Slash The Fat: Nine US Government Agencies To Cut By 50%

Bill Bonner is away today. In his stead, we present Part Two of the excerpt from David Stockman’s new book, which you can find here. David was kind enough to allow us to run what may be the most important chapter in the book. You’ll find it below. And if you like it, you have our permission to share it widely. You can also find more of David’s work at his website.

By David Stockman

As we have indicated, the 16 agencies slated for elimination do comprise a kind of Litmus Test of fiscal resolve. If these Federal bureaucrats and agencies can’t be eliminated, the prospect for reining in America’s unfolding fiscal calamity is dim indeed.

Yet the 71,000 headcount reductions and $11 billion of savings constitute hardly a nick out of the Federal payroll. In fact, on a government-wide basis including the uniformed forces, the total payroll numbers nearly 3.83 million civilian and military employees and costs nearly $600 billion per year. So the agency reductions outlined so far amount to just 1.8% of the total.

For this reason, we have identified a second layer of nine agencies where we believe the headcount could be cut by 50% and existing missions sharply curtailed. This would result in a further Federal staff reduction of 93,000 jobs and nearly $15 billion in direct compensation cost savings.

Agencies DOGE Should Target For 50% Staff Reductions:

• SEC: 2,250 staff and savings of $360 million.

• FCC: 750 staff and savings of $120 million.

• Federal Aviation Administration: 22,500 staff and savings of $3.6 billion.

• IRS: 41,500 staff and savings of $6.64 billion.

• National Labor Relations Board: 800 staff and savings of $130 million.

• Office of Personnel Management: 1,340 staff and savings of $214 million.

• Environmental Protection Agency: 8,500 staff and savings of $1.36 billion.

• NASA: 9,000 staff and savings of $1.44 billion.

• General Services Administration: 6,360 staff and savings of $1.02 billion.

• Total, nine agencies cut by 50%: 93,000 staff and savings of $14.9 billion.

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Securities and Exchange Commission (SEC):

The SEC is an exceedingly top-heavy agency with staff of 4,500 absorbing upwards of $1.1 billion per year in compensation expense, which figure computes to an average cost of $255,000 per head. It is also an egregious Nanny State meddler in an industry---the stock, bond and related markets of Wall Street---that hardly needs the helping hand of the state to function.

In fact, the basic SEC function---mandated financial disclosure---generates an endless tsunami of filings that are basically superficial, proforma, mechanical, ritualistic, minimally informative and lawyered ten-ways-to-Sunday. Consequently, real investors in today's $100 trillion+ Wall Street casino spend lavishly from their own pockets to dig for supplemental business and financial information that can actually make a difference with respect to the prospects and performance of registered companies.

Stated differently, the Wall Street casino is not some kind of latter-day nursery school where the boys and girls operating there need SEC nannies to proof their readers and workbooks. With tens of trillions at stake, investors and traders would get the financial and operational information they need. Failing that, uncooperative or crooked issuers would readily find a torrent of (short) sell orders at the posts were their securities are traded.

SEC efforts to specify and enforce accounting standards are even more of a joke. Virtually all Wall Street stock analysts construct elaborate non-GAAP accounting statements (Generally Accepted Accounting Principles) for the companies they cover and recommend, even as the SEC nannies and gumshoes require companies which mention or discuss these analyst-based non-GAAP versions of their financial results to provide elaborate bridges back to GAAP. So what's the point of spending hundreds of millions per year enforcing GAAP accounting standards when the daily financial vocabulary of Wall Street traders and analysts amounts to a systematic GAAP work-around?

Then comes the foolishness of the SEC's massive market monitoring and enforcement efforts with respect to essentially undefinable and mostly pointless insider trading cases. The very predicate of insider trading laws---that each and every investor should have access to exactly the same information at the same moment in time---is an inherent insult to the basic nature of financial trading markets, where the opposite principle actually pertains. To wit, investors who develop an "edge" are rewarded with superior returns, which is how the market incentivizes and compensates for the search for information and insights that make trading more efficient and productive.

The truth is, insider trading laws amount to a version of flat-earth economics. Besides, the trading moves of a big hedge fund are far more impactful to stock prices than some undisclosed financial tidbit from a company CFO. Yet the latter is per se illegal while your "insider" knowledge of trading activity by the big swinging hedge fund operating next door to your own trading floor is completely legal so long as it was not obtained through "a breach of duty or trust".  Whatever that means.

The argument that without SEC nannies the trading markets would be corrupted by illicitly obtained "inside" information is a relic of what politicians in the early 1930s didn't understand about the real reasons for the 1929 crash (the Fed caused it). But in today's world of instantly and infinitely available information and massive financial incentives to scour the landscape for market moving data, "inside information" amounts to a Snapchat equivalent. Its half-life is too short to make a difference to investors over any measurable investment horizon.

The same goes for the SEC's prosecution of "market manipulation".  The fact is, there are currently more than 8,000 hedge funds, which collectively manage $2.8 trillion of assets---with much of the latter coursing through the trading desks of a tiny number of "prime brokers" (Goldman, Morgan Stanley, JP Morgan etc.) on a 24/7 basis. These arrangements are fully legal but inherently result in market moving surges or plunges whenever the big boys all lean in a common direction. By happenstance, of course!

