Elon Musk predicts 'hardship,' economic turmoil and a stock-market crash if Trump wins
morningstar.com
Provided by Dow Jones
Oct 31, 2024 3:52am
By Brett Arends
Musk's shocking austerity message is an unusual one to send voters a week before what is likely to be a close election
The word "bombshell" has been so grossly overused for so long that it is guaranteed to make anyone's eyes roll. But what other word fits?
With just a week until the presidential election, Donald Trump's close ally and major economic adviser Elon Musk is warning supporters to expect economic chaos, a crashing stock market and financial "hardship" - albeit "temporary" - if Trump wins.
It sounds so extreme that Trump fans must either wonder why he had been so foolish as to say the silent part out loud, or maybe hope that the whole story is made up - "fake news."
But it's very real.
Billionaire Musk, Trump's would-be budget-cutting and government-efficiency czar, also says there will be "no special cases" and "no exceptions" when he starts slashing federal spending after Trump takes office.
And he predicts he will need "a lot of security" personally because of the likely reaction to his policy moves.
Speaking Tuesday on a "telephone town hall" with supporters, Musk promised deep federal budget cuts, austerity and economic pain ahead in a new Trump administration.
"We have to reduce spending to live within our means," Musk said. "That necessarily involves some temporary hardship, but it will ensure long-term prosperity."
Describing government spending as "a room full of targets," Musk said: "Like, you can't miss. Fire in any direction, and you're going to hit a target."
He said, "I think once the election takes place we'll immediately begin looking at where to take the most immediate action."
And, he added, "obviously a lot of people who are taking advantage of the government are going to be upset about that. I'll probably need a lot of security."
"Everyone," he said, will be taking a "haircut."
On his social-media platform X, the former Twitter, the Tesla (TSLA) CEO went further and agreed with a supporter who predicted "an initial severe overreaction in the economy" and that "Markets will tumble."
"Sounds about right," Musk replied.
Yikes.
Trump has already said he wants Musk to head up a commission on government efficiency. Trump says the billionaire tech entrepreneur would be his "Secretary of Budget-Cutting," implying a possible cabinet position. Musk himself has described his prospective role as running a "Department of Government Efficiency," though he admits the title is an inside joke - the acronym spells DOGE, the name of a cryptocurrency he has referenced often over the years.
Musk's shocking austerity message is an unusual one to send voters a week before what is likely to be a close election.
Especially when America is booming.
The job market is growing so strongly it has wrong-footed the Federal Reserve, which got worried a month ago and slashed interest rates to prevent a slowdown that didn't happen. Third-quarter economic growth was a thumping 3%. The latest inflation figures, while higher than expected, nonetheless show a dramatic fall from the postpandemic peak. Average weekly wages, after adjusting for inflation, are now (slightly) higher than before COVID-19.
Meanwhile, investors in the S&P 500 SPX have gained 54%, including dividends, since the start of the Biden administration - or 30% after deducting inflation. And the International Monetary Fund says the U.S. has the best major economy in the world.
This is not the usual picture when a politician and his campaign promise austerity, hardship, deep budget cuts, a likely economic "overreaction" and a slump in the stock market. You usually hear those things proposed during a deep crisis, when desperate times supposedly demand desperate measures.
Instead, Musk's agenda is like your new family doctor promising a major dose of brutal chemotherapy when you are perfectly healthy and cancer-free.
It can hardly help that Trump and Musk themselves are billionaires, and wouldn't experience any of the hardship predicted for ordinary Americans. Musk, with an estimated net worth of $270 billion, is the richest man in the world.
See: 'DJT' stock's tripling in October is adding $4 billion to Trump's coffers
Musk told supporters that the measures were needed because of the crisis of the skyrocketing federal debt.
He compared the U.S. to an individual, even though a country that controls its own currency cannot go bankrupt because of owings to itself. At one point he said spending was "bankrupting the company," before correcting himself and saying "country."
Musk did not address the issue of Trump's proposed tax cuts, which the Committee for a Responsible Federal Budget says would add about twice as much to the national debt as the proposals of Democratic rival Kamala Harris. Musk's concern with the ballooning national debt was focused entirely on cutting spending.
Musk also said cutting federal spending was needed to bring down inflation, even though it has already fallen to 2.4%.
The Trump campaign did not immediately respond to a request for comment.
Wall Street economists are warning that Trump's tax cuts and tariffs would add more to inflation than Harris's proposals.
As reported here at MarketWatch just one day ago, Musk's brutal budget-cutting math is way more severe than most Americans, including most MAGA fans, realize. Two-thirds of the entire federal budget already goes toward Social Security, Medicare, debt interest, defense, and veterans. (Note that does not include Medicaid.)
Everything else (including Medicaid) adds up to $2.35 trillion this year. So Musk's promise to cut "at least $2 trillion" from the federal budget either means he is going to abolish pretty much everything else - Medicaid, Transportation, Justice, Homeland Security, Agriculture, the Food and Drug Administration, and so on - or he is going to cut Social Security and Medicare.
Or, as Musk put it, when it comes to cutting federal programs there will be "no special cases ... no exceptions."
-Brett Arends
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