Elon Musk, the American tech billionaire, recently shared a video from years ago in which the late renowned American economist and Nobel laureate Milton Friedman mentioned that most federal agencies didn’t need to exist and only four and a half would be enough. Musk, along with another billionaire in the biotech industry, Vivek Ramaswamy, are leading the newly formed efficiency department of the elected President Trump’s administration.
In their recently announced three major reform plans, they aim to streamline the federal government based on principles laid out by Friedman. Friedman, a Nobel laureate in Economics in 1976, provided significant support and guidance for Musk’s current initiatives on government efficiency.
Friedman’s views on the bloated state of the federal government several decades ago were shared by Musk. He suggested abolishing departments like Agriculture and Commerce, while recommending the preservation of the Defense Department.
Friedman also proposed the elimination of the Education and Energy departments, except for the parts involving nuclear energy, which he suggested should be transferred to the Defense Department. Additionally, he advised trimming the Health and Human Services Department while suggesting the complete abolishment of the Housing and Urban Development Department.
Regarding other departments, Friedman recommended maintaining the Departments of Justice, State, and Treasury for tax collection purposes, while flagging as unnecessary the existence of Labor and Transportation Departments.
Friedman emphasized the importance of paying salaries to military personnel but deemed the Department of Veterans Affairs unnecessary for such a purpose. By reducing the 14 major federal agencies to four and a half, Friedman believed the federal government should focus solely on its basic functions of maintaining peace, defending the nation, and providing arbitration mechanisms for individual disputes.
The reference made no mention of the Department of Homeland Security, established in 2002. Currently, the U.S. federal government has 15 major federal agencies, with the heads of these agencies requiring approval from the Senate.
President of Argentina, Javier Milei, has encouraged Musk and Ramaswamy’s “Efficiency Department” to strive towards significantly reducing federal expenditures to the “extreme”. Milei’s bold fiscal reforms in Argentina have garnered praise globally for their impact on cutting government spending and fostering prosperity.
Musk’s admiration for Milei’s reforms in Argentina has led to discussions of potential collaborations. Milei’s drastic cuts to government expenditure upon assuming office have yielded positive economic effects, albeit with challenges and social unrest in the country.
The scaling down of government expenditure by Milei in Argentina has been lauded for achieving marked progress, sparking interest from Musk for potential investment opportunities in the country. The plans for an efficiency department led by Musk and Ramaswamy to curtail federal budget have been well received.
The re-elected U.S. President Trump’s announcement of Musk and Ramaswamy’s leadership in an “Efficiency Department” aligns with his campaign promises of reducing government spending and signifies a pivotal juncture for Musk to contribute significantly in this area.
Despite being labeled as the “Efficiency Department,” it doesn’t entail establishing a new federal agency but rather acts as an external advisory group to the White House’s Office of Management and Budget.
Musk has set a target of $2 trillion in cuts from the approximately $6.75 trillion U.S. federal budget. The ambitious scale of reductions resembles the actions undertaken by Milei in Argentina in recent years.
Realizing substantial spending reductions in the U.S. may require collaboration with Congress, given the country’s democratic system. With the current alignment of the White House and both houses of Congress under Republican control, the opportunity for Trump and Musk to enact such reforms is considered rare and significant.