Under our three savings bucket scheme, “Slashing the Fat” would account for just $300 billion or 15% of DOGE’s $2 trillion per year savings target. Needless to say, however, even that small portion would be far easier said than done.
That’s because unlike the case of typical US businesses, where payroll costs can range from 15% to 40% of total costs, such expenses comprise only a tiny fraction of total Federal spending. Setting aside DOD payrolls for the “Downsize the Muscle” bucket, we estimate fully-loaded nondefense employee compensation costs at $215 billion in the target year of FY 2029. That’s just 3.1% of the $7 trillion of nondefense outlays projected under current policy by CBO for what would be the final Trump budget.
So there is a lot of wood to chop in other areas of the budget, but we start with the assumption that $75 billion or 35% of nondefense payroll costs would be a fair target for a plan to generate the $300 billion of “Slash the Fat” savings. At the projected FY 2029 cost of $160,000 per Federal employee for payroll, benefits and fringes, as detailed in Part 1, this would require termination of 470,000 positions from the current total of 1.343 million nondefense employees.
On it’s face, this headcount reduction target is eminently plausible given that the Washington Swamp is a vast cesspool of padded payrolls, useless projects, endemic inefficiency and misbegotten government enterprises. But what is especially telling is that our 35% payroll cut would achieve well less than half of the 80% staff reduction that Elon Musk achieved at the old Twitter. And he did so in the context of a labor-intensive business without missing a beat in terms of operations and customer accommodation at the new X.
So we begin the payroll savings analysis by bringing the hammer down terminally on the 16 worst and most unneeded Federal agencies, including the FBI, OSHA and the FTC. Eliminating these 16 bureaucracies entirely would reduce Federal employment by 74,000 jobs and save just under $12 billion per year of compensation costs. That’s nothing to sneeze at, of course, but to place it in budgetary context it does represent only 13 hour’s worth of the $8.0 trillion per year of built-in Federal spending for the target budget year of FY 2029.
We also show that cutting 50% of the staff levels at another 9 dubious departments—including EPA, NASA and GSA—would shrink the Federal payroll by an additional 92,000. That would save a further $15 billion annually in compensation costs.
Still, we would need an additional $48 billion in nondefense savings to achieve the $75 billion target for direct compensation reductions. Accordingly, upwards of 304,000 positions would need to be eliminated from the balance of the nondefense budget or about 28% of the 1.084 million current jobs at everything from the Agriculture Department to the Social Secuity Administration and Veterans health care system.
In addition, as amplified in Part 3, we estimate that $75 billion of direct compensation cost savings would generate an additional $75 billion of savings in the related costs for agency overhead, occupancy and outside contractor and services support.
In summary, therefore, we’d propose that about one-half of the “Slash the Fat” savings target of $300 billion be obtained from the following areas inside the four walls of nondefense government. Part 4 will outline an equal $150 billion of savings from outside the walls of nondefense government in the form of cuts in corporate welfare, the Green New Deal and other wasteful private sector subventions.
Summary of Savings From Headcount And Nondefense Agency Waste Reductions (FY 2029):
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100% Elimination of Staffing at 16 Unnecessary Federal Agencies: $12 billion.
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50% Staffing Cut at 9 Dubious Federal Agencies: $15 billion.
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28% Staff Reduction at All Other Nondefense Departments: $48 billion.
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Indirect Overhead savings from nondefense staff reductions and agency eliminations: $75 billion.
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Total Non-Defense Staff and Overhead Savings: $150 billion per year.
Here are the 16 agencies to be shutdown, along with the number of staff positions to be eliminated and the resulting direct employee compensation savings. These agencies are slated for complete elimination because in the context of a roaring fiscal crisis, they are either utterly unnecessary or inappropriate functions of government or comprise activities that are already being handled by other Federal agencies, state and local governments or the private sector.
16 Agencies To Be Eliminated:
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National Endowment for the Arts: 100 staff and $16 million savings.
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National Endowment for the Humanities: 100 staff and $16 million savings.
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Legal Services Corporation: 800 staff and $128 million savings.
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National Highway Traffic Safety Administration (NHTSA): 600 staff and $96 million savings.
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Federal Trade Commission (FTC): 1,125 staff and $180 million savings.
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Corporation for Public Broadcasting: 100 staff and $16 million savings.
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OSHA: 2,200 staff and $352 million of savings.
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Consumer Products Safety Commission: 600 staff and $96 million of savings.
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Agency for Global Media: 1,125 staff and $180 million of savings.
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National Endowment for Democracy (NED): 162 staff and $26 million savings.
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Education Department: 4,245 staff and $680 million savings.
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Consumer Financial Protection Bureau: 1,500 staff and $240 million savings.
