Clifford Winston, Senior Fellow at the Brookings Institution, joins "Forbes Newsroom" to discuss Elon Musk and DOGE's efforts to cut what they are deeming wasteful government spending.
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NewsTranscript
00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes. Joining me once
00:08again is Clifford Winston, a senior fellow of economic studies at the Brookings Institution.
00:13Clifford, thank you so much for joining me. I'm really excited to talk with you today
00:19to get your perspective because I've talked a lot about Elon Musk and Doge and how it
00:24relates to politics. Now I'm excited to get the perspective from an economist. And as
00:29we know, Doge, with Elon Musk at the helm, was tasked with the goals to, quote, dismantle
00:34government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure
00:40federal agencies. Supporters of Doge and Elon Musk would say that this is the changemaker
00:45the government needs to cut waste, fraud, and abuse. And Elon Musk is a great outside
00:50perspective. Critics, on the other hand, would call Musk the shadow president and said that
00:55they are he and Doge are recklessly cutting things with a chainsaw instead of a scalpel
01:01when it comes to necessary things that helps the government function. You wrote Doge is
01:05a wake up call for economists and attorneys. Can you explain what you mean by that?
01:11So, you know, let's start from the beginning. I think there is certainly motivation for Doge,
01:18but Doge is not original. There have been many government programs trying to, quote,
01:24improve government efficiency. They're hardly the first one to do this. So, you know, for decades,
01:31elected officials have been saying, yes, we need to get government more efficient.
01:36And it's clearly motivated by the vast empirical evidence of what we call government failures.
01:44So it's certainly justified. But what concerns me is this is something that economists have
01:52written about. They know enough about it. But Elon Musk and the team are not drawing on what
02:01economists have to say. Now, I think one of the problems may be that economists tend to be more
02:09constructive in the sense they recommend efficient government reforms. And that's fine in theory.
02:17But the reality is policymakers just don't adopt those. And probably what they should have done or
02:24more economists need to do is point out private sector alternatives and say, look, OK, government
02:32has failed, as we say here. But here's a private sector approach that could be effective. And that
02:40then is what Musk should really be focusing on. Yes, it is true that government has a lot of
02:47inefficiencies. There's a lot of room for improvement. OK. But then you've got to say, OK,
02:53what is the alternative? What are we going to do? If we just get rid of services and don't even
03:01consider efficient reforms, then who knows what we're going to get. And you may wind up getting
03:07rid of things that really don't make sense to eliminate. That is the big problem. To your point,
03:14Elon Musk and the people who are working on Doge are hardly the first people to say, hey, we want
03:20an efficient government. We want to cut out wasteful spending. You're saying it's a good idea
03:25in theory, but in practice, it could be not doing what it needs to be done from an economist
03:31perspective. What are those some of those efficient reforms that you're talking about?
03:35So I think for each, you want to identify, for example, if you think that an agency really isn't
03:46providing benefits, right, that would be the easiest thing. In other words, and this is what
03:52Musk relies on. He plays an old YouTube of Milton Friedman, where Friedman's interviewed and he's
04:01checking off each department. Don't need that. Don't need that. Don't need education department.
04:07Don't need the labor department. Don't need this department, whatever. And Musk interprets that as
04:14the green light to just get rid of everything. However, my point is, let's take things a little
04:20more systematically and say, OK, if we don't need the education department, why do we have it in the
04:27first place? OK. Now, that's sort of a fairly subtle argument to make. In other words,
04:35education department could be justified for two reasons. One, because education provides a
04:43positive externality, meaning that it is better for society if more people are educated. OK.
04:52And so people on either political spectrum would say, yes, if more people were better educated,
04:59we might have different political outcomes. All right. So that's one reason
05:04why you could justify having some government intervention. OK. The other one is that we
05:10believe education is what we call a merit good. That is, regardless of whether you can afford it,
05:19this is something that all people should have. So we want education to be provided and not
05:28necessarily to people who can afford it. All right. K through 12, that kind of thing
05:33certainly occurs. All right. So then you step back and say, OK, do we still believe in these things?
