In order to give legal support to DOGE’s ambitious cost-cutting campaign, Senate Republicans are urging Elon Musk to stop fighting alone and use Congress’s formal “rescissions” process to make his controversial government-spending cuts permanent. However, this move could expose politically painful decisions to public scrutiny.
One of the most divisive policies of the second Trump administration is the Department of Government Efficiency, or DOGE. While some applaud it as a long-overdue attack on government waste, others denounce it as an unconstitutional power grab that goes against the separation of powers.
“The White House, I’m urging them to come up with a rescission package,” Republican Lindsey Graham, the Senate Budget Chairman, who is from South Carolina, told reporters following a close lunch with Musk on Wednesday. “The White House should now launch an offensive. Here, we’re losing altitude. Regaining altitude can be achieved by taking the work product, putting it to the vote, and removing yourself from the drama and people.”
The shift to rescissions coincides with DOGE’s mounting legal troubles, constituent complaints regarding service interruptions, and apprehension among Republicans that Musk’s combative strategies would backfire.
Sen. Rand Paul, a Republican from Kentucky, disclosed that Musk requested that him take into consideration a rescission measure worth at least $100 billion, and maybe a number of bills that might eventually recover up to $500 billion in previously authorized funds.
DOGE’s dubious legal foundation
Budget experts caution that a 1974 regulation intended to curb presidential overreach is probably violated by DOGE’s unilateral cuts.
Charles Konigsberg, the author of the newsletter Trillions and a former assistant director at the Office of Management and Budget during the Clinton administration, told bourseWatch, “What hasn’t received enough attention is that the actions by DOGE to just cancel all of this money is a blatant violation of the Impoundment Control Act.”
“It’s a direct assault on Congress’s Article 1 appropriations authority,” Konigsberg said. “I mean, here you’ve got a guy who’s not elected, not even confirmed, and he’s just deciding not to spend money, and that’s blatantly illegal.”
In response to President Nixon’s attempts to seize funds that Congress had approved, the Impoundment Control Act was passed in 1974. The legislation gives the president two legal options for deferring or stopping spending: rescissions, which need congressional approval, and deferrals, which temporarily halt spending for efficiency reasons.
The president recommends cuts under the rescissions procedure, and Congress has 45 days to approve them through a filibuster-proof process that only needs a simple majority of votes in the House and Senate—both of which are presently controlled by Republicans.
Market ramifications
Since the final result will have a big influence on government contractors, bond markets, and the overall state of the economy, Wall Street is keeping a careful eye on these events.
“If they wanted to do this the right way, they would propose rescissions and have Congress vote in an efficient and filibuster-proof manner,” Konigsberg said. “But there’s a big ‘but’ here, and that is the reason they haven’t done it that way is that it’s much easier to just go into the computer systems and shut this money down.”
The administration may be trying to evade public transparency. As Konigsberg pointed out, “There would be free discussion and openness if they truly followed the law and proposed rescissions to Congress. And since they would genuinely concentrate on the consequences, many of the rescissions would most likely not proceed.”
Despite offering legal protection, the rescissions option would subject each cut to legislative scrutiny and possible political backlash.
For Republicans who generally agree with DOGE’s objective but are the target of constituent complaints on the practical consequences of the cuts, this presents a conundrum.
Investors shouldn’t anticipate more DOGE cuts to become law, Veda Partners’ director of economic policy, Henrietta Treyz, cautioned in a note to clients on Friday, saying the attempt is “predictably running into the brick wall of Congressional and voter blowback.”
With an uncertain effect on the already volatile U.S. Treasury market, she projects that budget deficits “will be dramatically increased this year” by well over $2 trillion. BX: TMUBMUSD10Y
The way ahead
Sen. Graham told reporters that Musk is keen to make DOGE cutbacks a law, and Republicans are expected to try to pass a rescissions package.
A major tactical change for DOGE would be the adoption of rescissions, which would involve Congress more directly in the process and may slow down the rate of cuts while also giving the effort constitutional credibility that might shield it from legal challenges.
According to Konigsberg, Washington officials must once more concur that the budget process should be bipartisan and err on the side of fiscal restraint before real budget discipline can be reinstated.
He claimed that the loss of culture started under the George W. Bush administration, when they used the budget-reconciliation process to approve unfunded tax cuts, which led to nearly 25 years of politicized spending and tax bills that have caused the deficit to skyrocket.
According to him, “the expectation on everybody’s part, president and Congress, was that when we wanted to do something, new, you’ve got to pay for it, and find offsets.” He was employed in President Clinton’s budget office in the 1990s.
