Explainer-How Musk's US government efficiency panel might work

WASHINGTON (Reuters) - Donald Trump has tasked Elon Musk with setting up a panel to streamline the U.S. government. Although the president-elect has said little about how this group would operate, Musk has previously set an ambitious goal of cutting $2 trillion of spending.

Here is how this new panel, which will be headed up by Musk, the world's richest person, and former Republican Presidential candidate Vivek Ramaswamy, might work.

WHAT DOES MUSK WANT TO CUT?

Musk said at a Trump rally at Madison Square Garden in October that the federal budget could be reduced by "at least" $2 trillion. Discretionary spending, including defense spending, is estimated to total $1.9 trillion out of $6.75 trillion in total federal outlays for fiscal 2024, according to the Congressional Budget Office, suggesting Musk's target would be very difficult to meet.

Musk, whose companies include the electric vehicle maker Tesla (NASDAQ:TSLA ) and commercial space company SpaceX, has a deep knowledge of the National Aeronautics and Space Administration and the Pentagon, agencies he has extensive contracts with for rockets, satellites and other space operations.

He has also tussled with regulators within the Department of Transportation, including the Federal Aviation Administration, which has a say in his company's rocket launches, and the National Highway Traffic Safety Administration, which is investigating autonomous driving functions in his cars.

Ramaswamy, who founded pharmaceutical company Roivant Sciences (NASDAQ:ROIV ), has worked with the Food and Drug Administration, an agency he has previously called "corrupt". On social media site X in 2023 he added that "Countless FDA regulations and actions are hypocritical, harmful & unconstitutional."

WHAT HAVE MUSK AND TRUMP SAID ABOUT THE PANEL?

Trump in a statement on Tuesday said the panel would "provide advice and guidance from outside of government," on slimming down the government, cutting regulations, reducing spending and restructuring federal agencies.

Trump wants to abolish the Department of Education, and leave states in control of schooling, and decimate what he terms the "deep state" – career federal employees he says are clandestinely pursuing their own agendas.

Trump and Musk have suggested the panel will be able to make dramatic cuts, but generally speaking large budgetary actions are the remit of Congress. They can take advice from outside panels like the proposed efficiency panel, or disregard it.

In an effort to be transparent, Musk said the panel will post its "actions" for public comment.

"Anytime the public thinks we are cutting something important or not cutting something wasteful, just let us know!" he said on X.

He also mentioned a list of "dumb" spending, which he noted would be "extremely entertaining".

WHAT IS THE PRECEDENT FOR THE EFFICIENCY PANEL?

Former President Ronald Reagan announced in February 1982 that he would form a group of private sector experts to recommend ways to eliminate inefficiency and waste. That June, he issued an executive order forming the President's Private Sector Survey on Cost Control in the Federal Government, which became known as the Grace Commission for its chairman J. Peter Grace, the former CEO of W.R. Grace and Co.

Grace raised money to fund the effort through a foundation. About 150 business leaders volunteered their time on an executive committee that oversaw 36 Grace Commission task forces, which reviewed agencies or functions.

The Commission issued a report in January 1984 with some 2,500 recommendations, and the various task forces came out with reports as well.

“Most of the recommendations, especially those requiring legislation from Congress, were never implemented,” the Reagan Library said.

In March 2017, Trump signed an executive order that aimed to improve the efficiency, effectiveness, and accountability of federal agencies and to "eliminate or reorganize unnecessary federal agencies." It directed each federal agency to submit a proposed plan to reorganize. He also signed a separate executive order to place "regulatory reform" task forces and officers within federal agencies.

Trump also tried to kill at least 19 agencies but was unsuccessful during his first term. He called for eliminating the Overseas Private Investment Corporation that helps spur private investment in foreign development projects and the Corporation for Public Broadcasting. He also tried to cut funding for Amtrak, subsidies for rural airline service and the Special Olympics.

WHAT EXPERIENCE DOES MUSK HAVE WITH COST CUTTING?

After Musk bought the social media app Twitter, he laid off roughly 3,700 employees, or half its workforce, as advertisers pulled spending. Hundreds more employees subsequently resigned. He later renamed the social media site "X", but its valuation has shrunk dramatically under Musk's ownership.

Musk has had much greater success in space. SpaceX's Falcon 9 rocket slashed launch costs with its reusability, sprouting new satellite markets and giving rise to the company's fast-growing Starlink constellation, which has disrupted the established satellite communications industry and helped shape modern military strategies and turned SpaceX into a major defense contractor.



WHAT ARE THE RULES FOR A PANEL LIKE THIS?

The committee would likely operate under the Federal Advisory Committee Act, a 1972 law ensuring panels provide advice that is prompt, objective and open to the public. It also mandates cost controls and record keeping requirements that apply to the roughly 1,000 committees with some 60,000 members advising the President and the executive branch at any given time.

Source: Investing.com