The inherent irregular and sometimes herky-jerky movement of trading markets in response to information and investment flows generated by the hedge fund mob, in fact, is just economics 101. By comparison, the SEC's market manipulation targets amount to chasing the ghosts of what sharp-edged traders did in a more primitive time way back in the 1920s. In today's technology-enabled trading world none of these alleged marketplace sins would actually have more than a momentary impact and, in any event, would breed countermanding schemes similar to the manner in which some traders today buy excessively shorted stocks to trigger a covering rally. That is to say, today's markets root out cheaters and short-cutters far faster than could any passel of overpaid GS-16s at the SEC.

In short, the Trading Nannies at the SEC are not needed to prevent any of the five types of "market manipulation" pursued by the agency. Today's information, communications and technology rich Wall Street markets, where trillions are at stake every minute and hour, are always and everywhere on the alert for so-called abuses of these types. They don't need the SEC to tell them when marketplace miscreants are pumping, dumping, spoofing, wash trading, churning or lying. It quickly becomes obvious to other traders who are paid to stay alert.

1. Pump and Dump Schemes: Inflating the price of a stock through false or misleading information, then selling it at the inflated price.

2. Spoofing: Placing fake orders to create a false impression of supply or demand, influencing other market participants.

3. Wash Trading: Simultaneously buying and selling the same security to create the illusion of increased trading volume.

4. Churning: Excessive trading by a broker in a client's account to generate commissions without regard for the client's investment objectives.

5. False Statements and Rumors: Spreading false information to manipulate stock prices.

At the end of the day, the SEC should be retired to the museum of 1930s mythologies. Yet it is probably so deeply embedded in the warp and woof of the financial markets---especially with respect to routine reporting in 10Qs, 10Ks, offering prospectuses etc.---as to make its complete abolition impractical. Still, it is involved in so much unadulterated Nanny State nonsense and tom foolery that its massive staff and payroll could be easily cut in half.

That would reduce the Federal headcount by 2,250 bureaucrats and upwards of $575 million of annual expense. The fact is, the SEC modus operandi itself is an exercise in government-conducted fraud, waste and abuse because its Nanny State regime doesn't make investing on Wall Street any safer--- just more expensive and cumbersome. So if 50% of that kind of "fat" can't be cut, there is not much hope of achieving the much more difficult savings from downsizing the muscle or cutting the bone in the rest of the Federal budget.

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Federal Communications Commission (FCC)

The FCC is another relic of 1934. Even a brief perusal of the manner in which it allocates its $411 million annual budget tells you that much. In an internet-based streaming, satellite-TV and Starlink enabled world there is no longer any such thing as oppressive communications monopolies. Competition is exceedingly fierce, innovative and far-reaching---as perhaps crystalized by the "cable-cutting" crisis now sweeping the traditional cable TV business.

As it happens, traditional cable TV has seen a cumulative loss of over 10 million subscribers just since 2018, and the loss has been accelerating, with major providers like Comcast and Charter reporting relentless declines. So why in the world are the busy-bodies at the FCC in the business of consumer protection, competition promotion or broadband extension to so-called underserved areas, at all? Technological advance and competitive innovation have all these matters covered in spades without any help from the FCC nannies seeking to justify their jobs.

Indeed, the FCC nannies are mostly a hindrance to pro-consumer innovation, as is evident in the rigid blunderbuss of the "net neutrality" rules. Again, this is just regulatory socialism which prohibits internet service providers (ISPs) from blocking, throttling, or engaging in paid prioritization of any lawful content, such as providing premium priced "fast lanes" for streaming services.

That is to say, these bureaucratic power-grabbers through a new order as of April 2024 are attempting to shoe-horn today's world of internet and technology-based dynamism into the placid one-size-fits all Ma Bell modality of 1970.

At the end of the day, the only arguably useful thing the FCC does is public spectrum management, but even that should be limited to auctioning licenses for different categories of media---such as television, radio, mobile communications, and public safety. And that would require only a tiny fraction of today's staff and budget.

In short, the FCC would be getting off easy with a 50% staff cut. That would reduce its headcount by 750 jobs, save direct compensation costs of at least $120 million per year, and would also enable much of the remainder of its budget (@$300 million) to be eliminated, as well.

Breakdown of the FCC's $411 million budget for fiscal year 2024:

Federal Aviation Administration (FAA)

The FAA gives the notion of a padded-payroll bureaucracy an altogether new definition. Its 45,000 staff positions exceed by orders of magnitude the levels that should be needed to efficiently accomplish the air safety and traffic control functions it has been assigned by the Congress.

For want of doubt, just consider the enormous bloat in the 20,000 staff level at the Air Traffic Control Organization (ATO). A few years back the DOT inspector general (IG) performed a detailed comparison of costs and staffing levels as between---

• the 254 airport control towers that are operated and staffed by outside contractors, with 1,400 controllers who manage 28 percent of the National Airspace System.

• The 266 airport towers that are operated directly by the FAA, with 15,000 controllers who manage the other 72 percent of the system.

The IG found that contract towers were roughly three times more cost effective per aircraft movement handled than FAA towers. Yet the contract tower safety records for comparably sized facilities were also on par with those of FAA towers.

