Elon Musk and Donald Trump’s plan for FIRE on a national level

[Herbert Derp]

I think the jury is out on whether Elon Musk will use his government efficiency powers to (1) actually cut costs, or (2) remove regulations that hinder his companies without having any significant impact on costs.

Only time will tell which of the above will come true. Clearly, the cynics in this thread assume that (2) is the only possible outcome.

I do think Elon wants to use his powers to remove the regulations that hinder his companies. However, I also think he does actually want to slash costs by $2T. There will be a lot of pushback to that, so I’m not sure how dedicated Elon will be to achieving it once (2) is achieved.

As to where the $2T comes from, it’s from Argentina. Elon and his friends have been closely monitoring Javier Milei’s cost cutting reforms in Argentina and want to use them as a model for similar reforms in the United States.

Milei was able to slash Arentina’s federal budget by 28.6%:
https://www.batimes.com.ar/news/economy/the-expenses-cut-by-milei-to-achieve-a-fiscal-surplus.phtml

The US federal budget is $6.752T. Multiply $6.752T by 28.6% and you get $1.93T. So that’s where Elon got his $2T number from.

I think one could make a reasonable argument that Argentina’s government spending was much more bloated than the United States’s. After all, Argentina had triple-digit inflation and the United States did not. So I’m not sure that you can say that the United States can reduce expenses by 28.6% just because Argentina could.

But at least that explains where Elon is getting his $2T number from. This is an example of Elon’s “first principles” thinking, he points to what Argentina actually achieved, and assumes if they did it so can we.

[bacchi]

I think the jury is out on whether Elon Musk will use his government efficiency powers to (1) actually cut costs, or (2) remove regulations that hinder his companies without having any significant impact on costs.

Only time will tell which of the above will come true. Clearly, the cynics in this thread assume that (2) is the only possible outcome.

I do think Elon wants to use his powers to remove the regulations that hinder his companies. However, I also think he does actually want to slash costs by $2T. There will be a lot of pushback to that, so I’m not sure how dedicated Elon will be to achieving it once (2) is achieved.

As to where the $2T comes from, it’s from Argentina. Elon and his friends have been closely monitoring Javier Milei’s cost cutting reforms in Argentina and want to use them as a model for reforms in the United States.

Milei was able to slash Arentina’s federal budget by 28.6%:
https://www.batimes.com.ar/news/economy/the-expenses-cut-by-milei-to-achieve-a-fiscal-surplus.phtml

The US federal budget is $6.752T. Multiply $6.752T by 28.6% and you get $1.93T. So that’s where Elon got his $2T number from.

I think one could make a reasonable argument that Argentina’s government spending was much more bloated than the United States’s. After all, Argentina had triple-digit inflation and the United States did not. So I’m not sure that you can say that the United States can reduce expenses by 28.6% just because Argentina could.

But at least that explains where Elon is getting his $2T number from. This is an example of Elon’s “first principles” thinking, he points to what Argentina actually achieved, and assumes if they did it so can we.

So we can expect a 26% increase in poverty in 6 months to go along with the debt reduction? Is that the "hardship" Elon mentioned?

This smells too much like Chile and the "genius" economists who privatized everything there.

[Herbert Derp]

So we can expect a 26% increase in poverty in 6 months to go along with the debt reduction? Is that the "hardship" Elon mentioned?

You’re probably right. I agree that Elon is referring to the hardships in Argentina when he talks about the hardships associated with his proposed cost cuts.

I actually admire what they are doing in Argentina. Sometimes, big problems require ruthless solutions. Inflation is now under control in Argentina. The jury is still out on the long term effectiveness of the Argentinian economic reforms, but something drastic had to be done and they are doing it.

That being said, the people of Argentina seem to be willing to endure said hardships because triple-digit inflation had such a huge negative impact on them. Since the United States does not suffer from triple-digit inflation, I don’t think there is either the need or the will to implement Argentina-level spending cuts.

My personal opinion is still that we should cut as much as we can from the United States federal budget. I don’t expect the cost cutting to be on the level of Argentina, though, because there is neither the need nor the will for it.

[Fru-Gal]

So the world’s richest man, who gained his wealth via an American car company with an outsized valuation on the American stock market, looks at a small country that has been depressed since the 1950s, dealing with 200% inflation, rapid out-migration, and widely protested austerity measures, and says … “We should be like them.”

I liked Musk better when he talked about Mars.

[bacchi]

My personal opinion is still that we should cut as much as we can from the United States federal budget.

A lot of people want to see the government debt shrink. People disagree where the cuts are to be made and how to get there (i.e., we're on the left side of the Laffer curve already).

[Herbert Derp]

So the world’s richest man, who gained his wealth via an American car company with an outsized valuation on the American stock market, looks at a small country that has been depressed since the 1950s, dealing with 200% inflation, rapid out-migration, and widely protested austerity measures, and says … “We should be like them.”

I liked Musk better when he talked about Mars.

I think Musk and Trump realize that unless they find a way to reduce inflation and do something about the cost of living crisis, the 2026 midterms will go poorly, and the republicans will absolutely get kicked out of office by 2028.

