The Department of Government efficiency (DOGE) faces many challenges in downsizing the federal government.  The cuts in federal government programs proposed by DOGE have made headlines, but this approach to fiscal responsibility suffers from some blind spots.  The federal government could learn much from the states in restoring sustainable fiscal policies.

One flaw is that DOGE will not address reforms in Social Security, Medicare, and other health care programs.  These entitlement programs account for almost half of the federal budget and are growing at an unsustainable rate.  Over the next decade, the trust funds for Social Security and Medicare will be exhausted.  The most important lesson from the states is that budget constraints must apply to all programs, including entitlements.  In recent decades, state expenditures for public employee pensions and health care programs were growing at an unsustainable rate.  Most states responded to this challenge by reforming these programs to ensure their sustainability in the long term.

There is some ambiguity regarding the savings generated from DOGE reforms.  Perhaps the worst idea is to simply return these savings to the budget in the following year; the states that have done this have had little success in constraining spending.  Some have suggested that the savings generated by DOGE be offset by tax rebates, and some states have done this.  However, the federal government now faces a debt crisis.  The federal debt is now at $36 trillion and is projected to grow to more than double our national income by mid-century.  There is almost universal agreement among economists that this growth in federal debt is not sustainable.  The highest priority should be in stabilizing and reducing federal debt in coming decades, which means that any savings generated by DOGE, or from other reforms, should be earmarked for debt reduction.  

DOGE has a limited mandate in downsizing the federal government; some federal programs will be eliminated, whereas others will face budget cuts.  During the “Great Moderation” for the 1980s and 1990s, the federal government worked closely with the states enacting reforms to reduce costs.  Some federal programs that had been devolved to the states, such as neighborhood development programs, were either eliminated or privatized.  Significant reductions in costs were achieved through reforms in other programs, such as welfare and Medicaid.  Freed from federal mandates, states such as Florida enacted successful reforms to improve efficiency and reduce costs in these programs.  

The big challenge for DOGE is the absence of a budget constraint at the federal level.  Since Congress abandoned regular order in the budget process, it has not a budget, but a spending program.  The statutory rules designed to limit spending and balance the budget are routinely ignored and suspended.  Even if DOGE is successful in reducing federal spending, there is nothing to prevent future Congresses from reverting to fiscal profligacy.

In contrast, the states have for several centuries learned to live with budget constraints that require a balanced budget and limit debt.  The most successful states have fiscal rules incorporated in their Constitution.  For example, Colorado’s taxpayer Bill of Rights Amendment (TABOR) caps the growth in revenue that the state can keep and spend to the rate of inflation and population growth and imposes a similar budget limit at the local level.  The spending cap applies to all state programs, including expenditures for public employee pension and health programs.  Revenue in excess of the TABOR limit is offset by tax rebates and tax cuts.

TABOR requires voter approval for all new taxes and debt at all levels of government.  If a government wants to spend surplus revenue above the TABOR limit, this also requires voter approval.  Many of these ballot measures have been presented to Colorado voters over the years.  While many of the ballot measures pass at the local level, few have passed at the state level.  This reflects citizen perceptions of the effectiveness of government programs.  A survey found that most Colorado citizens think that local governments waste much of their tax dollars, and that the state and federal governments waste most of their tax dollars.

The lesson from the states is that a fiscal responsibility amendment must be incorporated in the U.S. Constitution.  Surveys reveal that the majority of citizens support this.  Piecemeal efforts to constrain federal spending, such as the DOGE Commission, may get headlines for budget cuts in the short term but will do little to restore fiscal sanity in the long term.  A solution to the federal debt crisis in the long term will require a fiscal responsibility amendment to the U.S. Constitution like the TABOR Amendment in Colorado.

Barry W. Poulson is professor emeritus at the University of Colorado, Boulder, and on the Board of the Prosperity for US Foundation.

Image: JD Lasica via Wikimedia Commons, CC BY 2.0 (cropped).