On average, the report said, contract towers use 48% fewer resources per aircraft handled per year. That's the case even though economies of scale should favor the larger FAA-run towers which handle significantly more flights.

Moreover, the IG found that the contract towers deliver lower costs because they typically staff their facilities with fewer controllers whom they pay much less than the FAA pays its staff. The report said a year’s worth of labor and benefit costs at the busiest FAA towers runs about $15.7 million compared to just $2.7 million for a contract facility.

Moreover, standardizing these figures on a per aircraft movement basis showed that the FAA facilities cost $22.34 per unit compared to $7.41 per unit at a contract tower. Further evidence for the gross inefficiency of the FAA-run towers lies in the fact that the cost per aircraft movement figure remained relatively constant as between busy and less busy airports, thereby revealing formulaic staffing rather than the scale-based efficiencies that should be realized with increasing volume levels. By contrast, the latter were very much in evidence in the contract towers, where per movement costs increased by roughly 30 percent at the slowest, lower-volume towers.

In short there is every reason to believe that the 15,000 controllers and 20,000 total staff at the FAA run towers could be readily cut by 50% if they were operated by efficient outside contractors.

Distribution of the FAA's 45,000 staff among the major functions:

The bloat is more than evident in the staffing levels for the other functions, as well. For instance, the FAA's 1,500 staffers in just the finance and management area compare to only 100 or so employees in the legal and finance functions at X; and the 9,000 employees in the RE &D, Facilities and Equipment and NextGen technology modernization functions compare to about 800 total employees in engineering and production functions at X.

Likewise, the 1,000 staff in the Commercial Space Transportation division essentially oversee just 50 launch service providers including, notably, Space X and Blue Origin and numerous far smaller, specialized operations; and, also, about 10 spaceport operators.  So the level of staff padding in this department is self-evidently massive.

But the real staffing jackpot lies in the AIP function which funds airport infrastructure projects such as runways, taxiways, airport signage, airport lighting, and airport markings. As is evident in the chart above, the FAA employs 2,000 staffers to bureaucratically stir, blend, mix, knead and return to local airports the ticket tax and landing fee revenues that should never have been round-tripped to Washington in the first place. That is, adopt a policy of eat what you kill in terms of airport fees and capital investment, and all 2,000 AIO bureaucrats would be redundant.

In short, cutting the FAA staff by 50% should be very easy. The reduction of 22,500 headcounts would save in the order of $3.6 billion per year, with collateral savings from reduced overhead and support costs of roughly equal magnitude.

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National Labor Relations Board (NLRB)

The NLRB is another relic of 1935 that is barely needed to enforce the nation's now well embedded and legally evolved labor laws. And like most other agencies on the banks of the Potomac, it has been captured by the unions it supposedly regulates.

After 89 years, in fact, the rights and protections of the National Labor Relations Act (NLRA) are well settled law and deeply institutionalized in practice. Specifically, the NLRA and its case law protects the rights of employees to organize, form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. It also prohibits employers from interfering with, restraining, or coercing employees in the exercise of these rights.

All of these rights, protections and safeguards, therefore, could be readily enforced by the Federal court system in lieu of the NLRB bureaucracy. The latter's separate and parallel administrative and adjudicatory system is simply regulatory capture at work. The unions like to own their own judges.

To completely shift NLRA enforcement to the regular Federal court system would likely take statutory amendments. But by proposing to cut the NLRB staff by 50%, thereby reducing Federal headcounts by 800 and compensation costs by $130 million, DOGE would pave the way toward the long-overdue displacement of an obsolete agency that survives mainly for the service of its political clients, not the public good.

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Internal Revenue Service (IRS)

Needless to say, we are not talking about just bureaucratic nannies and meddlers in the case of the current 83,000 IRS employees----a figure which is heading for 102,000 by the end of the decade under the Biden revenue grab. In the ranks of what amounts to a small city's worth of Federal bureaucrats are also a goodly phalanx of tax cops, gumshoes, enforcement lawyers and tax filing proctologists.

So the question recurs: What has generated this massive bureaucracy in the first place, and what fundamental policy shifts are needed to cut the IRS headcount by 50% (42,00 jobs) and upwards of $5 billion of compensation and other operating costs?

The answer starts with calling the IRS' bluff.  When you look at the actual tax filing data it is damn evident that the Deep State bureaucrats are faking mightily when it comes to their massive staffing demands. We discovered the scam way back in our OMB days while jousting with the Treasury Department over the sacred cows in its budget. But nothing is different 40-years later---so here's the smoking gun that points the way.

In the most recent complete tax-year (2022) there were 161.336 million individual income tax returns filed, which reported $14.83 trillion of Adjusted Gross Income (AGI). But fully 146.045 million of those filings, which reported $10.025 trillion in AGI, did not claim any itemized deductions.

Moreover, among these non-itemizers about 97 million owed taxes and used the standard deduction to calculate taxable income and the amount owed before tax credits. And another 49 million standard deduction users owed no Federal income taxes at all due to low taxable income or child and other tax credits.