05:41Is either education a merit good or a positive externality? Then you ask, OK,
05:47we don't like the way government's doing this. What is it that we want to do instead?
05:54And you go ahead and say, we want the private sector to do all this. We want private schools,
05:59K through 12, or charter schools, you know, let the colleges do all this,
06:04and we don't need to give them any money. But you've got to make the case and go through
06:10carefully and thoughtfully why you want to get rid of departments. And you could go through what I'm
06:16saying, you know, all the way down the line. And that's what is not happening. And I think that
06:21is really what's a problem, not just departments, but now also things like Social Security,
06:27Medicare. Stepping back, ask, why are we providing this? What can we do as an alternative
06:35and do it better rather than just simply saying, let's get rid of all these programs?
06:40I think that that's a really key first question of stepping back and saying,
06:44instead of just slashing things willy nilly, saying, why did we have this in the first place?
06:50And then as an economist, let's say you're advising Elon Musk right now. Let's say you're
06:54advising Doge. They're watching this. After they answer that question, why did we have
06:59this in the first place? Then what is the alternative? Then where do they go from there?
07:05Alternative, right? In other words, you know, there are two alternatives. One would be,
07:13okay, yes, we realize government's very inefficient, but we're going to pursue an
07:20efficient reform. So we're going to keep the activity within government, but we're going to
07:25do things a lot differently. Okay, here's an example. What is known as CAFE, C-A-F-E,
07:34Corporate Average Fuel Economy Requirements, are a policy that is established with the Department
07:44of Transportation and the Energy Department, right, to improve the fuel efficiency of cars.
07:52And the justification for this is to address an externality, right, air pollution. And for that
07:59matter, even gasoline consumption, fuel consumption. All right, but let's focus on
08:03air pollution, okay? So then the argument could be, Doge would come in and say, wait,
08:08this is an extremely inefficient policy, right? We really should not be doing this. Because all
08:15we're doing is we're raising the price of cars. We're forcing automakers to improve their cars
08:23so they get better fuel economy. But this seems kind of crazy because if it gets,
08:29if cars get better fuel economy, won't people drive more? Right, so that would be sort of an
08:34obvious critique of CAFE. Okay, so then what do you do? All right, one approach would be,
08:41okay, we will replace CAFE with an efficient government policy. Okay, and that will be the
08:48way we address pollution or trying to reduce auto emissions, right? And that policy could be
08:54what we call a VMT tax, a vehicle miles travel tax. So you have to pay based on the amount you
09:02drive and there'll be an emissions component, right, depending on, you know, how polluting
09:09your car is. And they can actually measure this in real time, right? So this might be an efficient
09:13government policy. We don't need to get rid of government. We're addressing this in an efficient
09:17way. Now, you could say, well, but they're not going to do that. So actually a VMT tax was
09:24actually included in the Biden inflation reduction legislation. And there were calls for actually
09:32tests or, you know, trials, pilot experiments by the Department of Transportation. They didn't do
09:39any of them. So we could say, yeah, this is fine in theory, but government is just never going to
09:43implement this. Fine. Turn to the next policy and say, okay, let's let the private sector do this.
09:50And the way you can do it is encourage the adoption of electric vehicles, right? Electric
09:57vehicles are going to pollute less, right? We can get rid of at least the CAFE component of the
10:03Department of Transportation. The people work on that. And the energy department, people work on
10:10that. But we got to turn to something to do it. Why not EVs? What are they doing with EVs?
10:17They're making it really hard for people to get electric vehicles because they have tariffs.
10:25And they don't even allow the best companies in the world from China, in particular BYD,
10:30Build Your Dreams, to even sell cars here. So it's just a mess. I mean, this is a problem.
10:36There are options to pursue it, and they're not taking any of them.
