Trump, Musk are trying to implement zero-based budgeting

Historically, when determining how much the federal government is spending annually, a process known as incremental budgeting has been used. This means that the next year’s budget is based on a certain incremental increase above the current year’s budget. This technique is at least partially responsible for the current $36 trillion public debt.

For as long as most of us can remember, Congress proposed an annual spending budget based on an increase from the prior year, often by 3% to 5% or more.

When the public responded negatively to the resulting large spending increase, Congress would simply say they would cut the budget. That meant instead of a 5% increase, Congress would cut the increase to 2%. Then they would claim they cut the budget.

This incremental budgeting process often encouraged government agencies to spend all budgeted funds before the end of the current year. Otherwise, they reasoned, next year’s spending would be reduced. This contributed to excess spending, large annual deficits, and eventually the huge public debt we have today.

President Trump through his appointed budget czar Elon Musk, is very serious about reducing annual spending. As such, he will use a zero-based budget. In other words, every expense in the budget must be justified in total, not just from the increase above the prior year.

Zero-Based Budgeting is “a method of budgeting in which all expenses must be justified for each new period. The process begins from a “zero-base” and every function within an organization is analyzed for its needs and costs. The budgets are then built around what’s needed for the upcoming period.”

Since Musk leads the Department of Government Efficiency (DOGE), he has examined the budgets of many government agencies. When he starts at a base of zero, he often concludes that nearly all the spending is simply not needed. In fact, he has argued that some whole departments in the government are not needed at all.

He found the grossly inefficient and perhaps politically motivated Federal Emergency Management Agency (FEMA) is often slow to respond to disasters, like the hurricane and flooding that recently struck North Carolina. When he compared that to the very efficient hurricane response in Florida, he concluded that the states could handle disasters better than a federal government agency.

President Trump has said it will be less costly and more efficient to simply provide the federal disaster relief funds directly to the states and eliminate FEMA.

Trump has noted that the US spends more per pupil to educate a student through high school than any country in the world. Yet our test scores rank the students very poorly when compared to other industrialized nations. Perhaps the Department of Education is not needed. Perhaps the money spent should be given directly to the states.

Musk’s first big find occurred when he examined the US Agency for International Development (USAID). That agency has been spending billions of dollars on expenses that simply do not benefit the American people.

In fact, Musk found that USAID spent $32.5 billion in Africa and the Middle East. While some of the spending went for legitimate expenses that could benefit US citizens, Musk said the majority of the spending was for ridiculous reasons, like the $20 million to build a version of Sesame Street in Iraq. This program went on for years.

The public debt is so large that it has put the US in a deep hole. Of course, the first thing to do when stuck in a deep hole is to stop digging. Trump wants to reduce or eventually eliminate annual spending deficits.

Because nearly all tax-paying Americans believe they are Taxed Enough Already, raising tax rates is out of the question. In fact, some economists argue that lower tax rates could generate more tax revenue. This is what occurred in 1997 when then-President Clinton lowered the capital gains tax rate from 28% to 20%. Capital gains tax revenue soared.

Annual government spending, which increased from $4.5 trillion annually in 2019 to nearly $7 trillion today, must be quickly reduced.

Using a zero-based budget and taking advantage of DOGE, that’s exactly what the president will do.

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