has a very different explanation of the relationship between taxes and economic output that readers with an interest would do well to acquaint themselves with).

This distinction is important because the result of DOGE, to the extent there is any, will be to privatize government functions for the benefit of oligarchs and Wall Street. For instance, NASA, the space agency of the US, has essentially outsourced the US space program to Elon Musk (and Jeff Bezos) under the theory that they can run it more efficiently than NASA can. But basic arithmetic argues against this theory.

Private enterprise must earn a rate of profit that the Federal government doesn’t in order to legitimate the social distribution of income and wealth. If the rate of profit is, say, 6%, this is 6% more that ‘private’ providers must earn to break even with Federal results. The US DoD (Department of Defense) actually offers ‘cost-plus contracts’ to guarantee private military contractors a rate of profit.

So, which is more efficient, for the Federal government to produce military equipment itself, to pay contractors to do so with a guaranteed rate of profit, or to put the question to ‘markets?’ There is no generic answer to the question. Each instance requires defining the intended outcome and estimating costs and methods. With the experience of Medicare in hand, there is no generic guarantee that the private solution is the most ‘efficient.’

The private health insurance ‘solution’ inflicted on the US has produced the worst outcomes amongst peer nations (see graph of life expectancy above) by a margin so wide that it should disprove the fantasy of capitalist efficiency from this moment forward. That Americans don’t know how bad these outcomes are suggests that the powers that be do know how bad they are. There is no benefit for Democrats from making these results known. And the only ‘private’ solution for Republicans (more capitalism) will produce even worse results than the Democrats have achieved.

Reagan’s economic thesis, tied to capitalist theory, had it that Federal spending is wasteful because of incentives. Question: why would private enterprise be more efficient than government? Both are structured hierarchically, meaning that they feature executives giving direction to the workers ‘below’ them. The capitalist theory is that ‘incentives’ motivate better outcomes. So, why not give incentives to government workers? Wouldn’t doing so ‘equalize’ them with private industry?

Giving Federal workers performance bonuses has actually been tried. Some Federal workers receive performance bonuses equal to up to 10% of base pay. But the real bonuses are paid when regulators and legislators leave government to take jobs with the corporations that they formerly regulated. These ‘revolving door’ jobs are limited to senior managers, suggesting a fungible, class-based, economy separate from the experience of, and outside of the purview of, rank-and-file workers.

Ironically, of sorts, coincident with this ‘revolution’ in economic understanding that people require incentives to give their employment their all has been a five-decade-long effort to reduce the economic incentives paid to labor (graph below). The result: it now takes two working adults to earn what one working adult earned (in inflation-adjusted dollars) a generation ago, leaving no one to raise children or maintain the household.

Another question to ask: what type of behavior does incentive pay motivate? Brian Thompson, the recently deceased CEO of United Healthcare, was paid large bonuses to kill ‘his’ customers by denying their legitimate insurance claims. The point: in the case of United Healthcare, capitalist ‘incentives’ legitimated the killing of thousands, possibly tens of thousands, of the firm’s ‘customers.’ So, why isn’t health insurer efficiency measured in life hours saved (graph below) rather than corporate profits?

Do incentives work in terms of big picture efficiency? In 2014, the year that the ACA was implemented, Americans lived 3.5 fewer years than did the citizens of peer nations. In 2022— eight years later, we live five fewer years than do the citizens of peer nations. Health insurance industry profits rose, executive compensation increased, and Americans have died at rates only seem in history in full-blown societal collapses (chart below). So no, the ACA goal of raising executive compensation has produced worse health outcomes, not better.

The point here is likely different than imagined. The point is that economic ‘efficiency’ depends on what the chosen objective is. If raising health insurance industry profits and executive compensation was / is the objective, then the ACA is an inspiring success. Government works! If the objective was to improve health outcomes for the people, this has not occurred. (Send me your evidence. I’m glad to debate this). But neither objective was handed down from God. Either is a social choice.

Early evidence for this conclusion can be found in the Republican debate over h-1b visas. Tesla employs about a thousand h-1b visa holders. Elon Musk is the Grand Poobah of Tesla. Musk maintains that the program allows Tesla to import skilled workers. However, as with the ACA and the health insurance industry, there is a history of large, industrial employers and contracting firms using the h-1b program to steal wages from workers. The point: when left to employers, robbing employees and customers enters quickly as an option.

My Republican friends argue that the ACA is ‘communist’ or ‘communistic’ without considering that if this is true of healthcare spending, it is also true of military spending. What they mean is that the ACA provides undeserving people with something for nothing. With the evidence from United Healthcare in hand, health insurance on which 30% – 40% of claims go unpaid is a lottery ticket, not insurance. The beneficiaries of the ACA are, again, health insurers and their executives. The proof: ‘excess’ deaths are through the roof, along with health insurer profits and executive compensation.

