Elon Musk is Coming For the US Federal Budget
And he is armed with an axe, not trimming shears.
Joining Trump on a Sunday MAGA rally, Elon Musk has sworn to cut at least “$2 trillion” from the federal budget. He promised that if appointed the “efficiency czar”, he would be ending decades of federal excess.
How would they begin to cut $2 trillion from the federal budget?
They can cut 85% of all programmes on highways, disaster relief, Agriculture, Homeland Security, Education, bank federal deposit insurance and close down all US embassies and abolish NASA, the Environmental Protection Agency and the Small Business Administraion. They would also end all welfare programs for children and the poor.
They are planning to cut Social Security and Medicare.
Trump has sworn several times that he would not be cutting Social Security and Medicare, which would be a very unpopular move among the middle and lower classes. However, Trump’s potential “Secretary for Cost-Cutting” Elon Musk has other ideas.
Implication for the Market
As in 2016, should Trump win the election, there should be animal spirits to lift the market once the uncertainty of the election be over. However, if the election result is challenged through the courts, this would cause more anxiety and uncertainty for the market.
Trump and Musk’s plan to do cost-cutting is not itself a bad thing, given the bloating federal budget and risk to US Treasuries and the dollar. However, cutting $2 trillion is a large sum and might bring about fiscal austerity, which would hurt the US consumer. Hence, should Trump win the election, it is still unclear if his economic policies will usher in a period of high inflation, along with low fiscal spending and lower growth.
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