It’s the Republicans, not Musk, who are serious about cutting spending

Entitlements are infamously difficult to cut. Yet that’s what House Republicans propose.

Elon Musk and House Republicans both promised to tackle federal spending. It turns out only one of them was serious, and it wasn’t Musk.

Musk, who broke with President Trump last week after labelling Republicans’ reconciliation bill a “disgusting abomination”, might claim some authority. As leader of the Department of Government Efficiency, he was the public face of Trump’s assault on government.

Remember him feeding the US Agency for International Development into the wood chipper? Encouraging civil servants to quit or be fired? The chainsaw?

Musk loves the theatrical: He helped scuttle an omnibus spending bill last year mainly because of its page length. The DOGE cuts thrilled Trump’s base, horrified Democrats and traumatised civil servants.

But theatrical didn’t mean substantive. Fire every civil servant and cut foreign aid to zero and you save about $US300bn ($462bn). The deficit last year was $US1.8 trillion.

DOGE claims to have cut spending by $US175bn. But The Wall Street Journal, the New York Times and others found DOGE routinely overstated savings. Federal spending in the current fiscal year is actually up 9 per cent from a year earlier. (Trump sent a slimmed-down budget to Congress last month that seeks to entrench some of DOGE’s cuts.)

The big money, as everyone except Musk and Trump seem to acknowledge, is in entitlements. Not fraud, waste and abuse, but cheques correctly issued to eligible recipients. Such programs, including Social Security, health programs, food stamps and welfare, plus interest on the national debt, equal 73 per cent of spending.

Entitlements are infamously difficult to cut. Yet that’s what House Republicans propose. Far from being full of “crazy spending increases”, as Musk claims, the bill would reduce spending over the coming decade by $US1.3 trillion, relative to current law, and that would be predominantly from entitlements, according to the Congressional Budget Office.

The US Capitol in Washington. Picture: Bloomberg

So why does the bill add to deficits? Because it reduces revenues even more, by $US3.7 trillion, by extending tax cuts enacted in 2017, then adding a bunch more. If Musk is upset about this bill adding to the national debt, it’s the tax cuts, not the spending, he should be attacking.

Healthcare is the single biggest source of federal spending growth. Since 2000, federal health programs, mainly Medicare, Obamacare, and Medicaid, have grown from 3.1 per cent of gross domestic product to 5.6 per cent. Given the ageing of the population and rising medical costs, that is expected to grow. For years, budget hawks have pleaded with Congress to address this.

Give Republicans some credit: They have. Past cost-cutting often meant paying providers less, and providers would then change their behaviour. It’s why so few doctors accept Medicaid. This time, Republicans are going the less popular but potentially more durable route of giving less money to beneficiaries.

The Congressional Budget Office estimates policy changes under Trump will mean 16 million fewer people will have health insurance. Is that good or bad? That depends on your politics. Democrats and progressives think it is cruel.

Republicans, though, could point out that many of those people entered the US illegally or gained benefits because of discretionary or temporary program changes. For example, nearly a third of that 16 million is because Republicans aren’t renewing a temporary expansion of Obamacare subsidies passed by Democrats under Joe Biden, and the Trump administration is tightening up enrolment and eligibility verification.

A further half reflects changes to Medicaid eligibility, such as penalising states that cover certain immigrants, verifying eligibility more often, or ending a loophole through which states and insurers extract more dollars from Washington.

Five million people would lose Medicaid because of work requirements on able-bodied adult recipients without dependants. This provision is arguably the harshest: Many of those people can’t or won’t work because of personal circumstances or age, or can’t process the necessary paperwork.

There’s lots for budget hawks to hate about the Republican bill. It leaves debt on track to hit records. It doesn’t touch the big drivers of spending – Social Security and Medicare. It shifts costs, such as for food stamps, to the states. It lards the tax code with breaks that reward Trump’s base rather than help economic growth, and sunsets them in 2028 to artificially reduce the cost. It front loads the tax cuts and back loads the spending cuts.

Nonetheless, the proposed legislation is superior to anything Musk has done in one crucial respect: It is legislation. The Constitution gives the power of the purse to Congress. DOGE and Trump have largely trampled on that principle, gutting foreign aid, research and countless other programs without authorisation or input from the public or their representatives.

Republicans in Congress mostly stood by and let this happen. With this bill, they’re taking back control of the purse. Perhaps they could make that a habit.

The Wall Street Journal