In short, you absolutely do not need a giant IRS bureaucracy---and, indeed, hardly any labor-intensive operation at all---to administer the IRS code in the case of 92% of annual tax filings and the overwhelming share of US income taxpayers. That's because virtually all the relevant data for completion of these non-itemized filings is machine readable and available on other IRS reporting systems, as shown below.

For want of doubt, here is the entirety of the tax computation for a couple earning wages at the US median income of $80,000, using the $13,850 standard deduction for a joint return and claiming two $2,000 child tax credits. The fact is, with today's technology 99.999% of the work of processing, examining and adjusting (if necessary) non-itemized tax returns of this type should be accomplishable by IRS computers, with nary a bureaucrat's finger-prints evident in the whole shebang.

That's especially the case because the overwhelming share of the $10 trillion of AGI among non-itemizers is for wages and salaries reported to the IRS on W-2s; and, also, for interest, dividends, rents, royalties, independent contractor earnings, stock sales, pensions, annuities, IRAs and taxable Social Security earnings---all of which are also reported by the payers of these amounts on Form 1099s.

In the illustration below, any alert machine---to say nothing of an AI-enabled one rigged-up by Elon & Co.---could cross check the W-2s, calculate the taxable income, apply the three relevant tax brackets, deduct the $4,000 of child credits, verify the tax liability of $6,243 and subtract the taxpayer's withholding amounts to determine whether a payment or refund was required. All in literally a nanosecond. Presto!

Step-by-Step Calculation of $80,000 Wage-Earning Couple With 2 Kids And The Standard Deduction

1. Gross Income: $80,000

2. Standard Deduction: $13,850 (for married filing jointly in 2023)

3. Taxable Income: $80,000 - $13,850 = $66,150

Tax Liability Calculation

1. Taxable Income: $66,150

2. Tax Rates:

• 10% on income up to $22,000

• 12% on income from $22,001 to $38,600

• 22% on income from $38,601 to $66,150

Tax Calculation

• 10% on the first $22,000: $22,000 * 0.10 = $2,200

• 12% on the next $16,600: $16,600 * 0.12 = $1,992

• 22% on the remaining $27,550: $27,550 * 0.22 = $6,051

Total Tax Before Credits: $2,200 + $1,992 + $6,051 = $10,243

Child Tax Credits

• 2 Child Tax Credits: $2,000 per child

• Total Credits: 2 * $2,000 = $4,000

Tax Liability After Credits: $10,243 - $4,000 = $6,243

So how in the world can they justify 83,000 bureaucrats and a budget of $16.1 billion when the overwhelming share of returns involve what can be aptly described as "machine work 101"?

The answer, purportedly, lies in the balance of filings---the 15.29 million itemized returns. But even here the overwhelming bulk of the relevant income items and deductible expense items are not so complex or opaque at all. Indeed, they too are available on other IRS reporting systems and are machine readable at the individual taxpayer ID level.

Specifically, in 2022 the amount of AGI reported on these itemized returns was $4.809 trillion or about 32% of total AGI. But within this total there was included the following amounts which are all machine readable from W-2s and 1099s:

• Wages and salaries: $2,345 billion.

• Taxable interest: $78 billion.

•  Taxable dividends: $230 billion.

• IRAs: $110 billion.

• Pensions and annuities: $176 billion.

• Taxable Social Security $82 billion.

• Unemployment benefits: $3 billion.

• Subtotal: $3.024 trillion.

• Above Income As % of AGI on Itemized Returns: 63%.

When it comes to verification on a machine-readable basis, the above income items are all check, check and check. This means that when you combine the above machine-readable AGI amounts from itemized returns with the $10.025 trillion reported on non-itemized returns, it works out to 88% or $13.049 trillion of the $14.834 trillion of total AGI reported for 2022.

None of this AGI should require any significant labor-intensive administration, examination, adjustment or enforcement. The IRS computers should be aware of every dime of AGI from the above categories and whether it was filed accurately by the taxpayer or in need of the proverbial IRS-ordered "adjustment".

So it is hard to figure out why on the AGI/income side of the equation there is a need for anything remotely like the headcount and budget magnitudes shown below. For instance, the 22,000 headcounts in "enforcement" and "compliance" should be as idle as the proverbial Maytag repairman when it comes to standard deduction returns and the machine-readable sources of income filed on itemized returns. In these instances, there is nothing material for taxpayers to cheat on that wouldn't be flagged by a properly programmed computer instantly upon filing.

And the same is true in the case of the 33,000 headcounts in "taxpayer services", "operations support" and "administrative support". Virtually none of these bureaucrats are needed to process the $10 trillion of AGI on the 146 million non-itemized returns and the $3 trillion of AGI on 15 million itemized returns that is already reported independently by the underlying payers of these income sources.

To the contrary, that's work for 24/7 machines, not 6.5 hours per day (after civil service required breaks and lunch) government bureaucrats who get 35 vacation, personal leave and sick days per year, on average. And a high share of whom in the post-pandemic era don't deign to come into the office even on workdays, anyway!

Breakdown of IRS Budget and Headcounts By Function:

For want of doubt, here are the other arguably more complicated categories of AGI reported on itemized returns. But even in these cases, there is plenty of work for the machines to do with respect to examination and verification. For instance, $845 billion or nearly half of the total below is owing to capital gains. But that source of income is already reported on Form 8940 and Schedule D of 1040s. So Elon's machines should be on top of that, as well.

