Nov 1, 2024
Tesla CEO Elon Musk has captivated the public once again, but this time, the topic wasn’t Mars, electric cars or brain-machine interface. Instead, Musk took the stage at former President Donald Trump’s event held in the iconic Madison Square Garden arena to discuss something much closer to home: reining in federal spending.
Introduced by Cantor Fitzgerald CEO Howard Lutnick, Musk stepped up to the microphone, drawing cheers from the packed crowd. Lutnick set the tone with a bold question: "How much do you think we can rip out of this wasted $6.5 trillion Harris-Biden budget?"
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It’s unclear where Lutnick got his figure from, but in the 2024 fiscal year, the federal government spent $6.75 trillion. More than three-quarters of this was for Social Security, health care, defense, and veterans’ benefits — which as Bloomberg pointed out are “politically fraught and notoriously difficult to convince Congress to cut” — as well as interest on the national debt.
Musk didn’t hesitate. “I think we can do at least $2 trillion,” he replied confidently. Lutnick responded with a fist pump and sparked another eruption of cheers from the crowd.
While Musk didn’t detail specific areas for cuts, he spoke sharply about government spending and taxation.
“At the end of the day, you’re being taxed … All government spending is taxation,” he said. “Your money is being wasted, and the Department of Government Efficiency is going to fix that. We’re going to get the government off your back and out of your pocketbook.”
The crowd roared its approval again, energized by Musk’s promise of a leaner government. But can he fulfill it?
Department of Government Efficiency (DOGE)
When Trump rolled out his economic proposals in September — including a new government efficiency commission to be led by Musk — the Tesla CEO expressed his willingness to take on the role.
“I look forward to serving America if the opportunity arises. No pay, no title, no recognition is needed,” Musk wrote in a post on X.
In characteristic style, Musk has joked about his prospective role as head of the “Department of Government Efficiency,” nicknamed “DOGE” after the cryptocurrency he has frequently championed.
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Trump acknowledged Musk’s many commitments and doubted he could dedicate himself to the role full-time. “I don’t think I can get him full-time because he’s a little bit busy sending rockets up and all the things he does. But he’s so much into that, he said the waste in this country is crazy,” Trump remarked.
And Trump doesn’t plan to pay Musk for his efforts — which, with a net worth of $272 billion, Musk probably doesn’t need.
Musk, who has endorsed Trump for president, sees a Trump victory as “a once in a lifetime” opportunity in deregulation and reduction in the size of government.
And as someone who runs multiple businesses, Musk is no stranger to downsizing. When he acquired Twitter (now X) in 2022, the company had around 7,800 employees. By 2023, Musk revealed in a BBC interview that the workforce had been cut to just 1,500 — a staggering 80% reduction.
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The challenge
If Musk takes on the efficiency commission, he’ll face a formidable challenge.
The federal government ran a $1.83 trillion deficit for the 2024 fiscal year. This is the amount by which spending exceeded revenue.
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When a government that’s already in debt keeps spending beyond its means, it adds to the national debt. As the Treasury noted, “The deficit this year contributed to a national debt of $35.46 trillion through September 2024.”
The national debt is still growing — reaching $35.82 trillion as of late October.
The sheer size of the debt brings another major burden: servicing it. Musk has previously pointed out that interest payments on the national debt now exceed $1 trillion annually. As the debt balloons, Musk warned that eventually, "the only thing we'll be able to pay is interest."
In fiscal 2024, Net Interest was the third-largest federal spending category, according to the Treasury Department. Net Interest surpassed Medicare and National Defense, trailing only Social Security and Health in total spending.
While Musk is optimistic about helping Trump manage America’s fiscal challenges, experts don't share his confidence.
A recent study by the Committee for a Responsible Federal Budget, a non-partisan think tank, projected that Trump’s policy proposals could add $7.75 trillion to the national debt over the next decade. Meanwhile, his opponent Kamala Harris’s proposals would increase the debt by $3.95 trillion.
The committee’s report concludes with a sobering outlook: “both the Republican and Democratic candidates for President have put forward campaign plans that would, at best, maintain the status quo and, at worst, add tremendously to our debt and deficits. Neither has a plan to fix the imbalances in the major trust funds.”
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
