The Unique Danger that is Musk: Mindless Disruption and Global Economic Collapse
If you like a good economic calamity, you will absolutely love what the Musk-Trump Administration has in store! Yes, I finally have an excuse to write again as a pure econ wonk, and it makes me feel strangely tingly inside to be able to describe something that is so obviously horrible and that seems not to be getting any attention.
To be honest, however, I am not entirely limiting myself to economic analysis here. Before getting to Elon Musk's specific insanity, we should first take a step back and ask how much damage will happen in the new Trump era no matter who happens to be installed in any particular position (official or unofficial) in the Trump orbit.
This is similar to asking back in 2018 what the true stakes were when the Senate was about to vote on Brett Kavanaugh's nomination to the Supreme Court. Even though there were very good reasons to oppose his confirmation, everyone knew that his defeat was not going to change the bottom line, because there were plenty of other people on the FedSoc list who would have been plug-and-play judicial theocrats. Trump's decision to barrel ahead with Kavanaugh was thus a matter of power politics rather than an outcome-oriented strategy, which was at that time a bit of a revelation.
Recently, House Democratic Leader Hakeem Jeffries took some ridicule from the left for saying that Democrats need to be like the New York Yankees' monster power hitter Aaron Judge, not swinging at every ball that comes his way. Although Judge might have connected with some of the pitches he ignored, he sensibly waits for his moments. Jeffries is right when it comes to opposing Trump's initiatives and especially when Jeffries' colleagues in the Senate assess how hard to fight against Trump's many, many unqualified and outrageous nominees. Yes, none of them should serve in government, but which ones truly matter?
Most directly analogous to Kavanaugh is Matt Gaetz. There are uniquely awful reasons that we should be glad that Gaetz is not the Attorney General, but as a matter of using up scarce political capital, the Democrats would have been unwise to oppose him if he had not stepped away on his own. There is nothing that his replacement will do that is at all different from what Gaetz would have done, because they are both standard-issue Trump true believers who will politicize the Justice Department and help to hasten the end of the rule of law in the United States. The same goes for Kash Patel, who is uniquely weird but not uniquely dangerous among those who would happily turn the FBI into a weapon for Trump.
[Update: I completely forgot to mention the new Secretary of Defense, Pete Hegseth, who is loathsome but in no way differs from his potential replacements on policy. If anything, he is a perfect example of a cardboard cutout who will do nothing that he is not told by others to do.]
This is true of Tulsi Gabbard as well, although it is a somewhat closer call. The damage that she can do to the world as Director of National Intelligence might be a bit unique (given her notably close ties to the Kremlin), but the US's still-for-now allies are also aware of how problematic she is and will thus anticipate and mitigate the damage by, for example, being much more careful about what intelligence to share with her. Indeed, they might decide to run counter-intelligence strategies when dealing with the US henceforth. This is bad for the world, of course, as is the anti-environmental policy that Trump will implement no matter who is at EPA or Interior, but once Trump reentered the Oval Office, we knew exactly what would happen.
Even Russell Vought, the now-confirmed Director of the Office of Management and Budget for Trump, is arguably not going to do any more damage than we would have seen if he had been voted down. Not only would his replacement have been another zealot, but even if Vought were not in government, he would have continued to be generate his uniquely terrible ideas. He co-wrote Project 2025 while out of government, after all, and if he had been rejected this week, he could easily have slunk back into the shadows while feeding his Christian White supremacist ideas into Trump's daily diet.
For that matter, J.D. Vance turns stomachs but is nothing special. Had he not been chosen as VP, the finance bro world would still be amply powerful in Trump's universe.
But the two most harmful characters -- the only two, other than Trump himself, who are uniquely dangerous -- are Robert F. Kennedy, Jr., and Musk. Although there are plenty of anti-vaccine and anti-science people out there (and I do mean out there), Kennedy brings an unusually dangerous set of ideas and instincts to the table, along with just enough remaining brain cells to know how to navigate in the policy space.
Musk is not limiting himself to a particular policy area, which is its own special disaster, but here I want to discuss his belief that he can magically shrink the federal government without causing any problems. In a recent column, I referred to Musk as a "budgetary simpleton" in reference to his rash efforts in December that almost caused a completely unnecessary government shutdown. Now, he is getting on with his self-assigned crusade to cut two trillion dollars from the annual federal budget.
In January, Musk did get Trump to sign an order freezing all government grants, but Trump soon backed down. As is now widely known, however, Musk has illegally seized control of the payments system that allows the government not to be a deadbeat. Seriously, no matter what else one might say about the federal government's supposed inefficiencies, its payment system is a thing of beauty. As I have discovered in my many years of studying the potential disaster of a debt ceiling crisis, the federal payment system has been one of the reasons that the US has a flawless credit history. The government has never missed a payment, covering every obligation in full and on time. What was the problem?
Musk's answer, of course, is the same answer that all Republicans have been bleating for years: But the spending is all waste, fraud, and abuse! If that were true (and it is not), however, the Republicans in 2025 again have the constitutionally granted power to find all of that misspending and delete it from the next budget. Musk, however, wants to do it by himself.
There has long been a trope in US politics that businessmen (note that I almost typed "businesspeople," but who am I kidding in this context?) should run government, because they "know what it means to have to make payroll." This is laughable when dealing with Trump, the serial contract breacher who thinks that paying people is optional, but it is in general ridiculous to think that the habits and attitudes that lead to business success will translate to success in public policy.