There are only so many levers that you can pull to reduce inflation. Clearly, they are not going to raise taxes. And the tariff increase should increase inflation, not lower it. And the fed can only do some much to combat inflation via interest rates.

The incoming administration needs to find some lever to reduce inflation, and slashing government spending is a big lever to reduce inflation that has not been pulled yet. Argentina has proven that this lever works, and I think Trump and Elon want to pull it. There is no political future for them if they can’t reduce inflation. Americans care about the cost of living crisis more than anything else.

[sixwings]

So the world’s richest man, who gained his wealth via an American car company with an outsized valuation on the American stock market, looks at a small country that has been depressed since the 1950s, dealing with 200% inflation, rapid out-migration, and widely protested austerity measures, and says … “We should be like them.”

I liked Musk better when he talked about Mars.

I think Musk and Trump realize that unless they find a way to reduce inflation, the 2026 midterms will go poorly, and the republicans will absolutely get kicked out of office by 2028.

There are only so many levers that you can pull to reduce inflation. Clearly, they are not going to raise taxes. And the tariff increase should increase inflation, not lower it. And the fed can only do some much to combat inflation via interest rates.

The incoming administration needs to find some lever to reduce inflation, and slashing government spending is a big lever to reduce inflation that has not been pulled yet. Argentina has proven that this lever works, and I think Trump and Elon want to pull it. There is no political future for them if they can’t reduce inflation. Americans care about the cost of living crisis more than anything else.

Biden got inflation under control, it's fine right now. However Trump and people who support him are morons and want to get it going again. Like Trump could literally do nothing. However I'm down for stopping inefficient wealth transfers from large "coastal elite" cities to the rural areas that hate the coastal elites. Hopefully Musk starts with cutting subsidies to the trump voting soybean farmers who were impacted in the first round of tariffs but voted for him again. No one wants to buy their soybeans anymore. Trump destroyed their customer base and market with tariffs, and now can yank their subsidies for "efficiency". I'm here for that. 

[achvfi]

You are talking as if Elon M is head of the government, he is just another rich advisor to Trump. Comparing failed economy like Argentina vs US makes little sense. He makes stuff like this all the time, brings up numbers from his backside.

Forget about savings. Only thing that is certain is steepening of debt and deficits under Trump. Trump promised everything to everybody during the campaign. One more certainty is extension of 2017 Tax cuts plus likely expansion of those tax cuts and loopholes further in 2025. There will be winners and losers but overall pie will only get larger.

Let's say they together magically find $2 Trillion in spending cuts a year and stick to it year after year, that will cause 10-20 million jobs lost in private and public sector. All that money not spent in economy will cause further cascading effects and deep recession, a recession that is larger than GFC. They will give up at the first blowback.

[Herbert Derp]

Biden got inflation under control, it's fine right now. However Trump and people who support him are morons and want to get it going again. Like Trump could literally do nothing. However I'm down for stopping inefficient wealth transfers from large "coastal elite" cities to the rural areas that hate the coastal elites. Hopefully Musk starts there.

Although inflation is currently at acceptable levels, the trouble is that prices remain high, and wages did not increase to match them. The solution is to find some sort of way to increase wages without also increasing inflation.

So it seems like the incoming administration plans to address the problem in a few ways:

• Encourage domestic manufacturing by increasing tariffs across the board. This will increase wages for blue collar workers.
• Further increase wages by reducing the size of the labor force by securing the border and deporting illegal immigrants.
• Decrease inflation by cutting government spending. The tariffs and wage growth from (1) and (2) will increase inflation. So they need to find a way to counteract this and increase wages without increasing inflation.

What are the top two things that Trump campaigned on? Immigration and tariffs. This is Trump’s plan to reform the United States economy. I have no idea if it will work but it at least seems logical.

Harris’s ideas about “price gouging” made literally no sense at all to me. I think her policies around increasing wages by boosting small businesses made some sense, though. I just don’t think she could have much of an impact with those limited incentives.

Joe Biden’s plan to increase blue collar wages by boosting domestic manufacturing via the Inflation Reduction Act made a lot of sense, and I do think we have tons of new jobs because of it. However, the Inflation Reduction Act was driven entirely by government subsidies which also increase inflation. So it’s kind of tricky to find a way to boost wages while also keeping inflation low.

[sixwings]

Biden got inflation under control, it's fine right now. However Trump and people who support him are morons and want to get it going again. Like Trump could literally do nothing. However I'm down for stopping inefficient wealth transfers from large "coastal elite" cities to the rural areas that hate the coastal elites. Hopefully Musk starts there.

Although inflation is currently at acceptable levels, the trouble is that prices remain high, and wages did not increase to match them. The solution is to find some sort of way to increase wages without also increasing inflation.

So it seems like the incoming administration plans to address the problem in a few ways:

• Encourage domestic manufacturing by increasing tariffs across the board. This will increase wages for blue collar workers.
• Further increase wages by reducing the size of the labor force by securing the border and deporting illegal immigrants.
• Decrease inflation by cutting government spending. The tariffs and wage growth from (1) and (2) will increase inflation. So they need to find a way to counteract this and increase wages without increasing inflation.

