Reality Dogs the DOGE

Editors’ Note: MarketMinder is politically agnostic, preferring no party nor any candidate. We assess developments for their economic and market effects only.

Halfway through January, political and sentiment drivers remain in flux, shrouding the outlook in fog. As elections abroad come and go and Congress gets down to business, things should solidify and clear, but in the meantime, we see reasons to be bullish and reasons to be skeptical—with pundits frequently miscasting both. One example: the widely hyped Department of Government Efficiency, better known as DOGE.

On its face, DOGE sounds like something out of a political satire. It is led by a Tech exec who already has several jobs, Elon Musk, and a businessman and former presidential candidate, Vivek Ramaswamy. Its name is oxymoronic, as if it were a project expanding the civil service in the name of shrinking the civil service—but that isn’t the case. DOGE isn’t an official government department, which would require an Act of Congress creating the office and appropriating funding for it. Instead, it is a volunteer committee, a blue-ribbon commission, in line with the blue-ribbon commissions appointed by pretty much every administration preceding it. Every White House has legions of “advisers,” paid and unpaid. The Trump 2.0 payroll isn’t set or public yet, but we reckon it will be the same.

Since the election, we have seen a lot of cheer from small government-types about the prospect of DOGE making government leaner, less bureaucratic and easier for people and businesses to deal with. Opinion writers and think tanks coast to coast have published suggestions and wish lists of regulations to scrap, spending to cut and red tape to vaporize. We have seen detailed analyses of government bloat and the pennies that could be saved by trimming the fat.

But here is the thing about markets: They pre-price all widely known information—including opinions of incoming government advisers—and ultimately move on the gap between expectations and reality. Stocks seemingly spent November and part of December pricing all this small-government hope, along with mounting expectations for tax cuts and a generally pro-business environment. December’s volatility reset this a bit, perhaps rebuilding some bricks in a bull market wall of worry, but high expectations for DOGE persist.

We suggest tempering them and watching how things unfold carefully, because DOGE is pretty darned powerless. Most of what people want it to do, it can’t do.

It can’t actually cut spending. Congress holds the power of the purse and appropriates money to federal agencies. If you have ever worked in or witnessed the public sector at the federal, state or local level, you have probably noticed that if there is money leftover at the end of the funding period, the powers that be ensure it gets spent so that their funding doesn’t get cut. DOGE can identify wasteful spending all it wants, and it can pinpoint positions it thinks are redundant. But it can’t actually stop agencies from spending all that Congress appropriates for them. DOGE-ers can’t march into agencies at fiscal yearend, wave their DOGE ID badges and demand unspent money be returned.^[i] So even if they could execute a mass headcount reduction (they can’t, federal employment protections are water-tight), it wouldn’t change the amount of money spent. And only Congress can change the level of funding.

DOGE can’t eliminate federal agencies or government departments, either. Congress creates these, and only Congress can take them away. And here, doing away with any department would probably require 60 Senate votes to bypass a filibuster, as this would fall outside of the budget reconciliation process that would allow Congress to amend mandatory spending with a simple majority. With Republicans’ six-seat Senate edge, this would mean some Democratic senators would have to cross the aisle. We guess this isn’t impossible, because nothing is technically impossible, but you are likelier to find life on Mars than seven Democratic senators who will break ranks over this.

Nor can DOGE scrap rules. It can study the landscape and identify rules its volunteers think are holding back private investment and commerce. But for those rules to go off the books, the government must follow the standard recission process, which includes formal proposals and public comment periods—basically, a mirror of the federal rulemaking process.

So if DOGE can’t cut spending, axe departments, erase rules, claw back unspent funds, eliminate federal headcount, cancel contracts with vendors or even upgrade computer systems, what can it do?

Basically, the same things as any other advisory thinktank like the Heritage Foundation or Brookings Institute. It can study government spending and efficiency based on publicly available information. It can propose that the White House, following official procedures, reclassify some federal employees as political appointees so that their positions are easier to eliminate. It can make lists and recommendations of departments and positions it thinks are unnecessary. It can go through the federal fisc and hand lawmakers a list of spending it thinks is fraudulent or wasteful. It can encourage the White House to move some agencies out of town in hopes people will resign. And it can lobby Congress, in the great tradition of all commissions and thinktanks.

Because that is what DOGE really is, once you cut through its high-profile personalities, clever branding and bravado. It is a commission. A panel. A thinktank without a fancy building or wealthy benefactors looking for a tax writeoff. It may be the first advisory committee named after a joke cryptocurrency based on an Internet meme of a Shiba Inu. But it is still just a run-of-the-mill advisory committee lacking any official powers. Maybe that changes. But it would take passing a law.

So check your enthusiasm, if you are enthused—and check your fear, if that was more your inclination. No judgment from us either way. But do keep an eye on how broader sentiment evolves as we pass the inauguration next week and everyone gets down to brass tacks. Because if broader enthusiasm stays high, that could make it harder for reality to top lofty expectations. This is only one thing we are watching, and it is far from a lone swing factor affecting 2025 returns. But it is part of the landscape.