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Agency for International Development (AID): 10,000 staff and $1,600 million savings.
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FBI: 37,310 staff and $5,970 million savings.
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BATF: 5,280 staff and $845 million of savings.
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DEA: 9,315 staff and $1.490 million savings.
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Total 16 Agencies To Be Eliminated: 74,559 staff and $11.939 billion of savings.
Needless to say, many of the above listed agencies were on the original Reagan zero-out list of 1981. Yet they are still alive and prosperous because the Swamp is relentless in the defense of its own, and especially because on the margin even most of the GOP movers and shakers on the Congressional spending committees have been Washington lifers, RINOs and political weaklings afraid to resist the politically correct dictates of the Washington establishment and their megaphones in the MSM.
National Endowments for the Arts and Humanities
For instance, they are still spending about $420 million per year on the National Endowments for the Arts and the National Endowment for the Humanities. Back then, when the public debt was only $1 trillion and 31% of GDP, we argued that the cultural institutions supported by the endowments should be funded by private philanthropy and public admission tickets to museums, operas etc., not hard-pressed bus-drivers in Milwaukee struggling to feed, clothe and shelter their families; and most certainly not via borrowing from future taxpayers through endless deficit finance.
At the time, the net worth of the top 1% of households was about $3 trillion, indicating ample capacity among wealthy patrons to support America’s important cultural institutions and endeavors, along with the voluntary support of tens of millions of other less prosperous but culturally engaged citizens.
Well, here we are 43 years later with a public debt of $36 trillion and heading skyward, while the net worth of America’s wealthiest households has risen by 16X to $47 trillion, which stands alongside a current net worth of $56 trillion for the next 9% of wealthiest households. Yet and yet: The clueless politicians on the Potomac are still borrowing money to fund cultural institutions when the top 10% of households alone have $100 trillion of net worth available for support of the arts and humanities.
In this instance, we’d suggest that Elon Musk set the example by pledging $2 billion over the next five years to enable cultural institutions and artists time to locate alternative sources of funding, thereby permitting the national endowments to be zero ‘ed-out on day # 1 in FY 2025. This would at least get the agency-elimination ball rolling with a bang.
To be sure, shutting down the two endowments would result in a reduction of only 200 Federal jobs and a compensation cost savings of just $16 million per year, but as we will detail on Part 3 it would also generate additional savings from grants and overhead of $390 million.
In any event, this is surely the place to start. After all, if the Trumpified Washington can’t even eliminate these two agencies, why then, truly, all is lost.
Legal Services Corporation
The same goes for the 800 staffers and $128 million of savings from eliminating the Legal Services Corporation. For crying out loud, this whole operation is a liberal hobby horse dating back to the early days of the War on Poverty in 1965. If the dubious political litigation it mainly supports via direct staff and another $432 million of grants and contracts has not found alternative funding more than a half century later, it doesn’t deserve any. Period.
NHTSA
In the case of NHTSA, we have the very worst of the Nanny State. It has not only usurped the role of the private market and legal liability system in determining appropriate engineering standards for auto safety, but for decades has been knee-deep in setting idiotic average fuel economy standards (CAFE) for the entire fleet of each automaker.
This causes immense distortions in vehicle offerings, pricing and production sourcing as automakers try to average together the lower fuel economy rating of heavier, higher performance and profitable cars the public actually wants to buy with artificially high fuel economy levels of small, stripped-down, under-powered cars that manufacturers price to move despite limited marketplace appeal, thereby meeting their fleetwide mandates. In the process of compliance, automakers also tend to shift sourcing of the latter small, cheap “compliance” vehicles to Mexico and East Asia in order to relieve the strain on profitability resulting from these largely unprofitable NHTSA-mandated vehicles.
Accordingly, we would propose to abolish NHTSA and in one fell swoop get rid of 600 bureaucrats and an overall waste of $1.2 billion per year, including about $500 million of safety grants to the states. With respect to the latter, if the genius socialist legislators in Sacramento and Albany want to steer their unwashed driving masses to purportedly safer modes of happy motoring, let them do so on their own taxpayers’ dime.
Abolition of NTHSA would also return consumer vehicle choice to the marketplace and likely bring a lot of current foreign-sourced auto production back home. That is to say, most of today’s auto companies—both the Big Three and foreign brands—make a decent profit manufacturing full-sized sedans, SUV’s and pickups in the United States. Upon abolition of the CAFE program, therefore, Nanny State-mandated and foreign-sourced econo-boxes that would lose their helping hand from Washington, paving the way for more US built vehicles on dealer lots.