What are the top two things that Trump campaigned on? Immigration and tariffs. This is their plan to reform the United States economy. I have no idea if it will work but it at least seems logical. Harris’s ideas about “price gouging” made literally no sense at all to me. I think her policies around increasing wages by boosting small businesses made some sense, though.

Spoiler: It's stupid and won't work for so many reasons that have been gone over many times. Kind of like the idea of firing government workers to create a sovereign wealth fund.

What actually made sense and does work is stuff like the CHIPS acts. However Trump wants to scrap that.

We're in the find out stage of fucking around, and people are about to really find out.

[Herbert Derp]

We're in the find out stage of fucking around, and people are about to really find out.

Indeed. I think even Trump knows the republicans are doomed in 2028 if his plan fails.

What actually made sense and does work is stuff like the CHIPS acts. However Trump wants to scrap that.

I think it’s strange that Trump thinks we can quickly bring chip manufacturing to the states just by increasing tariffs. I agree that stuff like CHIPS Act is what we need to get those chips ASAP. And we need the chips yesterday. The sooner we can eliminate this critical reliance on Taiwan, the better.

But it still sucks, because no matter how many tens of billions we bribe them with the CHIPS Act, Taiwan still refuses to build their best stuff in the US. They are now saying TSMC is “forbidden” to manufacture 2nm chips outside of Taiwan. Bummer. The sooner we find a way to kick these guys to the curb, the better.

[sixwings]

Why do you think it's strange that Trump thinks that? Have you literally never listened to him? He's a moron with a mushy brain who has no idea what a tariffs is or who pays for it. So of course he doesn't understand the nuances and complexities of anything.

Taiwan doesn't want to manufacture the good stuff outside of Taiwan because that's major leverage over the US to stop an invasion from China. The US doesn't want the Chinese to have that manufacturing capability, Taiwan doesn't want to be invaded. It's not overly complicated and we won't be "kicking them to the curb".

[Herbert Derp]

Taiwan doesn't want to manufacture the good stuff outside of Taiwan because that's a major incentive for the US to stop an invasion from China. The US doesn't want the Chinese to have that manufacturing capability, Taiwan doesn't want to be invaded. It's not overly complicated and we won't be "kicking them to the curb".

Exactly. Taiwan intentionally got the United States hooked on its chips to drag us into their future war with mainland China. And the United States willingly participated in this madness as part of their global empire building and communist containment policies that date back to the 1950s.

Trouble is that now China isn’t weak like in the 1950s and they aren’t going to be pushed around anymore. China now has the largest navy in the world. They’ve got hypersonic missiles and fifth-generation fighters. They can build more stuff than us. China will take over Taiwan and unify their people, just as previous Chinese governments unified the Chinese people countless times throughout 5,000 years of Chinese history. The United States has got to find a way to untangle itself from this madness.

If the United States is foolish enough to go to war over Taiwan, we are going to see US carriers at the bottom of the Pacific Ocean. Mark my words.

[reeshau]

I think it's actually kind of brilliant.  You can't get $2T without affecting military spending or entitlements--aka the Third Rail.  Let Musk, a nonpolitician, propose Social Security and Medicare cuts.  Then, every member of Congress just points out "I'm With Stupid" and "He's Trump's guy--amiright?" and has political cover to vote for something that would surely cost each of them their re-election if done in a saner mode.

[obstinate]

Although inflation is currently at acceptable levels, the trouble is that prices remain high, and wages did not increase to match them. The solution is to find some sort of way to increase wages without also increasing inflation.

This is false. Wages did rise with inflation, especially among the bottom quartile. https://fred.stlouisfed.org/graph/?g=1x5C6 Note that the fall from the COVID peak was the cessation of COVID relief payments. Since 2021, real wages are up.

Also, the idea of increasing wages without increasing inflation sounds so easy, but none of your proposals have any chance of succeeding. The only way of increasing wages without increasing inflation is improving labor productivity. All other avenues definitionally cause inflation. And none of the avenues you proposed plausibly improve the productivity mix of the labor used to produce goods Americans consume.

[Scandium]

Biden got inflation under control, it's fine right now. However Trump and people who support him are morons and want to get it going again. Like Trump could literally do nothing. However I'm down for stopping inefficient wealth transfers from large "coastal elite" cities to the rural areas that hate the coastal elites. Hopefully Musk starts with cutting subsidies to the trump voting soybean farmers who were impacted in the first round of tariffs but voted for him again. No one wants to buy their soybeans anymore. Trump destroyed their customer base and market with tariffs, and now can yank their subsidies for "efficiency". I'm here for that.

Same here. Cut all the wasteful farm subsidies, get rid of idiotic corn ethanol mandates! stop sending my tax dollars to backwards rural areas. Let them rot in destitute poverty and opioid overdoses, don't fix that with my taxes! No more wasteful mediaid payments to keep the only hospital in 3 counties open. This can all pay for some (even more) sweet tax cuts to my six-figure income and capital gains! (10% LTGC tax anyone..? yum!)
exactly what the degenerate trump voters wanted (that and their hatred for my neighbor's trans kid). And I'm all for it! Elon, go wild.

