The federal cost-saving myth

When Elon Musk bought Twitter, now “X,” his primary objective was to own a giant megaphone for his political ambitions. He immediately began to cut costs.

Twitter Layoffs: The Before and After of Elon Musk’s Staff Cuts

1. Massive Restructuring: Elon Musk’s $44 billion acquisition of Twitter led to layoffs of nearly 80% of its workforce, altogether redefining the company’s structure, operations, and mission.
2. Redistribution of Talent: Former Twitter employees have transitioned to leading tech companies like TikTok, Reddit, and Google, with many moving into senior and executive roles.
3. Industry Ripple Effects: Musk’s drastic cost-cutting set a precedent for widespread layoffs across the tech industry, reshaping talent dynamics and organizational strategies.
4. Mixed Platform Performance: X (formerly Twitter) reports growth metrics, but independent studies show contrasting metrics in user engagement and traffic since the rebranding.
5. Applying Organizational Philosophy: Musk is now set to apply his organizational reforms to government through his involvement in DOGE and the Trump administration. 

He cut costs because X is a private enterprise, a for-profit, monetarily non-sovereign enterprise. As such, it is the opposite of the Monetarily Sovereign federal government: Different problems; different solutions. (Think of the difference between solutions for overweight and underweight, and you’ll get the idea.)

Musk claimed that the layoffs were necessary to save the company from financial ruin. Fast forward to 2024, and Musk promises to bring these draconian cuts to government bureaucracy. 

Elon Musk’s takeover of San Francisco-based Twitter significantly transformed the social media platform. Musk’s acquisition, valued at $44 billion, led to drastic measures to restructure the company, starting in November 2022. This included laying off more than 6,000 Twitter employees—a reduction of nearly 80% of Twitter’s workforce.

The problem is that the federal government cannot experience “financial ruin,” Its primary task of growing the economy requires the federal government to spend more than it receives — in short, to run deficits.

Every time the federal government has spent less than it received — i.e., run a surplus, it has caused a depression, except once when it “only” caused a recession.

U.S. depressions come on the heels of federal surpluses.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

The relationship between federal deficit spending and economic growth is demonstrated by the following graph:

The lines are essentially parallel. A growing economy requires a growing supply of money, and federal deficits increase the money supply.

Unlike the federal government, X:

1. Does not have the infinite ability to create dollars.
2. Requires income to survive, long term.
3. Its primary financial goal is profits.
4. It reports to shareholders, in this case, Musk, and is designed to help achieve one shareholder’s personal goals.

By contrast, the U.S. federal government:

1. Has the infinite ability to create dollars simply by touching computer keys
2. Needs no income and, in fact, destroys any income it receives.
3. Needs no profits, and in fact, profits would be counterproductive to its mission of protecting and improving people’s lives. Federal losses are the economy’s gains.
4. It reports to the people of the United States and to a lesser extent, the people of the world.

Thus, when the ad hoc creation of the so-called “Department of Government Efficiency (DOGE) fires employees, it does nothing to help the government or American taxpayers. Federal savings do not fund federal spending.

On the contrary, firing federal workers to save money hurts the American economy. It hurts the workers individually and every American because the government will pump fewer growth dollars into the economy.

Gross Domestic Product (GDP) = Federal Spending + Non-federal Spending + Net Exports.

This demonstrates why great businessmen seldom make good Presidents. The entire motivation and process are different from what they know.

What a businessman does instinctively (minimize spending and maximize profits) is exactly the opposite of what a Monetarily Sovereign government leader should do (although it is perfect for leaders of monetarily non-sovereign state and local governments).

Musk may know this, but even so, he knows the public doesn’t understand it.

The public is conditioned to believe nine of the myths mentioned in Inflation: The Bugaboo That Confuses Our Leaders:

1. Federal finances are similar to state and local government, business, and/or personal finances
2. The federal government should live within its means, just as people and businesses should.
3. The federal government should be frugal.
4. Wasteful federal spending is a significant economic problem.
5. Excessive federal spending causes inflation.
6. Inflation is too much money chasing too few goods.
7. Federal deficits and debt are financial burdens on federal taxpayers and the government
8. The federal government levies taxes to pay for its spending.
9. The federal government borrows to pay for its spending.
   

