Can Elon Musk’s Vision Help Tame Inflation? Experts Weigh In
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Given Elon Musk’s attitude toward government overspending — he’s posted on the social media site X that he thinks it’s a major cause of inflation — it’s no surprise that cutting federal spending was one of his first priorities as soon as President Donald Trump began his second term.
While economists suggest that inflation is related to a variety of factors, from consumer spending habits to the interest rates set by the Federal Reserve Board (the Fed), what consumers know is that when inflation is high, costs of living are, too.
Musk’s strategy to reduce inflation so far, under the helm of his newly created Department of Government Efficiency (DOGE), has been to slash what he deems unnecessary spending. So far this has added up to a lot of government jobs being cut and it is yet to be seen if this will have an impact on inflation.
Experts weighed in on whether they think Musk’s strategy will help bring down inflation.
Federal Spending Does Contribute To Inflation
According to Crystal Stranger, an attorney, IRS enrolled agent and senior tax director and CEO of OpticTax.com, she’s willing to meet Musk in the middle, saying he’s “wrong and right.” Where he’s “right,” she said, is that because the government prints money, the additional dollars in the money supply create inflation, and the prices on goods go up because of this increased supply of funds.
“But it is a little more complex than that in the real world, and I’ve always felt that inflation was a bit misunderstood by most people,” she said.
It’s More Complex Than That
However, costs can increase because of many factors, Stranger pointed out. Inflation is more realistically measured by looking at “a large basket of goods” and seeing how much they increased in cost from one year to the next.
“The problem with this way of measuring is that it is highly susceptible to manipulation, and commonly the goods used to measure this change abruptly from one year to the next,” she said.
She said that one of the ways the government can keep inflation numbers as low as possible is by preventing prevent rises in government spending related to paying the interest on the national debt and paying out funds for annually indexed government programs like Social Security.
Other Economic Factors
According to Christopher Stroup, CFP and owner of Silicon Beach Financial, focusing on fiscal policy as the only driver of inflation is a little too simplistic, when in recent years the key drivers of inflation have been supply chain disruptions, energy price spikes and labor shortages.
“Focusing solely on reducing government spending overlooks these complex, global factors,” he said.
He pointed out that the government’s role in stabilizing the economy during crises, such as the COVID-19 pandemic, “was essential to avoid a deeper recession,” and stressed that it’s during periods like that where the argument against overspending can be overstated.
How Will DOGE Help?
Stranger feels that the DOGE approach will likely reduce inflation, but not in the way most people are looking at it.
“When you cut a large number of jobs and government contracts this will cause massive increases in unemployment numbers.”
Because the Fed has “a dual mandate” to control inflation and protect the U.S. economy, the unemployment figure is one of the numbers it watches the closest, she said. Thus, if unemployment increases to around 6% like she estimates, then the Fed will have to cut interest rates.
“This also may cause a bit of deflation because people who lose their jobs buy less. Thus, I do think the actions being taken will lower inflation, and interest rates will drop, and this will help reduce government spending to an amount where they can pass the tax cuts that will fuel our economy to greater heights.”
Whether the cost is worth it, she said, depends on where you are sitting. “If you lost your job it probably won’t seem like a worthwhile move, but for the greater U.S. economy it will likely have positive long-term results.”
It’s likely too soon to know whether Musk’s approach to inflation will work.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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