Musk, after all, thinks that he is a genius for having forced his employees at Tesla to work through the pandemic. And why should he care -- either personally or as a matter of profit-seeking -- that he was inflicting illness and death on many of them (and on whomever they might later infect)? This is a particularly ugly example of what economists call an externality, in which a decision-maker has no reason at all to think about the costs that he is imposing on anyone else. When some of his workers become sick, Musk dumps them and finds other workers to replace them. If he cannot find replacements (or even if he can), he might simply force his remaining employees to do more without additional pay.
With the federal budget, Musk thinks that he can simply fire hundreds of thousands if not millions of government employees and not worry about what happens next. He will have "saved trillions of dollars" by firing people whom he deems to be useless by definition, so what could go wrong?
Answering that question brings us back to my almost giddy exercise in economic wonkdom. Suppose that Musk (along with, to be clear, Trump and almost all Republicans) is right that every single federal worker is unproductive -- pure waste. Even in that fantasy world, those former employees would immediately have no incomes. Moreover, because Musk is talking about shutting down non-salary federal spending (see, sadly, his attack on USAID as Example A), he is talking about taking $2 trillion dollars of annual spending out of the economy, effective as immediately as he can make that happen.
This is the flipside of the economist John Maynard Keynes's famous (and misunderstood) sarcastic suggestion that "the captains of industry" would be happy if the private sector could be stimulated by a money-burying plan. Keynes's outrageous-to-make-a-point idea was that the US government hired people to go into the forests to dig holes and throw tubes of money into the ground, to be covered over and left for profit-seeking businesses to find and dig up. His point was that even something this purely wasteful would have the benefit during the Great Depression of putting otherwise idle people to work, with their salaries then being spent on groceries, clothing, and shelter that the economy could have been producing but was not.
Here, all of those wrongly-accused federal sloths will be left without income, and although Musk tells them to "get a real job," such private-sector jobs will not be there. Again, Musk wants to do this immediately as shock therapy, so even if there were a way to absorb these people into nongovernmental jobs over a sufficient amount of time, there would not be enough time for millions of people to make the transition before the bottom fell out of the economy.
How bad would it become? Basic macroeconomics has a couple of simple "rules" that allow us to make back-of-the-envelope computations. US GDP in 2025 would (absent the Trump-Musk assault) be about $30 trillion. Cutting $2 trillion per year in government spending would, through the "multiplier effect," cause the economy to shrink by more than $2 trillion. How much more? In "normal times," the fiscal multiplier is thought to be no higher than 2.0, which would mean that GDP would shrink by $4 trillion.
These would be anything but normal times, however, and the sudden negative jolt to the economy would give businesses good reason to reduce their investments in plant and equipment, because they would see that the future sales on which their decisions had been based would not materialize. And if Trump's trade wars resulted in foreign countries buying fewer US exports, that would further depress the US economy.
Even sticking with the minimal $4 trillion estimate, however, what would that mean to the real economy? Enter Okun's Law. To be sure, economists love to pretend that they have found the equivalent of physical laws, with "the law of Demand" being a good example of what they hope will impress people as an equivalent to the Law of Gravity. But even though Okun's Law is not a law, it is an empirical regularity that economists have studied since the 1960's. It finds a statistical correlation by which a 2 percent decline in GDP is associated with a 1 percent increase unemployment.
Musk's $2 trillion in cuts would propagate through the multiplier to at least a $4 trillion decline in GDP, which is a 13.3 percent decline in GDP. Under Okun's Law, that would be accompanied by an increase in unemployment of about 6.6 percent. That is additional unemployment, not the overall unemployment rate, which was 4.1 percent in December 2024. How bad is 10.7 percent total unemployment? The US unemployment rate on an annual basis topped out at 9.9 percent during the 2008-09 Global Financial Crisis, and it hit 10.8 percent in Ronald Reagan's second year in office. Other than the statistical one-off caused by Covid, the next-most recent year with a double-digit unemployment rate was 1940, when the US was still struggling to emerge from the Great Depression.
And to be clear, what those federal employees are doing is in fact very much needed, from the most mundane efforts to keep traffic running smoothly to monitoring disease outbreaks. Piling the economic consequences of those losses on top of the spending-related plunge in economic behavior would be much, much worse. Even without that, however, we are talking about a historic economic catastrophe, one that would spread to the rest of the world and possibly collapse financial markets as well.
Again, Musk has no reason to think about any of this. He sees "unproductive government workers" and wants to throw them away. Done and dusted. No side effects, no spillovers, no consequences of ill-considered decisions. Although it recently came to light that Musk is not in fact a great "gamer" (he even admitted that he was cheating to increase his ranking), the analogy to even the simplest video games is obvious. Going all the way back to 1980's-era games like Space Invaders and Galaxian, all enemies that are killed immediately disappear from the screen. There are no piles of bodies to bury, no disease outbreaks caused by rotting corpses or fallout from used weapons, and so on. The player wins by killing what is in front of him, without ever having to think about what happens later.
This does, however, leave open the question of whether Musk is worse than anyone else would be. After all, I noted above that Musk's unfounded belief that there are millions of unproductive government workers and spending projects is a foundational tenet of Republicanism. Would it not be true that every alternative to Musk, if put in charge of federal spending, would do the same thing?
It does seem that Musk is worse, for the simple reason that all of those Republicans have had decades during which they intermittently held power but ultimately chose not to act on their professed nihilistic beliefs. The first half of Trump's first term saw a Republican House and a Republican Senate send a big-ish (but definitely terrible, despite its moderate size) tax cut bill to Trump, but that was it. Musk truly seems to care nothing for the consequences of what he will do, which makes him a unique menace.
In addition, Trump seems truly to care about only a few things, one of which is the stock market. With anyone else running his budget policy, he could back off from anything that would make him look bad (and make his plutocrats lose money). With Trump seemingly unable to resist Musk's intrusions, all bets are off.