   
   

Wrong on all nine counts.

Having the infinite and unique ability to create dollars, the federal government has no “means,” and even “wasteful” spending is beneficial.

Taxpayers don’t pay for spending; the government spends with newly created dollars, so it never borrows.

And shortages like oil and food, not federal spending, cause inflation.

Actions that are good for a non-sovereign business often will be disastrous when applied to a Monetarily Sovereign government.

Musk’s and Trump’s combination of economic ignorance, hubris, laziness, and massive power, together with an insatiable craving for self-enrichment, will create a disaster for America and all Americans.

Finally, it’s one thing to fire employees of a disseminator of rumor and silliness like “X,” but do you really want fewer people inspecting your food for disease and poisons.

Do you want fewer people to provide family assistance, child support, childcare, Head Start, child welfare, and other programs that help children and families?

How about fewer people to help improve the quality, safety, efficiency, and effectiveness of health care for Americans?

Do you really want less effort to protect people from harmful chemical exposures? Or less effort to enforce federal criminal laws regulating the firearms and explosives industries? Or a smaller staff to preserve U.S. government records, manage the Presidential Libraries system, and publish rules, regulations, Presidential, and other public documents?

Is it your opinion that the Army Corps of Engineers and the rest of our military have too many people? Should we devote fewer resources to measuring labor market activity, working conditions, and economic price changes?

Maybe we should have fewer U.S. Capitol Police Officers to protect life and property, investigate criminal acts, and enforce traffic regulations on U.S. Capitol Grounds, while protecting members, officers of Congress, and their families. No one ever would attack the Capitol (right?), and if they did, the President would pardon them, so why have police?

And, of course, we should cut the Centers for Medicare and Medicaid Services (CMS), which provides health coverage to more than 100 million people through Medicare, Medicaid, the Children’s Health Insurance Program, and the Health Insurance Marketplace (right?)

And, what’s the good of the U.S. Courts of Appeals that hear appeals from lower courts of both civil and criminal trials to investigate whether or not the law has been fairly and correctly applied by the lower courts?

Don’t we already have too many people protecting the public from investment fraud, manipulation, and abusive practices? Then there are the useless patent and copyright offices. Shouldn’t they be cut?

And certainly, we could do without all those people whose jobs involve customs, border, immigration enforcement, emergency response to natural and manmade disasters, antiterrorism work, and cybersecurity.

There are thousands of examples of federal agency people who devote their lives to protecting you and national leaders (including the President) and visiting heads of state. I would vote right now to get rid of the group risking their lives to protect the President.

When you go through the list of federal agencies, you learn how vital these people are in improving and protecting all our lives.

Sadly, Musk’s casual, broadscale firing makes no allowance for individuals. That simply is too much work for him. His deferred resignation program already has received thousands of acceptances of his “deferred resignation” offer. Are these good employees, bad employees, vital employees, young, old, experienced, recently hired? No one knows, and no one seemingly cares.

To Musk and Trump, employees aren’t people who provide valuable services. They are job titles we can do without and without suffering losses.

Ignorance, hubris, laziness, and massive power together with an insatiable craving for self-enrichment — was there ever a better description of today’s White House?

SUMMARY

Federal deficit spending is necessary for economic growth and to fulfill the federal government’s mission to improve and protect the people’s lives. GDP = Federal Spending + Nonfederal Spending + Net Exports. Even “wasteful” federal spending grows the economy.

Federal taxes do not fund federal spending. Spending cuts do not lead to tax cuts, but they do lead to service cuts. Running a for-profit business is entirely unlike running a for-service Monetarily Sovereign federal government.

A Monetarily Sovereign government is not better when it is smaller and spending less. It is better when it is providing more services and collecting less tax, regardless of cost.

Rodger Malcolm Mitchell

Monetary Sovereignty

Twitter: @rodgermitchell

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MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell;

https://www.academia.edu/

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

Source: https://mythfighter.com/2025/02/07/the-federal-cost-saving-myth/