At the end of the day, most of the complexity and opacity of the IRS code relates to the $106 billion of net profits reported for business and professional income and the $704 billion reported by sub-chapter S corporations. Here the complexity arises not just from gross income reporting, but more especially from the timing and amounts of allowable business expenses incurred in getting to the net profits figures shown below.

Still, the total amount of AGI involved in these two sources at $950 billion is just 6.5% of total AGI. Even if returns with heavy sub-chapter S or professional and business earnings involve a lot of digging, checking, reconciling and verifying by humans, it is hardly likely to be anything close to 83,000 bureaucrat' worth.

So, yes, there may well be 2,650 pages of IRS code and another 9,000 pages of IRS regulations, and the whole thing may have 25 times more words than the Lord of the Rings trilogy. But when it comes to the overwhelming bulk of income tax filings and the AGI reported on them, 98% of this legal labyrinth is largely irrelevant. It's unfortunate existence is merely cited as a smokescreen to justify a massive, unnecessary tax collection bureaucracy.

Other Sources of Income Reported on Itemized Returns in 2022

• Business and professional profits: $106 billion.

• S-corporation net income: $704 billion.

• Capital Gains: $845 billion.

• Property sales: $26 billion.

• Rents and royalties: $20 billion.

• Estate and trust income: $29 billion.

• Gambling income: $29 billion.

• Other, net: $5 billion.

• Total of above: $1.785 trillion.

Nor does the itemized deduction side of the ledger change the picture. Upwards of 91% of itemized deductions, which amounted to $669 billion in 2022, were accounted for by the first five line-items shown below. These are largely machine readable based on standard reporting forms that originators of these deductions are required to file with the IRS.

For instance, mortgage interest deductions are reported on Form 1098; charitable contributions are reported in Form 990 and deductions for state and local taxes paid are available from IRS information sharing reports by the states. Yet in 2022 these three deductions alone amounted to nearly $500 billion or 75% of the total.

Major machine-readable itemized deductions in 2022:

• Medical deductions after floor: $93 billion (gross deductions of $121 billion less $28 billion floor effect).

• Taxes paid deduction: $125 billion.

• Mortgage interest deduction: $147 billion.

• Investment interest deduction: $23 billion.

• Charitable contributions deduction: $222 billion.

• All other itemized deductions: $59 billion.

• Total Itemized Deductions: $669 billion.

In short, upwards of 90% of the AGI reported in 2022 for all returns was machine readable from independent reporting sources and more than 90% of itemized deductions were also machine readable. Accordingly, the preponderant share of income and deduction data coursing through 161 million annual income tax filings is essentially riding in a self-driving vehicle. The work of processing, assessing, validating and adjusting it, where necessary, does not likely require more staff than the current headcount of the Capitol Hill Police (2,400).

Moreover, even a few small intelligent changes in the IRS code would narrow even further the number of returns and amounts of AGI that need labor-intensive review and verification. For instance, among the 15.29 million itemized returns filed in 2022, the overwhelming share were at the lower and moderate ends of the income scale where disputed deduction amounts are inherently limited.

2022 Distribution Of Itemized Deduction Returns By AGI Level:

• $100,000 and under: 5.755 million (37.6%).

• $100,000 to $500,000: 8.076 million (52.8%).

• $500,000 to $1,000,000: 0.903 million (5.9%).

• $1,000,000 and over: 0.558 million (3.7%).

• Total Itemized Returns: 15.292 million (100%).

As indicated above, 13.831 million itemized returns, or more than 90%, reported AGI of $500,000 or lower--including 5.8 million at $100,000 or lower.

In turn, these $500,000 and under filings reported an aggregate of $1.960 trillion of AGI and $475 billion of itemized deductions. So a "variable standard deduction" allowance of roughly this ratio---24% of AGI--- for currently itemized returns up to $500,000 would be revenue neutral. But by eliminating upwards of 90% of itemized deduction filings, an income based "variable standard deduction" would also surely reduce the need for several thousands of examiners, service personnel and overhead managers, as well.

After all, there are only 1.461 million returns with AGI of $500,000 or higher, which reported the amounts shown below for 2022. We absolutely do not believe, for instance, that you need a bureaucracy of 83,000 to examine $213 billion of itemized deduction taken by the wealthy, when $126 billion of these were owing to charitable contributions and $41 billion to investment interest deductions.  That's nearly 80% of the total deductions taken by the wealthy, yet every dollar of this is machine readable and verifiable because it is reported independently to the IRS by the charitable institution recipients and interest-receiving banks, respectively.

Likewise, 71% of the $2.78 trillion of AGI is due to W-2 salaries ($931 billion), investment interest ($62 billion), ordinary dividends ($170 billion), capital gains ($774 billion) and rents and royalties ($40 billion). As indicated previously, all of these items are also reported to the IRS separately and are machine readable by its computers at the taxpayer ID level.

So even in the insane nest of complexity which is the US tax code as it applies to the wealthy, the case just isn't there to justify the egregiously padded payrolls at the IRS. Not even remotely---and that's before taking a legislative scalpel to the tax code with the aim of drastically broadening the base and flattening the rates.

