Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / Why the Government Pays More for Space Than Musk Does
Transcript
- Lucas: So, Luna, quick question. How much do you think it costs to launch a single NASA astronaut to the Moon? Luna: I mean, I know it's not cheap. Billions? Lucas: Try four point one billion dollars. That's the estimated cost per launch of NASA's Space Launch System, the rocket built for the Artemis program. And that's just the rocket—not the capsule, not the ground systems, not the mission control. Luna: Four point one billion. For one launch. That's more than the GDP of some small countries. Lucas: Exactly. And here's the kicker: SpaceX's Starship, which is designed to do the same job—carry astronauts to the Moon—has a target cost of around ten million dollars per launch. Even if Starship ends up costing a hundred times more than SpaceX hopes, it's still a fraction of SLS's price tag. Luna: So why on Earth is NASA paying so much more? Is it just government waste, or is there something else going on? Lucas: That's the question. And the answer is more nuanced than 'government bad.' Sure, there's waste, but a lot of the price difference comes down to mission requirements, contracting models, and the political realities of public spending. Luna: Okay, let's dig into that. Start with the mission requirements. Lucas: So NASA's SLS is built to carry humans beyond low Earth orbit. That means it has to meet much higher safety standards than a cargo rocket. You're putting people on top of a controlled explosion, and you want them to come back alive. That drives up design, testing, and certification costs enormously. Luna: Right. But SpaceX is also building Starship to carry humans, so they're facing the same safety requirements. Lucas: True, but they're doing it with a different approach. Starship is designed to be fully reusable, which spreads the cost over many launches. SLS is essentially expendable—each launch is a brand-new rocket. And it uses engines, the RS-25s, that were originally built for the Space Shuttle. Those engines are incredibly expensive to produce because the manufacturing lines were shut down and had to be restarted. Luna: So you're paying a premium for heritage hardware that's no longer in production. Lucas: Exactly. And then there's the contracting model. NASA uses a cost-plus contract for SLS. That means the government pays the contractor's actual costs plus a guaranteed fee. There's very little incentive to come in under budget—in fact, the contractor makes more money the more the project costs. Luna: Wait, so they're literally incentivized to overspend? Lucas: In a sense, yes. Cost-plus contracts make sense when you're doing truly novel research and development, where nobody knows what the final cost will be. But when you're building a rocket based on existing technology, like SLS is, a fixed-price contract—where the contractor eats any overruns—is often more efficient. That's what SpaceX operates under. Luna: And that's a big part of why commercial companies can undercut the government. Lucas: Right. But there's also a political dimension. SLS is built by contractors in key congressional districts. The program was explicitly designed to preserve jobs and expertise from the Space Shuttle era. So there's a strong incentive for Congress to keep funding it, even if it's not the cheapest path to the Moon. Luna: So it's not just about getting to the Moon; it's about spreading the pork. Lucas: You said it, not me. But that's a classic public-choice problem. The benefits of the spending are concentrated and visible—jobs in a senator's state—while the costs are spread across all taxpayers. That makes it politically rational to keep the program alive, even when there's a cheaper alternative. Luna: And that's the same dynamic we see in defense procurement, right? The F-35 program is a perfect example. Lucas: Exactly. The F-35 has had cost overruns of over a hundred billion dollars, but it's built in dozens of states, which makes it nearly impossible to cancel. The same thing is happening with SLS. It's not just about the technical challenges; it's about the politics of public spending. Luna: So what's the fix? Should the government just stop building rockets and buy launches from commercial companies? Lucas: That's what a lot of space policy experts argue. NASA already does that for cargo resupply to the space station, and it's worked spectacularly well. SpaceX and Northrop Grumman deliver cargo at a fraction of the cost of the old shuttle program. And for crew, SpaceX's Crew Dragon is now the primary way American astronauts get to orbit. Luna: And it's way cheaper than the old shuttle or the new SLS. Lucas: Yeah. The problem is that SLS is a jobs program disguised as a rocket. It's not just about the technical mission; it's about maintaining a certain industrial base. And that's a legitimate goal, but it comes at a huge cost to the taxpayer. Luna: I'm curious about the broader lesson here. This isn't just about space, is it? Lucas: Not at all. This is a microcosm of how government procurement works in general. Whether it's building a fighter jet, a new highway, or a federal IT system, the same dynamics apply: cost-plus contracts, congressional earmarks, and a focus on inputs rather than outcomes. The result is that the government often pays multiples more than the private sector for the same thing. Luna: So what's the takeaway for a regular taxpayer? I mean, we're not going to fix the procurement system by ourselves. Lucas: I think the takeaway is to be aware of the choices your representatives are making. When a politician boasts about bringing home a defense contract or a big infrastructure project, ask yourself: Is this the most cost-effective way to achieve the goal, or is it just about bringing money to my district? And then ask what that money could have bought if it were spent more efficiently. Luna: That's a good note to end on. But before we wrap up, I want to mention something that's close to our hearts here at the show. Lucas: Go for it. Luna: If today's episode gave you a little more insight into how your tax dollars are spent, and you've ever thought about supporting what we do, you can buy us a coffee at buy me a coffee dot com slash fexingo. It's a small way to keep this show ad-free and independent. Lucas: And it genuinely helps. We're a tiny operation, and every bit of support goes straight into making more episodes like this one. No pressure, of course. Luna: Alright, back to the Moon. So, Lucas, given all this, do you think NASA will ever switch to a fully commercial approach for human lunar landings? Lucas: We're already seeing a hybrid approach. NASA is paying SpaceX and Blue Origin to develop lunar landers under fixed-price contracts. But the SLS rocket is still mandated by Congress, so it's probably not going away anytime soon. The most realistic path is that SLS gets used for the first few Artemis missions, and then as commercial systems prove themselves, the pressure to cut it will grow. Luna: So there's hope for reform, but it's going to be incremental. Lucas: Exactly. And the next time you see a headline about NASA's budget, remember that the real story isn't just about exploring space—it's about how we decide what something is worth paying for. And that's a question that applies to everything the government does.