10:40I think you raise a really interesting point, and that point being that there are no alternatives
10:45being offered by DOGE. Instead, they're just saying, we cut X, Y, and Z. Look how much we saved.
10:51But then there's no alternative, leaving people to wonder, are the lights still on at the federal
10:56government? And DOGE says it saved the federal government $115 billion and each individual
11:02taxpayer $714. It's hard to verify that number because DOGE hasn't posted all of its receipts
11:08yet. But as an economist, what are the economic impacts here of just slashing government spending
11:14by billions, is what they're saying, and then not offering any replacement in return?
11:22Services are cut that are valued, right? We're filing taxes now. I mean, if they start cutting
11:29the IRS, and they are, and people are flipped out, they stop working, you can imagine what a mess
11:38that's going to be. Same with Social Security. Same with national parks. At this point,
11:46you want to get rid of people who work in the National Park Service, but you're not even
11:51offering an alternative. OK, we're going to privatize the national parks. We're going to
11:56have a private firm come in, and they're going to run it. Great. So at least the parks will be
12:01open. There'll be service, so on and so forth. It's not even doing that. They're just getting
12:07rid of park rangers. Well, what happens when you show up? Are the parks going to be open?
12:13If there are emergencies, you're going to be able to get help, all sorts of things. And there's your
12:18problem, is some of these are valuable services. It doesn't mean the government has to provide
12:24them. You can get a private sector alternative to do it. But you can't just say we're just not
12:30going to provide it without some explanation, that there's absolutely no benefits from having
12:35this provided by the public sector or more efficiently by the private sector. That's what
12:41I'm concerned about. I spoke with one of the science and health care editors here at Forbes
12:47about some of the unintended consequences when it comes to DOJ. And he was telling me that they cut
12:53off USAID funding and then in turn, that really impacts science here and health here in America.
13:00As a microeconomist, what are some of the unintended consequences you're seeing
13:05from DOJ and from all of these cuts? The way to think about this is step back and say,
13:12what are we trying to do in the first place? All right. So really, what was the idea about?
13:17So one of the goals that government has in terms of what we think is a social goal
13:25is to make the world safe for democracy, right? That's not what we call a market failure.
13:30This is something beyond the markets. Markets can be efficient, but we have things that we want
13:37government to accomplish. And we determine these things in the democratic process,
13:43OK? Reducing poverty, providing what I said merit goods, but also security, defense,
13:50all these kinds of things. So AID was thought of as soft power, right? We're going to try to
13:57give money to these poor nations, but you'll have them feel good. A lot of us not support terrorism,
14:05do things to work with us, OK? So one, you could come over and say, well,
14:12we don't see any reason to do this. Fine, but make the case for it. Has AID been helpful
14:20to improve America's security in the world? OK. I'm not sure how people can show that, but
14:28I've not seen that, right? Then you go and say, what can we do better? All right. There's no doubt
14:34corruption, inefficiency, these kinds of things. We can look at some of the money we're funneling
14:39to various countries, make sure it's going to people who are doing constructive things,
14:45improving the health of their population, providing jobs, so on and so forth. But if we
14:51don't do any of that kind of stuff, and it was helpful, and we let someone else come in and start
14:57having an influence like Russia and China and these countries, they're not going to be on, quote,
15:04our side and trying to preserve democracy. And that's something that we did not anticipate.
