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Today’s post will really be two short posts on different but related topics: The failure of DOGE to make any progress on its stated goals, and what’s beginning to look like a rapid loss of confidence in Donald Trump’s economic policies.
First up, DOGE.
It has always been a mistake to trust anyone promising to run the government like a business. Businesses and government agencies have very different objectives, and even genuinely great business leaders often have terrible ideas about policy.
That said, there are some common aspects to running any large organization, and if you see what looks like dodgy behavior at a government or quasi-government agency, it’s not a bad idea to ask, “What would we think if we saw this at a private company?”
Which brings me to DOGE — the Department of Government Efficiency — which acts like a federal agency although, legally, it isn’t; which is run by Elon Musk but claims that he isn’t in charge; and claims to have already saved taxpayers $55 billion, but has presented no evidence to back that claim.
What DOGE did do last week was present a list of claimed savings from canceled contracts. The total savings claimed didn’t come anywhere near $55 billion, but never mind. Several news organizations, including Bloomberg, the New York Times and the Wall Street Journal have gone through that DOGE list, and found that it’s a steaming pile of, um, DOGEshit.
As the Times put it
Some contracts the group claims credit for were double- or triple-counted. Another initially contained an error that inflated the totals by billions of dollars. In at least one instance, the group claimed an entire contract had been canceled when only part of the work had been halted. In others, contracts the group said it had closed were actually ended under the Biden administration.
The big error the Times refers to involved counting a canceled contract worth $8 million as $8 billion.
Now, imagine that a publicly held company were to release a statement about its earnings that was riddled with major errors — with all the errors going in the same direction, making the company’s earnings look better than they are. What would you conclude? The answer, surely, would be to suspect that the company’s business is going very badly, but that top executives are trying desperately to hide the bad news while they sell off their own shares and possibly loot the company through sweetheart deals and so on.
By the way, this is the kind of thing Jim Chanos, the famed short-seller, used to look for before making a company a target. I had a long conversation with Chanos that I posted Saturday; paywalled for now, but accounting fraud — sometimes, as he says, legal fraud — was one of his main themes.
In the case of DOGE, it’s pretty clear that Musk is failing more or less comprehensively at his supposed task of saving money by eliminating waste, fraud and abuse. But he doesn’t want the public — or, more important, Donald Trump — to figure that out until he’s achieved his real objectives, which seem to involve taking effective control of large parts of the federal governmentb — particularly those parts of the federal government that are trying to regulate his enterprises and those of his tech-bro buddies.
Of course, given the indiscriminate nature of the layoffs he’s been carrying out and the devastating effect they’re having on worker morale, he may end up breaking the federal government rather than taking it over.
Which in a way leads me to my second topic: Growing evidence for a rapid collapse in the public’s trust in Trump as an economic manager.
I expected this to happen eventually, since Trump campaigned on promises — like his promise to bring down grocery prices on “Day One” — that he had no way to fulfill; he didn’t even have a concept of a plan.
But I expected it to take a while for disillusionment to set in. I don’t know if I set this down in writing anywhere, but I was quite sure that consumer sentiment would be considerably better during Trump’s first months in office than it was on the eve of the election.
This wasn’t just a gut feeling on my part. I based that prediction on two things I thought I knew.
First, I expected the real state of the economy in early 2025 to be more or less the same as it was in, say, October 2024, with unemployment near a historic low and inflation above target but nonetheless fairly subdued. Second, there’s a lot of evidence that views of the economy are strongly affected by partisanship — other things equal, people have a more positive view when their own party holds the White House. But as Feler, Rinz and Chelak have shown, “Republicans cheer louder and boo harder” than Democrats, so we’d expect a positive bump in overall sentiment after Trump won.
That did indeed happen briefly after the election. But after Trump took office, consumer sentiment plunged:
And many polls already show Trump’s approval on economic policy underwater, which is somewhat amazing given that the policies economists fear might be destructive — tariffs and mass deportations — have barely happened yet.
What happened? Part of the answer is an uptick in the prices of eggs and other groceries, which isn’t Trump’s fault — yet (wait until the deportations of farm workers begin). But given Trump’s promise to drive prices down, voters are being quickly disillusioned.
It surely must also matter that Trump, who ran primarily on the economy, has ignored it since taking office, instead going after wokeness (which isn’t a voter priority), threatening our allies, trying to rename the Gulf of Mexico and empowering Elon Musk to wreak havoc in the federal government.
So I guess it makes sense that buyers’ remorse among voters is setting in fast. And just wait until people see the real effects of Trump’s policies.
Given all this, however, I’m a bit puzzled by the relative complacency of financial markets. We’re being ruled by a mad king living in an alternate reality and a erratic, ketamine-fueled oligarch — it’s not clear which is the other’s sidekick. Yet the Dow, despite Friday’s plunge, is still higher than it was before the election:
What are investors thinking?
PS: Just seems worth mentioning that Russia invaded Ukraine on Feb. 24, 2022. So it has been 3 years since Kyiv was going to fall in 3 days. I’m ashamed that my country is led by people who find the courageous defense of freedom annoying rather than inspiring.