[Paper Chaser]

Although inflation is currently at acceptable levels, the trouble is that prices remain high, and wages did not increase to match them. The solution is to find some sort of way to increase wages without also increasing inflation.

This is false. Wages did rise with inflation, especially among the bottom quartile. https://fred.stlouisfed.org/graph/?g=1x5C6 Note that the fall from the COVID peak was the cessation of COVID relief payments. Since 2021, real wages are up.

Looks like inflation adjusted wages climbed from $360 to $371 per week between Q3 2019 and Q3 2024. That represents a 3% gain vs inflation over the last 5 years.
If we look back on the same data set to the 5 years prior to the pandemic, we see that wages climbed from $341 in Q1 2015 to  $367 in Q1 2020. That represents a 7% gain over inflation for the 5 year period leading into the pandemic.

So wages have beaten inflation by a bit lately, but growth has slowed compared to The Before Times.

Simultaneously, if we look at average food prices, we see that they've climbed 28% from Sept 2019 to Sept 2024:

https://fred.stlouisfed.org/series/CPIUFDSL

Rent has climbed 28% since Sept 2019 as well:

https://fred.stlouisfed.org/series/CUUR0000SEHA

Car insurance is up 18% since Sept 2019:

https://fred.stlouisfed.org/series/PCU9241269241261


So, unless I'm misunderstanding something, it appears that wage growth has slowed relative to itself and is far from keeping up with increases in common expenses over the last few years. Earning $11/week more doesn't add any benefit when your basic cost of living has increased more than that.

[Herbert Derp]

So, unless I'm misunderstanding something, it appears that wage growth has slowed relative to itself and is far from keeping up with increases in common expenses over the last few years. Earning $11/week more doesn't add any benefit when your basic cost of living has increased more than that.

And not to mention that with interest rates so high, people can’t afford to get loans. The cost of living crisis is real.

Biden boosted the economy via massive subsidies like the IRA and CHIPS Act. But he chose to balance out the inflation that these subsidies would have caused by hiking interest rates, which hurt everyone.

Money in, money out. The inflation equation must be balanced. Looks like Trump wants to follow Argentina’s lead and cut government spending to balance it out, rather than rely on interest rate hikes like Biden.

Cutting government spending will also cause a lot of pain, but at least the government employees who lose their jobs can go to work in one of Trump’s new factories I guess. There was no escaping Biden’s rate hikes.

That said, Trump may very well keep hiking interest rates if his government spending cuts fail to materialize. The equation must be balanced.

Also, Elon has come out in favor of ending government subsidies across the board, even for his own companies, which do not require subsidies to be competitive. Eliminating subsidies is another way to drive down inflation.

There is something to be said about ending government subsidies for domestic manufacturing and replacing them with tariffs. The growth in domestic manufacturing that results from tariffs may be more natural and sustainable than subsidized growth which is almost like a planned economy in some ways. Businesses created by government subsidies are not necessarily efficient, and don’t need to follow the free market. They might not even produce a product that anyone wants to buy in the first place.

For example, China has what amounts to the Inflation Reduction Act on steroids, they’ve been doing it for decades, and now it’s really coming back to bite them in the ass. China’s massive subsidies for domestic manufacturing have resulted in many businesses which are bloated, pointless, and unsustainable, manufacturing products that lack demand. Tariffs do not encourage people to make stuff that nobody wants, subsidies do.

Here is a good article on how artificially boosting manufacturing via subsidies without creating demand for the manufactured goods has wrecked the Chinese economy:
https://www.foreignaffairs.com/china/chinas-real-economic-crisis-zongyuan-liu

[Paper Chaser]

So, unless I'm misunderstanding something, it appears that wage growth has slowed relative to itself and is far from keeping up with increases in common expenses over the last few years. Earning $11/week more doesn't add any benefit when your basic cost of living has increased more than that.

And not to mention that with interest rates so high, people can’t afford to get loans. The cost of living crisis is real.

Biden boosted the economy via massive subsidies like the IRA and CHIPS Act. But he chose to balance out the inflation that these subsidies would have caused by hiking interest rates, which hurt everyone.

Money in, money out. The inflation equation must be balanced. Looks like Trump wants to follow Argentina’s lead and cut government spending to balance it out, rather than rely on interest rate hikes like Biden.

Cutting government spending will also cause a lot of pain, but at least the government employees who lose their jobs can go to work in one of Trump’s new factories I guess. There was no escaping Biden’s rate hikes.

That said, Trump may very well keep hiking interest rates if his government spending cuts fail to materialize. The equation must be balanced.

Also, Elon has come out in favor of ending government subsidies across the board, even for his own companies, which do not require subsidies to be competitive. Eliminating subsidies is another way to drive down inflation.

The President doesn't control interest rates. The non-partisan Federal Reserve does. Trump begged them to keep interest rates low (and keep the economy stoked). Low interest rates/high debt are all he knows. High interest rates make his leverage work against him.

What became the CHIPs act began as a bipartisan bill in the Senate way back in 2019:

https://en.wikipedia.org/wiki/CHIPS_and_Science_Act

I think most people attribute way too much praise or blame on the President regarding the economy. Inflation, interest rates, etc are all out of their hands. The Federal Reserve is the entity controlling money supply, interest rates, etc. That's what drives the economy.