15:10We just cut things out, then a fundamental goal is ignored and obviously can have disastrous
15:19consequences. I think the concern of your colleague, so, is that the growth of America
15:27and the economy is spurred by innovation and technological advance. Now, those might think,
15:34look, we want to restrict a lot of activities from foreign people, foreign companies,
15:42what have you. But they're not thinking about the unanticipated consequences of, this is a lot
15:49of our source of innovation and technological advance. And right now, they're, you know,
15:57basically threatening people or scaring them to come to our universities. And China is trying
16:04to take advantage of this and say, here, come be a student here, do your PhD here,
16:09come work here, contribute to our innovation and technological advance. You know, we will not be
16:16hostile toward you. I mean, the consequences of losing our technological edge to any country
16:25are huge. But that is exactly the kind of thing that could happen if we're not, you know,
16:30seriously thinking through what we're trying to do here. Today marks two months since President
16:36Trump was sworn in, since he began his second term. And I think it's impossible to talk about
16:42these two months without talking about Doge, without talking about Elon Musk. And as I said
16:47earlier, in all of my conversations, people have varying opinions, everything from let him bake,
16:53let him do his thing, he's a genius, to Elon Musk is really the shadow president. And all of this
16:58willy nilly cutting is really detrimental to Americans, to people's jobs, to a wide host of
17:04different things to the world and to democracy as a whole. From your vantage point as an economist,
17:10what do you think is missing then from this real national dialogue when it comes to Elon Musk and
17:14when it comes to Doge? I think what we're trying to do, I think we need to just really focus on
17:23what are we trying to accomplish as opposed to this cult worship and just saying no matter what
17:29he does, it's good, right? If he's trying to do something good for America, then he cannot break
17:36the law, right? It's this kind of cult worship that's getting us into a lot of trouble and
17:42preventing us from having a lot of serious dialogue, right? So we need to sort of say,
17:47what are our objectives? What are the right tools to use them? It's certainly true that government
17:53need not be the right tool, but let's discuss and identify the alternative. And this pretty much goes
18:00down to everything that they're doing as opposed to just saying, we know what we want to do,
18:05we want to cut government. And that quote is what we're trying to do, reduce the number of
18:11people working in the government. But if you don't focus on policies instead of people,
18:19then you're losing the target and you may be cutting out things that you want. But more
18:24importantly, you may not even focus on an objective of even allowing the private sector
18:32to accomplish the goal. So that's what's being lost here. It is too much cult worship. And then,
18:38of course, obviously only ideological divide that's really hurting the dialogue.
18:45When you're looking at this idea of cutting federal spending,
18:48how big of a disconnect do you think there is between policymakers and economists?
18:54A huge, huge. I mean, as far as I know, they don't even listen to us.
19:00So how do you bridge that divide? How do you how do we bridge that gap there?
19:06That's an interesting question. Alan Blinder gave a speech in D.C. about the divide between
19:15economists and policymakers. And he initially said sort of harmonic that, well, the one area
19:23where policymakers listen to us and Blinder was a member of the Federal Reserve,
19:30was vice president of the Fed, said it's in monetary policy. Right. That's what he said.
19:36You know, there are economists there and some of them have been chair and certainly vice chair.
19:42But this is one now that Trump even wants to take over. He wants to eliminate
19:48for that matter, any kind of expertise. And he says, oh, no, I understand interest is
19:54better than Powell. And I want to do that. So that's the one thing for sure
19:58that economists have historically had influence in. But other policies, you look at congestion
20:04pricing. So this is an area. This is my area of specialization where economists for centuries
20:10or at least a century have advocated, let's go ahead and do congestion pricing
20:14implemented in New York City. We're all excited. This is going to be the experiment
20:19about something we've recommended for years. And finally, it's being adopted.
20:24Well, what's happening? Trump wants to basically end the experiment. And I think the problem is
20:31one of dialogue. But I, you know, I talked with you last time and I said I thought these people
20:38are crazy. And what I mean by that, and obviously there was a lot of reaction to that, is they're
20:43crazy in the sense of delusional and unwilling to try to shape arguments and policy disagreements
20:53in terms of what theory says, what evidence says in terms of prospective evidence before that,
21:00and what retrospective evidence says. I can't imagine having a dialogue with any of these people
21:08where I can use that framework without in the middle being called a loser
21:14or something else. That's where our problem is, is we just cannot do things that really are aligned
21:20with generally rational intellectual thinking. Well, the good news is I certainly won't call
21:27you a loser. And I appreciate our conversations always. I appreciate your perspective.
21:32Clifford Winston, thank you so, so much for joining me. You are welcome back anytime.