Key Tax Data for the 1.461 Million Filings with AGI of $500,000 or Higher: 

• Total AGI: $2,780 billion.

• Itemized Deductions: $213 billion.

• Other Adjustments: $86 billion.

• Taxable Income: $2,481 billion.

• Taxes Paid: $708 billion.

• Itemized Deductions as % of AGI: 7.6%.

• Taxes Paid As % of Taxable Income: 28.5%.

So can the DOGE find a way to cut the IRS staff by upwards of 50% and 42,000 bureaucrats at a budget savings of $5 billion per year? We'd say, yes, just dig into the rich trove of data in the IRS Data Book for recent tax years and the degree of the current scam will become more than evident.

In that context, DOGE might well consider a technologically modern version of the old postcard-based approach to simplification of the Federal income tax. Thus, there is no reason why upwards of 150 million filers with AGIs under $500,000 could not simply receive an "E-Card" from the IRS at their personal email address in which the IRS machines have already done all the work. The E-Card would:

• Calculate and sum all sources of AGI.

• Apply the standard deduction and child credits.

• Compute the tax liability owed.

• Calculate the amount of either payment or refund due after crediting taxpayer withholdings.

• Provide an option to "accept" the E-Card outcome or elect to file different amounts in the regular way.

Again, based on the IRS filing data it is likely that at least 90% of E-Card recipients would check the "accept" box and be done with tax time, with no expense on their end and no IRS bureaucrats on the other end.

Our confidence in this conclusion is based on these considerations from the 2022 IRS data. Only 4.7% of the 120 million returns with AGI under $100,000 claimed itemized deductions and the amount of AGI on these returns was just 7% of AGI on all returns under $100,000.

Summary of Filings with AGI of $100,000 or Under:

• Returns With No Taxes owed: 47.048 million returns with $922 billion of AGI.

• Standard Deduction Returns: 66.865 million returns and $3.424 trillion of AGI.

• Itemized Deduction Filers: 5.755 million returns with $345 billion of AGI:

Likewise, 1.88 million or 22% of filings in the $100,000 to $500,000 range used itemization, but it is likely that the aforementioned variable standard deduction approach would limit the number of itemizers very sharply.

Finally, even without sweeping tax reform and the substitution of tariff and consumption taxes for the income tax, as has been proposed by President Trump, a huge share of the $550 billion that taxpayers now absorb to figure and file their taxes and contest with the IRS bureaucracy could be readily and substantially reduced.

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Office Of Personnel Management (OPM)

This entire agency is essentially a centralized HR operation for the 2.2 million civilian labor force (FTE basis) of the Federal government. But it is truly redundant because the big departments and agencies maintain their own HR operations, which in theory are geared to the specific missions and operating conditions of each agency.

For instance, the Veterans Affairs Department, with a total payroll of 412,000 employees has 19,000 HR staff. That's one for every 22 employees. Likewise, EPA has 583 staff positions and $402 million of budget devoted to "HR Solutions". That amounts to one HR staffer for every 29 EPA employees. So how could these deeply padded client agency operations need even more HR support help from OPM?

Similarly, the Homeland Security Department has 1,000 staff in its Office of the Chief Human Capital Officer (OCHCO), while DOJ has about 1,000 HR staff in its Justice Management Division (JMD). Most of the other large agencies including HHS, Treasury, USDA and the Interior Department also have large-scale internal HR departments that number upwards of 500 to 1,000.

Self-evidently, the theory of outsourcing HR-type service functions to a central bureau was borrowed from the corporate world, but this kind of outsourcing does not work in the labyrinthine arena of the Federal government. That's especially the case given that agency operating budgets are controlled by 12 different appropriations committees which often have vastly different agendas. Accordingly, all the HR and related "servicing" operations that have been centralized at the OPM should be assumed to be duplicative of those that already exist at the departmental and independent agency level.

At minimum, therefore, the 583 headcounts in OPM's HR Solutions division should be eliminated, as well the 18-person DEI staff and a goodly share of the nearly 1,400 staff in the health insurance and retirement services operations. All the large agencies have their own specialists to assist employees with health insurance and retirement matters.

Likewise, the 121 staffers and a $140 million budget for the Chief Financial Officer function, which amounts to 12% of OPM's budget, is beyond ridiculous. That's because the client departments and agencies which OPM services already have their own financial control offices and functions. So the only reason for this office in OPM is internal financial control, which could be handled with a desk-top computer and a small staff numbering 10 employees or less.

In fact, the only valid function for OPM is the original idea that it would set policy and employment standards for the other agencies, not operate as a far-flung employee support services department for the entire Federal government. A thorough downsizing program based on this core principle would easily support a 50% reduction in the budgets and headcounts shown below for the current OPM offices.

OPM Budget and Staff Levels by Major Functions (FY 2024)

Environmental Protection Agency (EPA)

The key to downsizing the bureaucratic monstrosity otherwise known as the EPA is straight forward. To wit, all the woke and left-wing ideological digressions which absorb enormous budgetary resources and manpower but have nothing to do with efficient minimization of legitimate pollution externalities in the areas of air, water, land and solid wastes should be eliminated.