[reeshau]

Although inflation is currently at acceptable levels, the trouble is that prices remain high, and wages did not increase to match them. The solution is to find some sort of way to increase wages without also increasing inflation.

This is false. Wages did rise with inflation, especially among the bottom quartile. https://fred.stlouisfed.org/graph/?g=1x5C6 Note that the fall from the COVID peak was the cessation of COVID relief payments. Since 2021, real wages are up.

Looks like inflation adjusted wages climbed from $360 to $371 per week between Q3 2019 and Q3 2024. That represents a 3% gain vs inflation over the last 5 years.

...

So, unless I'm misunderstanding something, it appears that wage growth has slowed relative to itself and is far from keeping up with increases in common expenses over the last few years. Earning $11/week more doesn't add any benefit when your basic cost of living has increased more than that.

You have conflated a couple things.  You give the inflation adjusted wages, then cite high inflation to compare against; essentially, double counting it.  To get an idea of scale, you would have to go back to gross numbers.  In that case, wages have also risen over a similar time frame in the mid-20% range, and higher at the low end.

[Paper Chaser]

Although inflation is currently at acceptable levels, the trouble is that prices remain high, and wages did not increase to match them. The solution is to find some sort of way to increase wages without also increasing inflation.

This is false. Wages did rise with inflation, especially among the bottom quartile. https://fred.stlouisfed.org/graph/?g=1x5C6 Note that the fall from the COVID peak was the cessation of COVID relief payments. Since 2021, real wages are up.

Looks like inflation adjusted wages climbed from $360 to $371 per week between Q3 2019 and Q3 2024. That represents a 3% gain vs inflation over the last 5 years.

...

So, unless I'm misunderstanding something, it appears that wage growth has slowed relative to itself and is far from keeping up with increases in common expenses over the last few years. Earning $11/week more doesn't add any benefit when your basic cost of living has increased more than that.

You have conflated a couple things.  You give the inflation adjusted wages, then cite high inflation to compare against; essentially, double counting it.  To get an idea of scale, you would have to go back to gross numbers.  In that case, wages have also risen over a similar time frame in the mid-20% range, and higher at the low end.

I was curious if the other sets were indexed to inflation or not, as they don't specifically say so. Y axis of all of the inflation adjusted wages chart shows 1982-84 CPI adjusted dollars. The Y axis of all other charts shows values for some index with 1982 being 100. How different are CPI adjusted 1982 dollars to a random index value based on 1982? What benefit is there to having data represented by a random indexed value rather than simply showing all of these categories in inflation adjusted dollars?

[blue_green_sparks]

Well, if you really want to get someone's attention, slice into their already dismal Social Security check or cut their Medicare benefits. All of a sudden illegal farm workers and trans story time isn't such a big deal. Trump talks about eliminating SS tax, but that just shortens the run-out schedule.

I guess raising taxes against billionaires a mere 3% is impossible, right. Not after all those huge campaign donations. I read that some wealthy folks live off perpetual low-interest loans so as not to show income. Just pure greed, especially since they often use our common infrastructure disproportionally.

Woe to the Republic.

[blue_green_sparks]

Last week I saw a MAGA voter being interviewed and he was very surprised that when the Republicans repeal "Obamacare", he will lose his ACA health insurance. Blank stare from under that red dunce hat, as his 15 Trump yard flags blew in the breeze. I am hoping that the least they will do is get rid of anything mandatory about the plan and rebrand it as ChumpCare or something.

[bacchi]

So, unless I'm misunderstanding something, it appears that wage growth has slowed relative to itself and is far from keeping up with increases in common expenses over the last few years. Earning $11/week more doesn't add any benefit when your basic cost of living has increased more than that.

And not to mention that with interest rates so high, people can’t afford to get loans. The cost of living crisis is real.

Biden boosted the economy via massive subsidies like the IRA and CHIPS Act. But he chose to balance out the inflation that these subsidies would have caused by hiking interest rates, which hurt everyone.

Money in, money out. The inflation equation must be balanced. Looks like Trump wants to follow Argentina’s lead and cut government spending to balance it out, rather than rely on interest rate hikes like Biden.

Cutting government spending will also cause a lot of pain, but at least the government employees who lose their jobs can go to work in one of Trump’s new factories I guess. There was no escaping Biden’s rate hikes.

That said, Trump may very well keep hiking interest rates if his government spending cuts fail to materialize. The equation must be balanced.

Also, Elon has come out in favor of ending government subsidies across the board, even for his own companies, which do not require subsidies to be competitive. Eliminating subsidies is another way to drive down inflation.

The President doesn't control interest rates. The non-partisan Federal Reserve does. Trump begged them to keep interest rates low (and keep the economy stoked). Low interest rates/high debt are all he knows. High interest rates make his leverage work against him.

What became the CHIPs act began as a bipartisan bill in the Senate way back in 2019:

https://en.wikipedia.org/wiki/CHIPS_and_Science_Act

I think most people attribute way too much praise or blame on the President regarding the economy. Inflation, interest rates, etc are all out of their hands. The Federal Reserve is the entity controlling money supply, interest rates, etc. That's what drives the economy.

