While Elon Musk was promising to chainsaw the federal government into submission with his Department of Government Efficiency cosplay, one mild-mannered tax economist quietly did what grown-ups do: he read the budget tables.
Alan Cole, a 37-year-old economist at the right-leaning Tax Foundation, looked at the prediction markets lighting up with Musk believers betting that federal spending would shrink in 2025, and saw what can only be described as free money. He wasnāt betting on vibes or ideology. He was betting on math.
When Muskās Department of Government Efficiency (DOGE) stormed into Washington promising dramatic shrinkage, the newly booming prediction markets filled with believers willing to bet that federal spending would fall in 2025.
The wager was hosted on Kalshi, a federally regulated prediction market platform where people can trade contracts on the outcomes of real-world events. Think of it as a futures market for reality: instead of betting on a football game, traders buy and sell contracts on things like inflation rates, election outcomes, or government statistics. If the event happens, the contract pays out. If it doesnāt, it expires worthless.
The contract was straightforward and mercilessly objective. If federal spending in each quarter of 2025 exceeded spending in the fourth quarter of 2024, measured in annualized, seasonally adjusted nominal dollars, using official government data, the āgovernment keeps growingā side would win.
There was no interpretive spin or panel of judges. No viral X thread to massage the definition of ācut.ā No Elon Musk on a stage, grinning and hoisting a chainsaw above his head as sparks fly and the crowd roars. Just the numbers as published.
The Bureau of Economic Analysis does not care about theatrics. The Treasuryās quarterly statements are immune to branding, and actuarial tables do not applaud. Cole wasnāt betting against a personality, but he took the other side of the Musk believers.
Then he went all in. Not āa little speculative position,ā or āplay money.ā He moved $342,195.63, effectively everything outside retirement accounts and home equity into the bet.
Why? Because federal spending is not a discretionary tech startup that can be pivoted with a motivational speech. Itās Social Security checks. Medicare reimbursements. Interest on nearly 100% debt-to-GDP. An aging population. Healthcare inflation. Structural commitments that donāt evaporate because a billionaire tweets about efficiency.
As The Wall Street Journalās Richard Rubin reports, Cole wasnāt dismissive or ideological about it. He was clinical. In what may be the most beautifully understated line in the entire story, Cole explained that even if Musk cut contracts and trimmed the federal workforce, there was āno plausible pathā to meaningfully dent overall spending.
That phrase, no plausible path, is doing a lot of work. Itās not a moral judgment. Itās an actuarial assessment.
Rubinās reporting makes clear what so many of the prediction-market traders seemed to miss: federal spending isnāt dominated by discretionary office budgets that can be axed during a dramatic on-stage moment. Itās dominated by mandatory programs and debt service that run on autopilot. Social Security, Medicare, Medicaid, and plenty of interest payments. You cannot fire compound interest.
The U.S. government has been described as an insurance company with an army. In 2025, itās an insurance company with an army and a giant mortgage. You canāt DOGE that away, at least that is the way Cole saw it.
When the final 2025 figures dropped on February 20, it wasnāt close. The lowest spending quarter was $66 billion above the betās target. Cole collected $470,300.
Profit: $128,000.Return: 37%.Cause of death for the āMusk will shrink government overnightā fantasy: arithmetic.
What makes this story so perfect isnāt just that he won. Itās why he won. He wasnāt some ideological warrior betting against Musk. Heās a tax-policy nerd who specializes in things with acronyms that require hydration breaks to pronounce. He simply understood that structural federal spending doesnāt reverse on a dime because of swagger.
People on the other side of the bet were apparently wagering on vibes, not budget baselines. Coleās wife reportedly read the Kalshi comments and felt reassured because the Musk backers ādidnāt seem to understand what they were buying.ā
There is something almost poetic about that. This was a triumph of basic public finance over magical thinking.
And itās a reminder worth sitting with: the federal budget is not a startup burn rate. Itās a demographic machine that runs on entitlements, debt service, and healthcare costs. You can fire press secretaries and rebrand agencies, but you cannot meme away compound interest.
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