For instance, the current 2022-2026 EPA strategic plan focuses on seven goals but the first two have nothing whatsoever to do with it statutory missions:

1. "Tackle the Climate Crisis: Reduce emissions, accelerate resilience, and advance international climate efforts".

2. "Advance Environmental Justice and Civil Rights: Promote environmental justice at federal, tribal, state, and local levels".

Thus, DOGE should root out every staffer and budget dollar devoted to DEI and to so-called greenhouse gas emissions and the regulatory rule-makings and enforcement activities predicated upon net zero. As a matter of science, CO2 is not even a pollutant but rather is fertilizer to the very life of the planet---even as these regulatory misfires waste EPA resources and shackle production, employment and economic growth in the private sector.

At the operational level, this right-sizing to its legitimate statutory functions would result in enormous savings in staff and budget outlays. For instance, here is EPA's own summary of its current activities on the Climate Crisis which have no defensible statutory basis:

EPA's Efforts Against the Climate Crisis

1. Measuring Emissions: EPA tracks greenhouse gas emissions using programs like the Inventory of U.S. Greenhouse Gas Emissions and Sinks and the Greenhouse Gas Reporting Program.

2. Reducing Emissions: EPA works with industries to reduce greenhouse gas emissions through regulatory initiatives and partnership programs.

3. Climate Adaptation Plan: The EPA's 2024-2027 Climate Adaptation Plan focuses on building climate resilience and preparing for climate impacts.

4. Advancing Science: EPA conducts research to understand climate change impacts and develop strategies to manage risks.

5. International Partnerships: EPA collaborates with other countries to address global climate change.

Nearly all of the above should be eliminated under a strict interpretation of the EPA's legal mandate as recently clarified by the Federal courts. The power-seeking bureaucracy at EPA has long insisted that its authority to regulate greenhouse gases arises from the Clean Air Act (CAA), which, unfortunately, the Supreme Court initially greenlighted in Massachusetts v. EPA (2007).

However, the court has subsequently clarified in West Virginia v. EPA (2022) that the CAA does not grant the EPA such expansive regulatory powers over greenhouse gases and that it may not implement broad-based controls on them. Accordingly, the EPA's current regulatory dragnet needs to be purged of all rules, regulations, enforcement and other administrative activities that run afoul of a strict interpretation of the West Virginia ruling.

That's especially warranted because the Biden Administration has made every effort to circumvent the court's decision. For example, the EPA has proposed new carbon control rules that focus on reducing emissions at individual facilities rather than implementing its previous power generation-shifting measures on a broad regional and national basis, falsely claiming that this ruse is compliant with West Virginia. But it surely is not.

Nor is the area of greenhouse gases the only place where regulatory overreach needs to be drastically curtailed. For instance, under the Clean Water Act the EPA has gone far astray in interpreting "waters of the United States" (WOTUS) to include thousands of isolated, temporary and seasonal waters, wetlands, ponds and puddles that go way beyond any rational case for Federal protection.

Indeed, the latitude for a drastic scale-back of EPA regulatory and enforcement activities based on strict adherence to explicit Congressional intent and the black letter of the law is enormous. For instance, in 2020 alone the EPA published more than 1,400 documents, rules and orders in the Federal Register that could not possibly have been within the explicit intent of the statutes cited.

Obviously, a strict constructionist purging of EPA's regulatory and enforcement dragnet would enable a substantial reduction in its 17,000 headcount and the related estimated compensation cost of $3 billion. Yet beyond that it is abundantly clear that EPA is a world champion of padded payrolls.

For instance, only about 9,500 of its 17,000 FTE's are attributable to its core function of "environmental programs and management". All of the remainder are in science and technology research, liaison with state and tribal operations and various operational roles involving Superfund sites, leaking storage tanks, oil spill etc. A large share of these activities are either redundant, unnecessary or could be contracted out by competitive bid at far lower cost.

In short, it would be virtually a no-brainer to cut 8,500 positions from the EPA payroll at an estimated savings of $1.4 billion per year in fully-loaded compensation costs. And that would be just the tip of the iceberg.

NASA

NASA's current budget is about $25 billion, and its staff count is 18,000. However, the implied payroll cost of $2.88 billion at our fully loaded assumption of $160,000 per head by FY 2029 accounts for only 12% of the total. The preponderant budget costs at NASA, therefore, are for outside contractors and vendors of goods and services.

These costs totaled about $19.6 billion in FY 2023 and break-out as shown below. Approximately $3.8 billion of these costs, mostly in the first line item, were paid to Space X for various services such as rocket launches, cargo missions to the International Space Station (ISS), and development work for NASA's Artemis program.

Breakdown of NASA's $19.6 billion spent on outside contractors and vendors for fiscal year 2023:

Needless to say, Elon Musk would know exactly how much padding and excess is built into these contracts, which figure is undoubtedly massive and amounts to billions per year. And he would also surely recognize that NASA's entire budget in the context of the current public debt explosion is entirely discretionary: A nation heading for fiscal calamity simply doesn't need anything that NASA provides---and certainly not if it's funded by piling more debt on future taxpayers.