Troof.

M1 spiked during Trump's last year in office. It's almost as if something unusual happened in 2020.

https://fred.stlouisfed.org/series/M1SL

[Telecaster]

Biden boosted the economy via massive subsidies like the IRA and CHIPS Act. But he chose to balance out the inflation that these subsidies would have caused by hiking interest rates, which hurt everyone.

Money in, money out. The inflation equation must be balanced. Looks like Trump wants to follow Argentina’s lead and cut government spending to balance it out, rather than rely on interest rate hikes like Biden.

That doesn't make a ton of sense.    The current inflation rate over the last 12 months 2.4% compared with the long term average since WWII of about 3.5%.   For a number of reasons, most economists agree that an inflation rate of about 2-3% is ideal (because it leaves room for rate cuts in recessions, among other reasons).  FWIW, the Fed's target rate is 2%.   

So the plan to inflict pain on the American economy in order to potentially reduce inflation by maybe 0.4% seems awful arbitrary.   Which is it such a bad thing to grow the economy and have low inflation?   I mean, that's happening right now.   Are our lives too cozy and Trump needs to toughen us up or something?   

And as others have mentioned, the president doesn't control interest rates, that's done by the Federal Reserve.  And even then they have only indirect control.   So if Trump's plan to stall the economy works, the Fed will just cut rates anyway with the intention of increasing inflation.   I think it would be prudent to skip and step and not needlessly ruin the economy.   

And we heard these same stories from Trump back 2016.  He was going to make the government work more efficiently, and cut taxes without growing the deficit--he promised to balance the budget in fact.   Then he didn't do any of that.   

[bacchi]

So if Trump's plan to stall the economy works, the Fed will just cut rates anyway with the intention of increasing inflation.

Until mid-2026, when Powell's term ends, and then all bets are off.

[Scandium]

And we heard these same stories from Trump back 2016.  He was going to make the government work more efficiently, and cut taxes without growing the deficit--he promised to balance the budget in fact.   Then he didn't do any of that.

Whenever someone says "Trump's plan is..." I instantly tune out because I know anything following is complete BS. Trumps says wild shit constantly, and announce 18 contradictory policies before lunch, every day. The idea that he has any "plan" of any kind is completely laughable! (Except avoid prison and enrich himself off his rube followers I guess). That anyone with above room temp IQ believe anything he says is insane to me.
Usually it's people say what they think is a good policy, and graft this onto a collection of Trump's incoherent rhetoric.

[PathtoFIRE]

"That is, a $1 increase in spending on the IRS’s enforcement activities results in $5 to $9 of increased revenues."
https://www.cbo.gov/publication/57444

Bingo. Quickest way to find the shills is to bring up adequately funding the IRS.

[sixwings]

Lolololol he announced DOGE today, the department of government efficiency, headed by Musk and Ramaswamy, it’s going to be outside government who provides guidance and advice to government on how to be more efficient. Sooooo basically just a bunch of highly paid consultants. Wonder how much taxpayer money is going to flow directly to musk and Vivek for absolutely nothing. This is one of those programs where a few billion will get paid out to contractors who made 2 recommendations that never got implemented that we will hear about and shake our heads sadly.

I was wrong, it’s not a smash and grab, it’s just a taxpayer funded give away.

[Herbert Derp]

Well, I for one am not cynical enough to give up just yet. I wish Elon and Vivek all the best and hope that they can ruthlessly slash the federal budget and increase government efficiency!

I am 110% behind this effort, as long as DOGE remains serious about producing meaningful results, and is empowered by the government to actually produce said results. This has always been one of my dreams, for as long as I’ve understood the national debt and how the government spends money.

If this all turns out to be a lie, and DOGE has no intention of meaningfully cutting costs, then fuck them. We will find out very soon.

For now, I’m with Vivek on this. SHUT IT DOWN.

[rantk81]

I'm not 100% against the idea of cutting unnecessary fat from any budgets... Buuuuut, doesn't the constitution give the "power of the purse" to the legislative branch?  Seems kind of contrary to that, for the executive branch to just create an "efficiency" department with the goal of slashing spending, without the blessing of congress first?

[Paper Chaser]

I'm not 100% against the idea of cutting unnecessary fat from any budgets... Buuuuut, doesn't the constitution give the "power of the purse" to the legislative branch?  Seems kind of contrary to that, for the executive branch to just create an "efficiency" department with the goal of slashing spending, without the blessing of congress first?

They're just consultants. They have no authority to enact any change.

[Scandium]

I'm not 100% against the idea of cutting unnecessary fat from any budgets... Buuuuut, doesn't the constitution give the "power of the purse" to the legislative branch?  Seems kind of contrary to that, for the executive branch to just create an "efficiency" department with the goal of slashing spending, without the blessing of congress first?

