The DOGE Effect on Risk Management

Elon Musk and Vivek Ramaswamy shed more light this week on how they want their Department of Government Efficiency to operate. Their vision shows an alarming lack of understanding about how government operates, so compliance professionals should watch closely for the mess these two might make; you’ll be among the many stuck cleaning that mess up.

For those who haven’t yet heard, the Department of Government Efficiency (DOGE) is neither a department nor a wing of government, but rather a pet project of Musk and President-elect Donald Trump to cut $2 trillion from U.S. federal government spending. Musk (rich kid turned billionaire) and Ramaswamy (failed biotech entrepreneur) are co-chairs of DOGE, and earlier this week they published a column in the Wall Street Journal describing how they want their commission to work. 

Why should corporate compliance professionals care about DOGE? Because Musk and Ramaswamy’s stated aim is to cut at least half of all government regulations and half of all government employees. Even if they succeed (dubious), that will result in a profound re-ordering of how corporations interact with government and the nature of the risks that companies will still need to manage somehow. You should understand those forces now so you can be better prepared personally and professionally later. 

Much more likely, however, is that DOGE is going to be a mess of uncertainty, because their WSJ column shows a deep ignorance (or a diabolical clarity, perhaps) of what government really does and how it works. You should be prepared for that scenario too. 

The gist of their plan is as follows:

1. Hire a “lean team of small-government crusaders” to identify a list of regulations that, according to said crusaders, should be abolished because the agencies that adopted those rules exceeded the statutory authority granted to them by Congress.
2. Musk and Ramaswamy then present that list of regulations to Trump, who will immediately pause enforcement of those rules and then “initiate the process for review and rescission.” 
3. With so much less enforcement, the Trump Administration can then cut the federal workforce. “The number of federal employees to cut should be at least proportionate to the number of federal regulations that are nullified,” Musk and Ramaswamy said — so if they propose to cut half of all rules, that should mean half of all federal workers are dismissed, too. 
4. Citing several recent Supreme Court precedents, they also say agencies will then be proscribed from adopting new regulations in the future.

What’s wrong with that libertarian dream? Lots.

That’s Not How Government Actually Works

First, a majority of federal employees work in the Department of Defense or the Department of Veteran Affairs — but those two agencies alone don’t count for a majority of rules and regulations adopted by the federal government. If Musk and Ramaswamy really want their reduction in rules and regulations to result in an equally large reduction in the government workforce, by definition they would need to cut into the U.S. military and veteran services. Does anyone really expect such cuts to happen?

Like, do the math. The entire federal government is roughly 2.3 million people. Of that number, roughly 1.3 million are uniformed military personnel. If you want to cut the federal workforce to 1.15 million (which is half of 2.3 million), there’s no way to do that without cutting into uniformed service members. You could eliminate everyone else — no border security agents, no air traffic controllers, no federal prosecutors, no food and safety inspectors, no VA counselors, no Medicare fraud examiners, no members of Congress; heck, not even any president or White House staff — and you still wouldn’t have enough. 

Nor would this exercise result in the $2 trillion in savings that Musk, Ramaswamy, and Trump are promising. The federal government spent $6.75 trillion in fiscal 2024. Of that amount, roughly $4.8 trillion went to Social Security, national defense, Medicare, veterans’ benefits, and interest on the national debt. That leaves only $1.95 trillion for everything else: Congress, federal courts, disaster relief, border security, diplomatic operations around the world, Medicaid, consumer protection, aviation safety, space exploration, tax collection, and all else the government does. You could cut all of it, and still fall short of the $2 trillion goal.

The logic behind Musk and Ramaswamy’s promises for regulatory and staff reduction doesn’t add up. A small subset of regulations apply to many businesses, and they require lots of manpower to administer. For example, think of bank regulations to protect the financial system; they apply to many banks, and need many bank examiners around the country to administer. You can’t cut half of all banking regs and half of all examiners, and still expect a sound financial system. 

That’s not to say banking regulation can’t be simplified; sure it can. It’s ridiculous that multiple branches of the Federal Reserve might examine the same bank simply because that bank has branches in multiple Fed jurisdictions. We could dream up other streamlining, too. You could consolidate the Public Company Accounting Oversight Board into the Securities and Exchange Commission as a Division of Audit Oversight or something like that. (As was originally discussed in 2002 when the Sarbanes-Oxley Act was being drafted.) You could streamline purchasing, modernize IT to save manpower, and so on and so forth.

We could also do much to curtail the hundreds of billions in fraud and waste that slosh through our $6.75 trillion budget every year — but you do that by hiring more auditors, with better technology, to intercept and reduce fraud; not by abolishing half the workforce willy-nilly just to satisfy some simplistic one-for-one equation. 

The sweeping numbers and promises of DOGE just aren’t possible. They’re for show. 

The Real Aim of DOGE

Musk and Ramaswamy give away the game in the latter half of their WSJ column, when they talk about what Trump will do after he gets their recommendations. He’ll simply order enforcement of those rules to cease and then move ahead unilaterally to repeal the rules and impound the funds Congress appropriated to administer them. 

Can a president get away with that? Well, that’s the whole point: Trump wants to try. He’ll argue that a 1974 law requiring the executive branch to expend money according to Congress’ wishes is unconstitutional. If the Supreme Court agrees with him (and given the makeup of this court, it probably will), then Trump will be able to defang regulatory agencies’ ability to fulfill their duties.

After that, libertarian activists will use other, more recent Supreme Court decisions such as Looper Bright v. Raimondo (ending Chevron deference) and West Virginia v. EPA (curtailing what regulators can do without express permission from Congress) to constrain future presidents and regulators from adopting new regulations. That’s the real goal here; DOGE’s regulatory review work is just the pregame show.

Libertarians will rejoice at this permanently constrained small government. Corporations and their risk management functions, however, should contemplate: how do we function in such a highly risky, highly interdependent world? 

How do you make long-term financial plans when regulators can’t address evolving bank risks? How can you develop new drugs or consumer products with confidence if you don’t know acceptable safety or labeling standards? How can you trust technology vendors (or how can customers trust your tech) when we have no uniform standards for cybersecurity or artificial intelligence? How do you manage fewer compliance risks, but more operational and litigation risks? 

I’m not saying such bridges can’t be crossed, but crossing them is seldom the most efficient use of corporations’ time. Corporations like certainty more than chaos. But a permanently defanged regulatory capability, and all the uncertainty that’s likely to ensue, are exactly what waits for us at the end of DOGE road.