 So NASA should consider itself lucky to be assigned a 50% across-the-board cut for all of its outside contracts and in-house staff costs alike.

In the latter case, that would amount to a 9,000-headcount reduction, with an estimated compensation cost savings of $1.44 billion. In addition, contractor savings would amount to another $10 billion per year, as outlined below.

Obviously, a 50% budget cut would have to be allocated among the 10 major program areas currently being pursued by NASA. While there are no credible national security or near-term societal benefits from any of these programs---they amount to a swell taxpayer funded adventure for humanity---it is possible to distinguish between programs that have more of a pure science than a commercial aspect and reserve the funding priority for the former.

That is to say, let the billionaires and venture investors absorb more of the cost for the Artemis, Space Launch and Moon programs, while reserving funds in the residual NASA budget for the Space Telescope, astrophysics and planetary science programs. In any event, $12.5 billion and 9,000 staffers is surely the most the nation can afford in the face of public debt heading toward $150 trillion before mid-century by CBO's own reckoning, and probably well before the royalties from any ballyhooed Moon and Mars mining programs could make any difference.

 Breakdown of NASA's Major Programs and Activities In 2023

General Services Administration

Slashing the $11 billion budget and 13,000 staff positions at the GSA would be a no brainer in the context of a $2 trillion budget cut program that includes a 40% reduction in the non-defense payroll. After all, huge portions of the 360 million square feet of office and other space currently under GSA management, which is contained in 8,400 buildings spread across 2,200 communities from sea-to-shinning-sea, would become vacant and redundant.

In that context, the first to get pink slips should be the 3,000 staffers at GSA's Public Buildings Service (PBS) division. The latter's mission is "to construct, manage, and preserve government buildings". Given that millions of square feet of GSA space will become vacant the last thing the agency should do is spend one more dime on the location, acquisition, construction or fitting-out of additional government owned office space.

In fact, of the 690 major buildings managed by the GSA about 500 are leased and just 190 are owned. Since it is locked-in to legally-binding long-term leases on the first 500 buildings, the obvious thing for GSA to do after the "Fat is Slashed" from the Federal work force is to sell the owned buildings and consolidate Federal activities in the leased buildings---an action which would eliminate entirely the need for the 3,000 staffers at the PBS division.

And surely next in line would be the 2,000 staff in the "Staff Offices" division. This operation encompasses a mini-overhead department with policy and planning functions, legal and regulatory affairs, human resources, financial management and budgeting, communications and public affairs, information technology, facilities management, acquisition support and emergency preparedness sub-divisions and offices.

For crying out loud, this amounts to a bureaucratic version of the Russian Matryoshka Dolls---the same function stacked inside the next and the next and the next. All of the client agencies of both the GSA and OPM have these same functions. And if these "Staff Offices" functions don't primarily service client agencies, which have their own overhead functions, the story is even worse: The 2,000 bureaucrats in these overhead activities amount to one for every 6.5 GSA employees.

Distribution of GSA 13,000 Staff 

Indeed, even when it comes to the 5,000 staffers at the Federal Acquisition Service (FAS) it is evident that we have another case of centralized support functions run amok within the vast labyrinth of the Federal government. Among the nine major functions of the FAS division, upwards of eight of them surely duplicate thousands of bureaucrats performing the same functions in the client agencies.  The only function logically needed at the GSA is the policy and compliance function, which, again, could be done by a few dozen overseers.

The argument could be made, of course, that the duplication should be eliminated at the client department and agency level rather than GSA. But as the man said, the best way to kill a snake is to smash the eggs.

• Technology Transformation Services (TTS): Leads the digital transformation of federal government by helping agencies build, buy, and share technology that allows them to provide more accessible, efficient, and effective products and services for the American people.

• Office of Assisted Acquisition Services (AAS): Provides acquisition, technical, and project management services that assist agencies in acquiring and deploying information technology and professional services solutions.

• Office of General Supplies and Services (GS&S): Simplifies the buying process to meet customer agency needs in the areas of office supplies, computer products, tools, security, furniture, and many others.

• Office of Information Technology Category (ITC): Offers high-quality commercial products, systems, services, and support to federal, state, and local governments.

• Office of Professional Services and Human Capital Categories (PSHC): Responsible for the strategic leadership, oversight, and management of FAS’ professional services, human capital services, and charge card management programs and contracts.

• Office of Travel, Transportation, and Logistics Categories (TTL): Develops and manages programs and solutions for travel, motor vehicle, and transportation services, and FAS emergency support.

• Office of Policy and Compliance: Ensures operating practices are consistent and that GSA’s activities are fully compliant with federal laws, regulations, and policies.

• Office of Customer and Stakeholder Engagement: Enables GSA to better understand customer requirements and become a strategic partner in helping agencies meet their acquisition needs.

• Office of Strategy and Innovation: Sets the strategic vision for all of FAS, consistent with the overall GSA strategic vision, and also a consistent set of tools to help achieve the vision.

In short, a $1 billion savings from eliminating 6,400 staff positions (50%) would be a minimal start on reducing the fat at GSA. But billions more could be eventually saved by selling-off redundant GSA owned building and sub-letting what would be millions of unused leased square footage to private sector users.

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