What exactly is the "unnecessary fat"? Like, give me a specific item?
Dozens of 'working groups', committees, "bipartisan efficiency gurus" etc have gone through this exercise countless times, and produced bajillions of pages of recommendations. Yet every time what some deem "unnecessary", is extremely important to another large group of people and/or congressional representatives.
Sure, cut the flyfishing improvement subsidy for landowners in Montana, tennis court improvements to the Greenland Air force base, or whatever, I don't care.. But someone there's always someone who objects. And usually the objections are way stronger than the push to remove something. People not getting money are almost always way more invested in the fight than the people trying to stop spending money that isn't theirs.

[sixwings]

I’m looking forward to the report that they spend 2 years on a report and studies that provides a recommendation of laying off 20% of the workforce (which doesn’t happen) and Musk and Vivek collecting their tax payer funded payment for such incredible insight.

[achvfi]

There is waste in any organization. I am sure there is lot of waste in federal government of United States of America it is a humongous organization. Definition of bloat will differ based on perspective. For instance 1960s majority of people felt Nasa and Space program are waste, it was not widely embraced by all as we think they did.

Cynic in me tells me that real objective is to weaken federal government. Put its employees on notice and build culture of fear at its core. Say you cross wrong people, you and your department are part of efficiency cut. What that means is feds cannot react strongly to abuses by any organizations like states and businesses. You can extend to external threats as well. Governments across the globe can use these individuals in power to blunt US response to their actions.

[reeshau]

I half expect they will recommend spending $200B on AI to replace those workforce cuts.  To be executed before midterms.  Of course, it won't happen.  Or even worse, it does, and suddenly you can't file taxes, and SS checks don't go out.  But don't worry, we'll fast fail our way to progress, and just chalk up the 2025 tax season as a "public beta."

[PeteD01]

Elon Musk proposed 2 trillion federal budget cuts and acknowledged that there are hardships coming.

Just a cursory glance at the size of the federal budget reveals that 2 trillion $$ cuts must come in large part from transfer payments.

As I posted upthread, many red states are critically dependent on these transfer payments and red state Republicans apparently got really upset as they do not want to be put in a position to publicly defend transfer payments and thus expose that all the talk about cutting these payments is bullshit - including calling such cuts a political third rail and that they would support cuts if it wasn't for that rail.

Red state Republicans know that their state economies suck and cuts in transfer payments would be extremely painful, particularly in rural areas.

Of course, these same Republicans want to continue to present themselves as budget hawks, because that's what their voters want to see in them, while gladly accepting the transfer payments.

This website illustrates the issue nicely and shows that red state dependence on transfer payments is increasing with no end in sight:
 

...

https://eig.org/great-transfermation/

Elon Musk is a drug addled narcissist who does not understand politics at all - that's why he didn't realize that he committed political suicide with his proposals.

Now he has been unceremoniously (didn't even get his own press release) sent to the doghouse (pun intended) and been forced to share the powerless job with Vivek Ramaswamy.

Funny that the first thing that happened in regard to budget cuts is to propose yet another government agency and one that appears to have as its sole purpose to provide a sandbox for Elon and Vivek to play in - rather ironic I'd say.

[bacchi]

I half expect they will recommend spending $200B on AI to replace those workforce cuts.  To be executed before midterms.  Of course, it won't happen.  Or even worse, it does, and suddenly you can't file taxes, and SS checks don't go out.  But don't worry, we'll fast fail our way to progress, and just chalk up the 2025 tax season as a "public beta."

And then the government will hire back the federal employees that Trump fired.

[reeshau]

...

https://eig.org/great-transfermation/

Very interesting site and report!

Coincidentally, I am familiar with all 4 of the locations they focused on, although less so for Seattle.

[Kris]

Trump has picked Fox talking head Pete Hegseth as Defense Secretary.

This is unreal. Anyone who actually cares about the military or the troops should be fucking outraged.

[tooqk4u22]

Look, its absurd to think there isn't a ton that can be cut......its equally absurd to think that $2trillion can be cut in annual spending (maybe over 10 years).  $2 trillion is almost 30%, kind of ridiculous.

But lets put some numbers out there....

Q4 2019 (i.e. pre-pandemic) - spending was $4.8 Trillion
Q3 2024 Current - spending is $7.05 Trillion

Increase of $2.25 Trillion

If spending just increased at inflation then current spending should be $5.9 trillion, or an increase of $1.1 Trillion since 2019, which is still a lot.

But that means there is $1.1 trillion of increased spending in real dollars that has been added.  Some of the pandemic spending remained and got reallocated into other spending under the guise of "spending is going down"......sure against the backdrop of spending that included trillions of one-time covid spending.

Attached is the a chart with federal spending and summary of spending of 2023 vs 2019 - up 40-43% vs inflation of 19% over that time.   Inflation through Q3 2024 was 23% and spending got even greater so it is worse.
 
Now some of that increase is caused by:
Interest - increase of $425 billion (real $)
Social Security & medicare  - ahead of inflation but more people receiving as boomers age up).

And that is not even looking back to 2019 when it is likely that at that time people would have argued that spending is out of control and can be cut.

So really its not crazy to think that federal spending can be cut by 10%, but even a $700 billion cut per year would likely be crushing for the economy and many individuals.  But cut $150-$200Billion and hold spending below inflation then in a decade the US financial house would be in really good shape.

