What Muskonomics would mean for Donald Trump’s America

The Tesla billionaire’s radical ideas could soon hold sway over the running of the world’s biggest economy

Dressed all in black, Elon Musk let out a roar. At last week’s Madison Square Garden rally, the billionaire pointed to his black “Make America Great Again” cap proclaiming: “I am dark, gothic Maga.”
Once a self-described “socialist”, Musk has emerged as one of Donald Trump’s most prominent and strident supporters in the final few weeks of the US election campaign.
He has made frequent appearances at rallies, handed out checks for $1m (£770,000) to supporters who register to vote, and used his platform on X, formerly Twitter, to both praise Trump and rail against Kamala Harris.
The richest man in the world hopes he can sway what is one of the closest elections in recent memory. If he is successful, he may also be angling for a job in the new administration.
Addressing Trump’s New York rally, Musk called on the Republican to cut $2 trillion from the Federal budget under a Department of Government Efficiency (or Doge, a reference to the joke cryptocurrency). There have been talks about handing him a role running the department himself.
During Trump’s election campaign, the Republican nominee has repeatedly called for a dramatic reduction in the size of the state and austerity to cut government debt – something Musk has long voiced concerns about.
The second Trump Presidency will be the most fun America has had in a while. It’s gonna be awesome! 😎
And there are other signs he has the former president’s ear.
In the past, Trump attacked the electric vehicle industries and green subsidies. Yet since Musk’s endorsement, he has softened his stance. In August, Trump said: “I’m for electric cars. I have to be, because Elon endorsed me very strongly. So I have no choice.”
If Trump returns to the White House, the Tesla chief is likely to carry significant influence. Having given more than $130m to Trump’s election bid, some Democrats have even labelled Musk – who, by virtue of his South African birth, cannot run for office – a potential “shadow president”.
But what would Muskonomics mean for America?
Perhaps most crucial for his business empire, Musk is looking for a bonfire of red tape and a gutting of US government agencies he has accused of holding back SpaceX and Tesla, delaying his overriding ambitions of reaching Mars and deploying Tesla robotaxis and artificial intelligence (AI) robots all over the US.
High on the agenda for Musk are massive spending cuts, he told attendees at a rally last week. “We have to reduce spending to live within our means,” he said. “And you know, that necessarily involves some temporary hardship, but it will ensure long-term prosperity.”
Such pronouncements reflect Musk’s own business philosophy. He has sacked thousands of X and Tesla employees during downturns or tough moments for the company. Yet economists have doubts about whether this approach can realistically be applied to government.
Paul Mortimer-Lee, an independent economist and research fellow at NIESR, says Musk’s plans for $2 trillion in cuts were “crazy, nuts proposals”. It would wipe out the equivalent of the budget for transport, education, housing, social services, science and the environment – as well as decimating other benefits like Medicare.
“The proposed cuts are $2 trillion, or 8pc of GDP,” says Mortimer-Lee. “Cutting that amount from spending would send the economy into a tailspin and send unemployment soaring.”
Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, which pushes for cutting the deficit, told the Washington Post that Musk’s cuts would be “borderline impossible” without going after areas like defence.
A spokesman for the Trump campaign told the newspaper it was “committed” to having Musk lead a cost-cutting commission. And Howard Lutnick, the Trump-supporting chief executive of Cantor Fitzgerald, has pledged to help the billionaire “rip the waste” out of the budget.
Musk’s companies such as SpaceX have secured billions in government contracts and subsidies. His rocket business alone has racked up $15bn in government deals since it was founded.
It could therefore be assumed that gutting the federal government would harm his business interest. But vicious spending cuts may be to Musk’s benefit. Tim Farrar, a space analyst, says there is the possibility that the Trump regime could “defund projects that compete with SpaceX for resources”.
“For instance, Musk has previously said that there is no need for Boeing’s Starliner, which competes with SpaceX’s Crew Dragon.” Nasa has so far funnelled $4bn to the much-maligned rival rocket project.
While there is some scepticism about the feasibility of Musk’s proposed cuts, his fears about the scale of US government debt are shared by economists.
“The government deficit, at almost 7pc of GDP, is ludicrously wide,” says Mortimer Lee. “Bidenomics has delivered a very big deficit.”
In a 2021 interview – which he recently reposted to X – Musk said: “We’re running this incredible deficit, something has got to give. This just can’t keep going.”
The planned spending cuts risk a potential clash with Trump, who has shown few signs of fiscal hawkishness. The Committee for a Responsible Federal Budget, a Washington nonprofit, has estimated that Trump’s tax and spending plans would lead US debt to rise by roughly $7.75 trillion, compared to $3.95 trillion for Kamala Harris.
Trump and Musk are also at odds over trade. Trump has promised to ramp up his trade war to new heights to protect US industry, including introducing huge tariffs on Chinese goods.
However, Musk has advocated for free markets and no tariffs on China, where Tesla has a major presence. “I’m in favour of no tariffs,” Musk previously said. He has also advocated repeatedly for carbon taxation.
The pair are more aligned on other economic issues, however. Trump has repeatedly called for the Federal Reserve to lower interest rates and even floated the idea of giving the president a role in setting rates. Musk has blamed high rates for a slowdown in Tesla sales, saying they increase the “difficulty level” for car companies.
He has also been a regular critic of plans endorsed by Joe Biden to tax unrealised capital gains, which would require paying a huge tax bill when Tesla stock rises, even if he did not sell shares. Harris has declined to endorse the idea.
Some of Musk’s beliefs are less at home in the Republican Party. Like others in Silicon Valley, the billionaire, who is worth $270bn, is preoccupied with the potential of AI to disrupt human civilisation.
He has long expressed a belief that a form of Universal Basic Income is inevitable as automation by AI bots improves. “There will be universal high income, not basic, in a positive AI future,” he said last December.
Arguably Musk’s biggest wish from a Trump White House would be a gutting of federal agencies and a massive cull of regulations that he feels are holding back his businesses.
With Trump, Musk claims the US has “an opportunity to do a once in a lifetime deregulation and reduction in the size of government”.
“I think [Trump] winning makes a big difference in humanity getting to Mars and making life multi-planetary,” he posted on X this month.
He has bristled over repeated investigations into Tesla’s self-driving capabilities, which jeopardise his aim of making autonomous driving the centrepiece of the electric car company’s offerings.
He has called for the Biden-appointed Federal Trade Commission chair, Lina Khan, to be sacked and accused the chairman of the Federal Communications Commission of “contemptible lawfare”.
Musk has reserved a special ire for the Federal Aviation Authority (FAA), which regulates private space flight, calling on its chairman to resign. The billionaire has claimed the regulator has pursued SpaceX for “petty matters that have nothing to do with safety, while neglecting real safety issues at Boeing”.
The FAA has accused SpaceX of repeatedly breaching its licensing conditions with its missions from Starbase in Boca Chica, Texas.
Musk’s dramatic launch of his Starship superheavy rocket earlier this month made headlines around the world after its 233ft booster was caught by a giant tower.
But Musk said: “It takes longer to get a permit to launch than to build a giant rocket. It’ll eventually become illegal to do any large project and we won’t be able to get to Mars.”
With Trump in the White House, Musk would no doubt hope that such regulation is rolled back – and aggressive regulators become more amenable.
If it comes to pass, a Republican victory could prove very profitable for the entrepreneur. Yet if his vision of deep cuts to federal government takes place, the outlook for the rest of the US may not be so promising.