THE ECONOMIST: What is Elon Musk getting up to with America’s payment system?

On the morning of January 28 April Mullins-Datko, the director of ADVOCAP, a social-services provider in Fond Du Lac, a city of 40,000 people in Wisconsin, put in her usual request to draw down $US250,000 ($400,000) to pay staff salaries and other expenses connected with Head Start, a federal program that provides child care, education and food to families on low incomes.

Every other time ADVOCAP has done this the money has arrived within 48 hours. This time it did not.

As of February 9, ADVOCAP has received just $US44,000 of the $US250,000 they were expecting.

To pay their workers, they have had to use bank credit. If the money does not materialise soon, they will have to begin laying off staff and shutting down their Head Start programme. The result will be 202 children without services and 80 staff members without jobs.

ADVOCAP appears to be a victim of Donald Trump’s seizure of the federal government’s payment systems.

Its money should not be missing, according to the White House.

A memo that froze much government funding, issued late on January 27, was quickly rescinded after an outcry and a court ruling. Yet ADVOCAP’s money has not turned up and nobody seems able to explain why.

Ms Mullins-Datko says she has been calling anyone she can, but “they’re not responding. I’ve heard nothing from them.”

She has received only one insight: “I called the Office of Head Start central office in DC and they said, ‘Oh, we’re sorry. This isn’t an Office of Head Start problem. This is a Treasury Department issue’.”

Guidance sent to NGOs by the National Head Start Association, which represents service providers, confirms they too have been told that the problem is with the Treasury.

That clue connects ADVOCAP’s glitch to a bigger question that has roiled Washington over the past week: Exactly what has Elon Musk’s “Department of Government Efficiency”, or DOGE, been doing inside the Bureau of the Fiscal Service, a once-obscure but sensitive area of the Treasury?

This is the part of the government responsible for paying out roughly 80 per cent of the nearly $US7 trillion that the government spends each year.

The drama broke into the open on the morning of January 31, when David Lebryk, the bureau’s longstanding boss and a career civil servant, suddenly resigned. Until then, the bureau was among the most anonymous of federal offices.

According to Don Hammond, a former official there, Mr Lebryk often told staff members that if the bureau is in the news, the country is in serious trouble. Ever since he stepped aside, it has been in the news an awful lot.

A few days after Mr Trump took office, Tom Krause, a software executive now working with DOGE, ordered Treasury officials to halt payments made by the US Agency for International Development (USAID), according to emails obtained by the New York Times.

USAID has subsequently been all but shut down. In the emails, Mr Lebryk argued that refusing payments was not the Treasury’s legal or technical role - only agencies (like USAID) can do that.

He was put on leave and subsequently resigned. His defenestration has sparked something close to panic among seasoned government watchers and career civil servants about what DOGE might be doing.

What is clear is that allies of Mr Musk, including Mr Krause, and also a 25-year-old former Twitter engineer, Marko Elez, have been given access to the bureau’s payment system, under the orders of Scott Bessent, Mr Trump’s new Treasury secretary.

They may have asserted the authority to write new code into it, although politically-appointed officials deny that. Nobody disputes that they have acquired the ability to read details of some of the most sensitive data the government holds, including the bank details, social security numbers and tax identifications of essentially every individual and organisation ever paid money by the federal government.

In the past only non-partisan career civil servants have had access to this information. Mr Krause not only is partisan, he retains his previous job, as CEO of Cloud Software Group, a tech-services company.

What could they have done? Contradicting the Treasury’s own spokesperson, Mr Musk has repeatedly suggested on X, his social-media platform, that his team are shutting down payments to government contractors directly. He claims to be fighting corruption.

Before DOGE came in, Treasury officers “literally never denied a payment in their entire career”, he scoffed.

If they are blocking payments, it could violate two court orders. Yet Treasury insiders are concerned that DOGE officials may have found ways to implant code that could delay payments to recipients while hiding that from career civil servants.

Another possibility is that DOGE could be asserting authority over a system, Do Not Pay (DNP), designed to prevent bad payments by automatically freezing out accounts known to belong to dead people, tax delinquents and recipients out of compliance with federal rules.

The firing of 17 inspectors-general, one of Mr Trump’s first acts in office, might facilitate this, since they have oversight of the DNP system.

Even if Mr Musk’s claims that he is blocking payments are nonsense, the system is vulnerable to accidents caused by tinkering. Programs like these have been built up over decades, literally on top of 1960s “COBOL” mainframes, says Mikey Dickerson, a former head of the United States Digital Service.

“No living person understands more than a small piece of it.” Small changes made without extensive testing can produce catastrophic errors.

The Treasury says Mr Musk’s team has been limited to “read-only” access. Yet Mr Musk says he is issuing instructions to others. These could impinge on several privacy laws.

And the payment system could be used against political opponents in a devastating fashion, by cutting transfers to unfavoured organisations.

There is only one real precedent for political appointees going into these sorts of federal systems, some older officials note. That was when Richard Nixon’s team used Internal Revenue Service records to work out how to target people on the president’s “enemies list”.

On February 8 a federal judge in New York, citing a risk of “irreparable harm”, stopped DOGE temporarily from gaining access to the payment system, and ordered that any data retrieved be destroyed. But Treasury workers fear that this order will simply be ignored.

Mr Musk’s response was to call the judge “a corrupt judge protecting corruption” and to call for him to be impeached. J.D. Vance, the vice-president, retweeted a claim that the order amounted to “judicial interference”.

For ADVOCAP, the consequences are already serious. Ms Mullins-Datko says her employees are worried that they may not get their next pay cheques, and some have been looking for other jobs.

The money ADVOCAP is owed, she stresses, is for work already done, and she has a five-year contract to continue providing services.

The terms of this contract include extensive auditing to prevent any fraud or misuse of funds. “The government is in breach of contract,” she says.