So, everyone is talking about the Department of Government Efficiency. Not the meme coin, though that's where the name came from, but the actual "DOGE" commission led by Elon Musk and Vivek Ramaswamy. They’ve been making huge waves with claims about slashing trillions from the federal budget. But if you look at the recent BofA analysis of DOGE savings, the experts at Bank of America are basically holding up a giant yellow "caution" sign.
Honestly, the numbers flying around are dizzying. We're talking about billions in supposed cuts. But BofA’s analysts, led by Mariana Perez Mora, have been digging into the spreadsheets. Their take? The savings might be a lot smaller than the headlines suggest.
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The Reality Check on Federal Contract Cuts
The DOGE commission recently claimed they saved taxpayers roughly $20 billion by terminating over 5,000 federal contracts. That sounds like a win, right? Well, BofA’s research suggests this number is "overstated."
Here is the kicker: the way DOGE calculates these savings is kinda weird. They look at the "contract ceiling"—which is the maximum amount a contract could spend—and subtract what has actually been paid out. The problem is that many government contracts never actually hit that ceiling anyway. It’s like saying you "saved" $500 on a grocery trip because you had a $600 budget but only spent $100. If you were never going to buy those extra $500 worth of groceries, did you really save the money?
BofA points out that this methodology leads to inflated figures. In their own breakdown, they placed the verifiable savings closer to $18 billion, and even that comes with some serious asterisks.
Why the "Power of the Purse" Matters
There is a huge legal hurdle that most people are ignoring. You've probably heard the phrase "Power of the Purse." In the U.S., that belongs to Congress, not a commission and certainly not the executive branch alone.
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BofA analysts have been very vocal about this:
- DOGE can identify waste.
- They can cancel specific contracts.
- But they can't actually shrink the deficit on their own. Basically, if DOGE "saves" $1 billion at the Department of Education, that money doesn't just vanish and lower the national debt. It usually just sits in the agency's account until they spend it on something else—unless Congress steps in and actually passes a law to take that money back. Without Congressional action, these "savings" are just reshuffling the deck chairs.
Who is Actually Getting Hit?
If you’re wondering who is feeling the heat, BofA’s analysis of DOGE savings highlights a few specific targets. The U.S. Agency for International Development (USAID) and the Treasury Department were among the first to see the axe.
Even big defense contractors are seeing small dents. For example, BofA noted that General Dynamics (GD) had two education-related programs cancelled. Booz Allen Hamilton saw an $8 million reduction. While these are huge companies, these specific cuts are relatively tiny compared to their total revenue.
Wait, it gets more complicated. BofA also found evidence of "double counting." This happens when the commission counts the elimination of a main contract and then also counts the elimination of the subcontracts underneath it as separate savings. It makes the total look bigger than it actually is.
The Problem with "Unauthorized" Programs
Vivek Ramaswamy has mentioned that over $500 billion could be saved by ending "unauthorized" programs. These are programs that Congress still funds even though their original legal authorization has expired.
It sounds like an easy win, but BofA and other independent analysts (like those at Politico and the American Prospect) warn this is a bit of a reach. Many of these "unauthorized" programs include things like Veterans Health Administration and the Department of Justice. Are we really going to stop funding the VA? Probably not. BofA suggests that while some efficiency is possible, the $2 trillion target Musk often tweets about is more of a dream than a realistic fiscal projection.
Is DOGE Actually Working?
Look, it's not all bad. The commission is finding actual waste. BofA acknowledged that the total is growing—it went from $15.2 billion to over $18 billion in a very short span. That’s real money.
But there is a massive gap between "we found $20 billion in old contracts" and "we are fixing the $34 trillion national debt."
What most people get wrong is thinking this is a simple accounting job. It's actually a political cage match. BofA’s core message to investors is to watch the ROI (Return on Investment) of these moves. If the cuts end up causing more revenue loss—like the IRS losing the ability to collect taxes—the "savings" could actually end up costing taxpayers more in the long run.
Practical Steps for Following This Trend
If you're trying to figure out how this affects your wallet or your investments, keep an eye on these three things:
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- Watch the Defense Sector: BofA is closely monitoring how DOGE impacts major contractors. If "efficiency" leads to a $1.5 trillion defense budget (which BofA says is possible for FY27), the "cuts" in other areas might just be offset by massive spending in AI and automation for the military.
- Verify the Numbers: When you see a "savings" headline, check if it’s based on "contract ceilings" or actual "obligated funds." The ceiling is almost always a fantasy number.
- Monitor Congress: The real drama starts when these proposed cuts hit the House and Senate. If Congress doesn't adjust the appropriations, the DOGE savings are just a PR exercise.
Don't get swept up in the hype or the doom-scrolling. The BofA analysis of DOGE savings proves that while the intent to trim the fat is there, the math is currently more about "potential" than "actual" cash in the bank.
Next Steps for You:
Check the official DOGE.gov tracker against the BofA Securities weekly market recaps to see the "spread" between what the government claims and what Wall Street actually believes. Look for mentions of "contract obligation versus ceiling" to spot where the numbers are being padded.