Elon Musk Warns of Short-Term Economic Pain from Trump's Plans

Elon Musk, a key supporter of Donald Trump, acknowledges potential short-term economic challenges due to Trump's proposed policies while advocating for long-term government efficiency.

Elon Musk, recognized as the world’s richest person, has emerged as a prominent figure in Donald Trump's presidential campaign, serving as a major donor and vocal advocate. Despite his support, Musk has recently cautioned that some of Trump’s economic proposals could lead to financial difficulties in the short term.

One notable proposal is the creation of a new “government efficiency commission,” which Musk could lead. This commission would be tasked with examining federal expenditures and eliminating programs viewed as unnecessary. During a telephone town hall on Friday, Musk stated that the spending cuts recommended by the commission would likely cause "temporary hardship." However, he emphasized that these measures would ultimately promote "long-term prosperity."

“We need to cut spending to operate within our means,” Musk asserted. He further echoed concerns expressed on social media regarding potential severe economic consequences if Trump’s administration implements certain agenda items. An anonymous user on X warned that mass deportations coupled with Musk's proposed government reductions could result in an initial economic downturn. Musk responded to the post, stating, “Sounds about right.”

When contacted for comment, Musk's companies, Tesla and SpaceX, did not immediately respond. However, the Trump campaign lauded Musk, highlighting his qualifications to enhance government efficiency. Senior adviser Brian Hughes remarked, “As President Trump has said, Elon Musk is a genius, an innovator, and has made history by creating modern and efficient systems.”

On the campaign trail, Trump has promised to impose tariffs of up to 20% on all imported goods and deport millions of undocumented immigrants. Economists generally warn that such policies could raise consumer prices, as businesses tend to pass on added costs to customers. Trump has also proposed eliminating the personal income tax for Americans, suggesting that this lost revenue could be offset by significant tariffs. However, experts have indicated that achieving this balance would be nearly impossible, given that the individual income tax generates about half of the federal government's annual revenue.

In 2023, the U.S. imported approximately $3.8 trillion in goods. To match the revenue currently collected from the individual income tax solely through tariffs would require a staggering tariff rate of around 70%, according to Alan Auerbach, a law professor at the University of California, Berkeley. Such a high rate would likely reduce U.S. trade significantly, further diminishing tax revenue.

Musk, who leads both Tesla and SpaceX, has actively supported Trump, contributing about $75 million to a pro-Trump Super PAC in a recent three-month span. His social media presence on X, where he has over 202 million followers, often features posts in favor of Trump.

Currently, the U.S. national debt stands at approximately $35 trillion. Both President Biden and former President Trump have contributed to this debt. A budget model from the University of Pennsylvania's Wharton School projects that Vice President Kamala Harris' economic proposals would raise primary deficits by $1.2 trillion over the next decade, while Trump's plans could increase them by $5.8 trillion in the same period.

During the recent telephone town hall, Musk committed to meticulously reviewing the federal budget if appointed to lead the proposed government efficiency commission, indicating his intent to analyze every expenditure and question its necessity.