And, yes, if consumers want six airbags per car as now mandated by NHTSA (standard sedans are required to have two frontal airbags, two side airbags and two curtain airbags to protect occupants in the event of a side-impact crash), manufacturers will offer them dealer-installed options at the appropriate (steepish) mark-up to base sticker prices. Indeed, the idea that consumers need a Federal Auto Nanny in order to choose a vehicle goes back to Ralph Nader’s original grab for regulatory power back in the 1970s and 198os, which we fought in Washington when at least some Republicans still understood the statist scam of alleged “market imperfections”.
Federal Trade Commission
America imports $3.1 trillion of goods every year, which is testimony in itself that planet earth is crawling with potential competitors, fair and unfair, which militate against any domestic manufacturer monopolizing anything. In fact, students of sound market economics have understood since at least the 1960s the populist idea that private capitalism is an incubator of monopoly is just plain nonsense. With extremely rare exceptions, monopolies and rigged oligopolies only arise when they are enabled by the state via regulatory favoritism and capture, subsidies and/0r protectionist restraints of both domestic and international trade.
So what Washington needs is not anti-monopoly policemen, but the elimination of crony-capitalist policies that bestow unfair and coercive competitive advantage on politically privileged competitors. Most certainly, therefore, two anti-monopoly bureaucracies is way beyond the ken, meaning that the FTC should abolished entirely. Any minor residual meddling with business in this area can be handled by a low-cost rump operation in a drastically down-sized anti-trust division of the DOJ.
Again, savings of $180 million per year of FTC compensation expense is more than warranted, even as it would free American business from Nanny State meddling that results from 1,125 staffers scurrying around in search of imaginary problems to justify their salaries. And, as we will amplify in Part 3, there would be a bonus savings here of $250 million, representing the non-payroll waste incurred by the FTC.
Corporation for Public Broadcasting
Even back in the world of 1981, there was no case for public funding of radio and TV, but by the year 2024 it has become a screaming case of “oh, puleeeze!”
Twitter nee X is testimony itself that the lead hometown newspaper and three networks no longer have even a remote monopoly on the news. That was the ostensible reason for the government funded NPR back in the day, which, predictably, was by-passed by the flowering of tens of thousands of technologically and market-based alternative media and news/information/entertainment venues. And then, even as NPR became redundant and utterly unnecessary, it morphed into a state propaganda agency, to boot.
Accordingly, the 100 staffers should be told to send their resumes to the blooming, buzzing world of alternative media on day #1, even as the CPB expense of $16 million for compensation and $520 million for affiliate grants and contracts is eliminated. Cold turkey would be the obvious way to serve-up the savings in this case.
OSHA (Occupational Health and Safety Administration)
As it happens, there are approximately 90,000 units of state, county, city, village and township government in the United States—the overwhelming share of which are involved in the business of grass roots public health and safety administration and enforcement in some form. So, if these manifold units of government can’t look after safety in the workplace—from farms to warehouses and factories—what’s even the point of the founders’ genius understanding that healthy democracy requires a decentralized Federalist form of the state, not a unitary power in a capital city distant from the daily life of the people and the marketplaces and communities in which they operate?
Beyond that, there is no absolute science of workplace safety. Always and everywhere, it involves a trade-off between levels of protection and costs and also choices among an infinite array of engineering and behavior approaches to safety—all of which have their pros and cons. That’s why a Federalist approach is tailor made for the very function and jurisdiction of OSHA.
That is to say, Justice Brandeis had the answer more than a century ago when he argued that the states were the proper laboratories of democracy and that many of the functions Washington has since usurped might be better experimented with and executed at the state and local level.
In the case of cowboy safety, for example, the California-style approach illustrated below might be appropriate for a state that lost its cowboys long ago, anyway. But Texas, which still has some, might well prefer a more practical and less burdensome approach.
In any event, 2,200 bureaucrats and inspectors on the OSHA payroll are absolutely unnecessary to insure safe workplaces in America. Not only would the elimination of OSHA save $350 million of staffing costs and $1.3 billion of annual Federal expense overall, but it would also relieve businesses and workplaces in America of literally billions of compliance costs and millions of hours of paperwork that represent the inherent overkill of a centralized bureaucracy that has become a captive of its own labor union constituencies.
Besides, we’d bet that Florida, the Carolinas and Texas would be more than happy to accommodate the relocation of businesses that might be chased-away by a mini-OSHA in Albany, Sacramento or Springfield. That is, competition among the states for investment, jobs and a favorable business climate is likely to be a far more powerful brake on Federal regulatory agency excesses than the s0-called Congressional oversight committees ever have been, or even the courts—neither of which have real skin in the game.
Written by: David Stockman @David Stockman’s Contra Corner
The post “Memo To Musk & Ramaswamy: How To Cut $2 Trillion of Fat, Muscle And Bone, Part 2” first appeared on David Stockman’s Contra Corner