There is an old proverb known as the “law of holes.” It goes something like this: “Let me tell you about the law of holes: If you find yourself in a hole, stop digging.”
This particular version of the proverb was coined by Bill Brock while serving as President Reagan’s Secretary of Labor. It matters today because it applies to the poor fiscal state in which the U.S. government finds itself.
It’s no secret that the U.S. government’s fiscal situation has deteriorated since 2000. During the last four years, that fiscal deterioration sped up for the worse. U.S. politicians and bureaucrats have dug into a deep hole because of excessive spending. This spending directly contributed to 2021’s inflation surge, which subsequently led to 2024’s explosion in the U.S. government’s cost of borrowing.
How to stop digging
The outcome of the 2024 elections offers the potential to deliver a change in fiscal direction. Washington D.C.’s incoming leadership acknowledges the need to address the nation’s growing fiscal crisis.
Tesla CEO Elon Musk’s call for “at least” $2 trillion in cuts to federal spending is drawing skepticism from experts as the billionaire tech magnate cements himself as one of former President Trump’s most prominent backers.
“How much do you think we can rip out of this wasted, $6.5 trillion Harris-Biden budget?” Howard Lutnick, a Wall Street CEO and Trump’s transition team co-chair, asked Musk at the former president’s recent rally held at Madison Square Garden in New York City.
Without offering specifics, Musk said in response that he thinks “at least $2 trillion” in a brief moment that has since gained widespread attention online and drawn mixed reactions from budget world.
Although the size of the figure draws skepticism, Musk’s two-trillion-dollar spending reduction target is typical of his “set a big goal then go after it” business philosophy. To be sure, it will be opposed by many Washington D.C. institutions that will work hard to make it impossible to achieve.
That is not a bad thing because achieving any significant portion of the target against that self-serving opposition can deliver at least one positive outcome. Writing at Reason, Veronique de Rugy describes how U.S. politicians and bureaucrats can rediscover a key principle of good governance:
The best way to cut $2 trillion out of the budget is to ax everything the federal government does that it shouldn’t be doing in the first place. It’s time we rediscovered the exercise of thinking critically about government and the role it should or shouldn’t play in our lives. Questions like, “Is that the role of government?” or “Should the federal government pay for that?” haven’t been seriously considered in years. The muscle of fighting for first principles has atrophied among Republicans as it’s no longer in style to call for small government….
Cutting $2 trillion from the federal budget should be easy. Of course, it will be anything but, given Congress’ continued lack of interest in discussing spending cuts and the president’s sorry track record. If anything, let’s hope this Musk-led effort to cut spending will hopefully reintroduce seemingly forgotten rationales for cutting the federal budget.
There is a related proverb that applies here, called Stein’s Law: “If something cannot go on forever, it will stop.” The deep fiscal hole Washington D.C.’s players have dug through their excessive spending cannot continue forever. Certainly not as has been allowed during the past four years. Setting a $2 trillion target for spending cuts and working to make them happen is a means to stop digging the nation’s fiscal hole deeper at the speed they have been. It is both common sense and long overdue.
Craig Eyermann is a Research Fellow at the Independent Institute.