DOGE – Meme or Just Pure Fantasy

We freely admit it – we are suckers for a good restructuring story. Our bias comes from years of single stock equity research showing potential for high reward returns when companies reduce operating costs in hard times, leading to higher margins, operating leverage and higher profits when good times resume, creating tremendous value for shareholders. While a publicly traded company operates differently than the federal government, we saw some similarities of potential outcomes when reading the recent Wall Street Journal editorial written by Vivek Ramaswamy and Elon Musk.¹ Will the US federal government be the largest restructuring story in history? Or will it be more like Dogecoin, the cryptocurrency featuring a Shiba Inu dog meme?

What is DOGE – we’re not talking about the meme coin here! – And what is DOGE’s purpose?

The newly proposed Department of Government Efficiency (DOGE), co-founded by Vivek Ramaswamy and Elon Musk, aims to identify $2 trillion in federal spending savings. With the 2023 federal budget consisting of $3.8 trillion in mandatory spending, $1.7 trillion in discretionary spending and $659 billion in net interest on federal debt, this ambitious target represents roughly 29% of total expenditures.² DOGE has three focus areas—regulatory rescissions, administrative reductions and cost savings.

Federal Budget Overview and Constraints

To evaluate whether DOGE can achieve $2 trillion in savings, it’s crucial to understand the composition of federal spending:

1. Mandatory Spending ($3.8 trillion): This category includes programs such as Social Security, Medicare, Medicaid and other entitlement programs. These expenses are dictated by existing laws and are politically sensitive. Efforts to reduce mandatory spending would face significant resistance from both lawmakers and the public.
2. Discretionary Spending ($1.7 trillion): This category funds defense, education, transportation and other programs through annual appropriations. While more flexible than mandatory spending, discretionary cuts often provoke opposition due to their visible impact on public services and national priorities.
3. Net Interest on Federal Debt ($659 billion): This cost is essentially non-negotiable, as it reflects obligations to bondholders. Reductions here would require lowering the national debt itself—a long-term goal unlikely to yield immediate savings.

Given this framework, the $2 trillion target would require a 32% cut to mandatory and discretionary spending combined, or a drastic restructuring of federal programs.

DOGE’s Focus Areas

1.  Regulatory Rescissions
Regulatory rescissions aim to eliminate outdated or burdensome regulations to reduce costs. While regulatory efficiency can unlock savings, the potential financial impact on federal spending is limited. Most regulatory rescissions affect compliance costs borne by private entities, not direct federal expenditures. That said, some regulatory changes could lead to federal savings, such as streamlining environmental review processes or procurement regulations.

For example, the federal government could simplify permitting for infrastructure projects, which could reduce delays and lower federal costs associated with prolonged oversight. Most of the benefit here would accrue to the private sector, which may over time benefit tax revenue.

2.  Administrative Reductions

Administrative reductions focus on cutting waste in federal operations, including duplicative agencies, inefficient processes and bloated staffing. This area holds more promise for savings but faces practical challenges.

Federal agencies like the Department of Defense or Health and Human Services could theoretically operate with leaner administrative structures. For example, leveraging technology and automation in areas like claims processing or procurement could yield efficiencies. Similarly, consolidating overlapping programs—such as those providing education grants—could reduce redundant spending.

However, the scale of potential savings from administrative reductions is limited. The federal workforce and associated costs, while significant, represent a small portion of the overall budget. According to estimates, even a 10% reduction in federal workforce costs would save around $140 billion annually.

3.  Cost Savings

Cost savings involve renegotiating contracts, improving program efficiency and addressing systemic waste. This is arguably the broadest and most impactful area but also the hardest to execute effectively. Renegotiating contracts with defense contractors, healthcare providers and other vendors could lead to substantial savings. For example, the federal government could adopt strategies used by private enterprises, such as value-based pricing in healthcare.

Another avenue for cost savings is tackling fraud, waste and abuse. Programs like Medicare and Medicaid, while essential, are prone to inefficiencies and improper payments. Enhanced oversight and technology-driven solutions, such as artificial intelligence for fraud detection, could mitigate these issues. 

Key Challenges to DOGE’s Goal

Several obstacles make the $2 trillion target highly unlikely:

1. Political Resistance: Mandatory spending programs like Social Security and Medicare are often described as the “third rail” of politics. Any proposal to cut these programs would face fierce opposition from voters and lawmakers.
2. Implementation Complexity: Rescinding regulations, cutting administrative costs and finding efficiencies are administratively burdensome tasks requiring time. DOGE plans on using executive orders and judicial precedence to compress timelines.
3. Incremental Nature of Savings: Even with ambitious reforms, savings from regulatory and administrative changes are typically realized gradually, not as immediate windfalls.
4. Public Perception: Aggressive cuts risk public backlash, especially if they are perceived to undermine essential services or safety nets.

Conclusion

While DOGE’s focus areas—regulatory rescissions, administrative reductions and cost savings—represent sound principles for improving government efficiency, achieving $2 trillion in federal savings is highly improbable under current conditions. Most achievable savings lie in incremental reforms and targeted efficiencies, which, while impactful, fall short of the transformational scale required to meet this goal.

Setting aside the $2 trillion cost cutting goal, there does seem to be real potential in our restructuring analogy if we consider the broader US economy as the revenue side of the value equation. Regulatory rescissions and administrative reductions have the potential to unlock significant value for the private sector and operational efficiencies within the government. Similar to other periods of government reform both in the US and in other countries, structural reform lays the foundation for future growth. 

If done correctly DOGE’s positive benefits likely begin after this administration has left office and will be felt far into the future. And what about that goal of $2 trillion in cost savings? That’s about as real as Dogecoin. 

Important Disclosures & Definitions

1 Musk, E. and Ramaswamy, V. (11/20/2024). Elon Musk and Vivek Ramaswamy: The DOGE Plan to Reform Government. Retrieved 11/22/2024 from Wall Street Journal online.

2 Ready, D., Salazar, J. and Verboon, C. (March 2024). The Federal Budget in Fiscal Year 2023. Congressional Budget Office. Retrieved 11/22/2024 from CBO online.

AAI000844  11/26/2025