From Reagan forward the Pentagon budget has been a rallying point for demands for government ‘efficiency,’ if not quite in the way currently imagined. The point of confusion appears to be the units of concern, ‘individuals,’ versus ‘the nation.’ This can be rectified easily enough by putting military spending in terms of individual benefit. The per capita (person) Pentagon budget for 2024 is a tad over $2,200. This means that for a family of four, Mom, Dad and two kids, the annual Federal outlay for the Pentagon is $8,800.

Conceiving the Pentagon in the same way that the ACA is, as Federal outlays paid per individual for their own personal benefit, finds that $2,200 per person per year is paid. Recall, the ACA benefit, to the extent there is any, isn’t ‘paid’ to individuals. It is paid to health insurers, much as the Pentagon budget is distributed to MIC suppliers and contractors, not to citizens. Question: why would someone who is undeserving of healthcare be deserving of national defense?

Further, the US hasn’t ‘won’ a war since WWII. And in that case, it was the Russians (Soviets) who won WWII. If efficiency at the Pentagon is graded by how many wars the US has won since WWII, the grade is F. What then is the correct measure of ‘efficiency’ when it comes to national defense? The number of wars won? The destructive power created per dollar spent. The political state of the West? The answer depends on one’s interests. So. What are Trump’s / Musk’s interests with respect to the Pentagon? SpaceX? The US?

The mutual disdain that the political parties in the US are able to generate and maintain is a product of the differentiated material realities that are supported by differentiated discourses (graph above). When the US entered economic crisis around 2008, bailouts of the malefactors were quickly organized, leading those whose livelihoods were tied to Wall Street to quick recovery. The heavily subsidized US tech industry also quickly recovered. But this hasn’t been the case for the other 80% – 90% of Americans (graph above).

The analogy of the Federal budget to either a corporate or family budget is flawed for very basic reasons. The Federal government has the legal authority to create money. Corporations and households don’t. For example, should a family want to buy a car, it can pay for the car from savings or borrow the money to buy it. What it cannot legally do is ‘print’ the money needed to buy the car. The same is true, with some differences, for state and local governments and corporations.

My Republican friends argue that ‘money printing’ is in all cases counterproductive. But the actual risk of inflation is contextual—it depends on resource constraints, not simply on economic demand. Barack Obama ‘printed’ somewhere around $19 trillion USD to bail out Wall Street in 2009. But most of this was never drawn down, meaning that it never entered the economy. Deflation was the problem that Obama / Ben Bernanke were trying to solve, not inflation. The point: even in the face of large-scale ‘money printing,’ inflation was restrained from 2009 – 2020.

Had Mr. Obama’s ‘stimulus’ and bailouts been inflationary is the sense of causing a rise in the price of a broad basket of goods and services, my Republican friends might have a point. But in fact, what was proved (chart below) is that large amounts of money can be added to a depressed economy without inflation taking hold. This was a fundamental insight of economist John Maynard Keynes during the Great Depression. And it provided the theoretical justification for the Depression-era spending that eventually pulled the US out of the Great Depression.

Donald Trump clearly understood this when he promoted his $2.3 trillion pandemic relief program in 2020. Trump’s (and Biden’s) economic stimulus is widely blamed for the inflation that followed. However, corporate profits rose in lockstep with the rise in prices, meaning that producers were charging customers for price increases that they were not experiencing. Add this to health insurers killing their customers to earn larger bonuses and the social practice of capitalism is brought into the light.

For those who missed it, US Presidents have been promoting government ‘efficiency’ for five decades now. The result of those earlier efforts is the current state of the US. While ‘entrepreneurial’ spirits are applied to Donald Trump and Elon Musk, Mr. Trump was born rich and Elon Musk owes almost all of his fortune to fortunate timing. Musk took Tesla public in 2010, just as Mr. Obama was doing everything in his power to raise stock prices. And Mr. Trump’s ‘pandemic relief’ is more accurately described as the ‘save the stock market Act of 2020.’

Recall that within capitalist explanations of income and wealth, skill and hard work are fundamental. In contrast, the wealth of American billionaires doubled after Donald Trump put his pandemic relief bill forward in 2020. How did the already rich in 2020 get already rich? They were already rich from when Barack Obama bailed out Wall Street in 2008. From 2008 – today, the best guarantee of getting richer has been to already be rich. This represents a rigged game, not returns to skill and hard work.

Partisan political frames detract from understanding American political economy. The current Republican conceit that Elon Musk is a radical here to shake up a moribund system misses that every President over the last five decades has made a similar pitch. And while economic predictions are notoriously difficult to get right, this is a guarantee: should DOGE get up and running, the rich will be made richer and the rest of us poorer. This isn’t because Trump and Musk are evil or singularly self-interested. It will because this is how the American economy has been set up to operate.

The people running the US continue to make the worst decisions in the history of bad decisions—for the rest of us. For themselves, the free money keeps on flowing. S&L Crisis? The rich got bailed out. GFC (global financial crisis)? The rich got bailed out. Stock market down because of the pandemic? The rich got bailed out. In each case ‘we’ were told that it was ‘the system’ that was being bailed out. But somehow the money always landed in the pockets of the looters, not the looted. The US is out of time to get this right. In the parlance of the age: sad.

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