In this episode, Scott Becker discusses the complexities of reducing government spending, the potential impact on the economy, and the challenges of managing the growing deficit.
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Chapter 1: What is the main topic of this episode?
This is Scott Becker with the Becker Private Equity and Business Podcast. We're thrilled to be coming to you today with a studio audience, so we're excited to be here with an audience. Today's discussion, and every day we try and teach, to learn, to entertain, make sure I'm learning, you're learning,
Chapter 2: What is the Department of Government Efficiency?
Thrilled this last week to pass almost 23 million downloads between the Private Equity podcast and the Becker's Healthcare podcast. So God bless all of you who listen. Thank you. Today's discussion is doge, doge, doge. So here's the situation. This Department of Government Efficiency, this is a concept originally Vivek and Elon needed. It seems like Elon has taken it over completely.
Vivek, I'm not sure where he is going. But Elon is sort of driving this Department of Government Efficiencies, which essentially is recommendations to Trump and others on job cuts and efficiency and saving money and so forth. So here's sort of the good, the bad, and the ugly. The good is that obviously as a government, we're spending way more than we're bringing in.
Chapter 3: What are the implications of government spending on the economy?
I think last year was about $6 trillion spent, $4.3 million brought in. That's a losing number. That's a debt financing number. That's a deficit number that doesn't work. As we talk about often, Deficit kills families, governments. It kills companies. You know, no good.
Chapter 4: How does government debt affect families and companies?
I had a discussion yesterday on a podcast where somebody asked me, or a webinar, where somebody said, look, we've got a company that's, we've had it for five years in our portfolio. Debt is seven to 10 times EBITDA. Are we stuck? And the answer is probably yes. So too much debt, no good. So I want the concept of Department of Government Efficiency looking at debt. Now that's the good.
Chapter 5: What growth rates are we seeing in relation to government debt?
Now here's the problem. We use the government deficit and the government spending to sort of juice the economy and keep it growing. The most recent numbers last year or so, and these are horrible numbers, we got 3% growth as an economy on 8% debt as a fraction of sort of deficit spending as a fraction of GDP. So it's a horrible, horrible numbers, but we sure like that growth.
Chapter 6: What strategies can be used to cut government spending effectively?
so here's where the rubber hits the road if elon and team are actually successful at cutting enough government spending and we would encourage them to look to cut a few hundred billion not to try and cut a trillion at a time but to sort of work through this and the great challenge is might not be an office of four years so afraid not to cut a lot of it now
But if we have to get it somewhat in order, but if we do it too aggressively, it really harms the economy and the growth in the job market and everything else. So you've got this very balanced challenge of all of us know we've got to cut the deficit. This was a big discussion yesterday, though. But if you're in health care, like everything else, you don't want the deficit cut there.
You want to cut someplace else. And this was the great challenge of all this budgeting, whether the tax side or the spending side, everybody wants taxes to spending in order. They just want them in order in a way that works for them. So what's the consequences? The consequences of this is, You're starting to see the community a little bit scared about the potentiality of cuts.
That puts a little bit of freeze in deal work. It also puts a freeze on consumer sentiment. So today, meaning Friday, and this will be released on Saturday, we've got the worst consumer sentiment reading in about seven months. And what that's going to do is hurt the stock market, which is what it's doing today, because people are now concerned again about where is the economy going?
Also, things are too hot for the Fed to cut rates, but people are very concerned about whether they'll continue to make the living they want to make, whether they'll be able to afford what they want to afford and continue to progress. In any event, that's today's discussion. Doge, doge, doge. A ton of this is unanswered questions.
But it's starting to put a little concern in the business and consumer community. And again, I am one of these people that really wants to see this debt get put into order. But the medicine we do sort of take to do so, it can't be like chemo where it might kill us in doing it. So it's really a challenging spot for the government.
And you're sort of at a spot where President Trump goes back and forth day to day on what things are going to look like. And that's a little bit hard to figure out. from a business perspective. In any event, good luck to Elon in doing this, but let's hope he does it intelligently and not with just a huge knife. We'll see how it goes. Doge, doge, doge.
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