[bacchi]

So really its not crazy to think that federal spending can be cut by 10%, but even a $700 billion cut per year would likely be crushing for the economy and many individuals.  But cut $150-$200Billion and hold spending below inflation then in a decade the US financial house would be in really good shape.

There's always waste in large groups from government bureaucracies to megacorp departments but I suspect that Musk and Ramaswamy aren't really interested in waste as much as they are interested in cutting programs that they (and Trump) don't like.

However, there's another way to close the deficit by over $150-200B/year and that's to let the TCJA cuts expire.

CRFB: "Extending these expiring tax cuts could lose $3.4 trillion over the subsequent decade, or more than $4 trillion if corporate provisions are revived as well."

We know that won't happen, and we know that SpaceX contracts won't be cut, so it'll come from Medicaid, the DOE, and the VA. Maybe federal retirement plans too.

[waltworks]

Presidential commissions and task forces are where you stick bored politicians spouses and annoying celebrities. Is Musk aware of this? He's getting stuck with the nobody/pathetic suckup Ramaswamy? To make recommendations?

If I was him I'd be pissed. But then again this is Trump's MO, so I also wouldn't be surprised.

-W

[PeteD01]

And calling the thing DOGE is just the perfect mockery - but there is a nonzero chance that Musk isn't getting it...

[tooqk4u22]

So really its not crazy to think that federal spending can be cut by 10%, but even a $700 billion cut per year would likely be crushing for the economy and many individuals.  But cut $150-$200Billion and hold spending below inflation then in a decade the US financial house would be in really good shape.

There's always waste in large groups from government bureaucracies to megacorp departments but I suspect that Musk and Ramaswamy aren't really interested in waste as much as they are interested in cutting programs that they (and Trump) don't like.

However, there's another way to close the deficit by over $150-200B/year and that's to let the TCJA cuts expire.

CRFB: "Extending these expiring tax cuts could lose $3.4 trillion over the subsequent decade, or more than $4 trillion if corporate provisions are revived as well."

True and some form of tax increases or additional reform should be part of the equation.  The irony of letting the TJCA expire is that it would mostly hurt the lower and middle classes and benefit all the high income coastal folks as the SALT cap would go away - so on net basis I am not sure that is a good thing.  And sure the top 1%ers benefited the most with a 2-3% decrease in taxes that probably totals $60Billion annually but then so much money is made in the SALT states so not sure the offset.

The real beneficiaries of the TJCA were corporations and thereby rich people who own stocks and benefited from stock appreciation (retained earnings and stock buybacks) and increased dividends - it was an instant 16% increase to earnings (and those don't expire).

The change in estate tax also benefited the wealthy as did AMT, but so many middle class households were getting caught up in AMT because it was never indexed for inflation.

We know that won't happen, and we know that SpaceX contracts won't be cut, so it'll come from Medicaid, the DOE, and the VA. Maybe federal retirement plans too.

But I agree that priority one is to extend TCJA and I guess cut corporate and other taxes more.   Space X contracts will be increased in terms of volume and value and EV credits will be extended and increased only for Tesla - Musk, Tesla, Space X and all the other BS wouldn't exist without all the government subsidies and loans throughout almost entirely on the backs of democrats (some gratitude) - and not in the Obama "We built the roads" kind of way.....actual direct benefits. So ridiculous. Let's start by eliminating all payments/contracts or whatever with anything affiliated with Musk (obviously not going to happen).

Anyway, come up with a $200Billion- $100B in cuts, $100B in taxes or whatever, and we will be better off. But then again it may not matter, our economy was juiced for monetary and fiscal policy in such enormous ways and still is that any reversion to the mean will be tough medicine.

[Herbert Derp]

And calling the thing DOGE is just the perfect mockery - but there is a nonzero chance that Musk isn't getting it...

Elon was the one who wanted to call it DOGE in the first place. It’s his own joke 😂

[bacchi]

Matt Gaetz lol

Idiocracy is here.

[tooqk4u22]

And calling the thing DOGE is just the perfect mockery - but there is a nonzero chance that Musk isn't getting it...

Elon was the one who wanted to call it DOGE in the first place. It’s his own joke 😂

We have all known that the rich influence politicians and outcomes, but the fact that this is overt and out there is proof that it things really need to change.  It is completely unacceptable

[achvfi]

Matt Gaetz lol

Idiocracy is here.

So Trump is nominating someone who was being investigated for having sex with minors and known around to be abusing drugs to be new attorney general.

Not surprising. Thats exactly what Trump did first term. He pushed for nominating folks that want to break the system. Many top posts were not filled last time and were managed by acting leaders.

And of course this is the most important position for Trump. He wants someone that will clean up all investigations on Trump.

[reeshau]

Matt Gaetz lol

Idiocracy is here.

I can see a clever tactic here.  The House will be an even narrower margin.  If they want to conduct any business, they have to ditch the troublemakers who might tank the Speaker again.  So, send them off to a corner nobody cares about (DOJ!) and let them make a mess while the big kids pass tax cuts.

Next: Lauren Boebert for HHS!  MTG for Nasa!