Former President and Republican presidential nominee Donald Trump and Elon Musk — the richest man on the planet — had a two-hour-long live-streamed conversation on X (formerly Twitter) on August 12, spanning a wide range of topics. One of them was inflation, which Musk blames on “government overspending.”
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“Inflation comes from government overspending because the checks never bounce when it’s written by the government,” said Musk, according to the conversation transcript.
Musk said he believes there needs to be “a government efficiency commission,” to look at ways “to make the spending sensible.” In addition, he argued that there needs to be deregulations, “like have sensible regulations, because a lot of the regulations are nonsensical and cause the cost to be extreme for no reason.”
Richard Stern, director of budget policy at the Heritage Foundation, said he generally agrees with Musk’s viewpoint, adding however, that inflation comes from the combination of federal deficits and Federal Reserve money printing.
“The federal deficit is so large that it would soak up an enormous percentage of available investible funds across the whole economy,” he said. “This is why interest rates are so high right now for buying a home or starting or expanding a business.”
Stern noted, however, that when the Fed prints new money to fund the government’s deficit — as it did in 2020 and 2021 — the money supply increase allows for interest rates to stay low but does so at the expense of much higher inflation down the road.
To put this in context, consumer inflation dropped down to 2.9% in July — the first time it’s been below 3% since March 2021, according to the much-awaited Consumer Price Index (CPI), released August 14. While it is still a bit off the Fed’s 2% target, experts argue that progress will cement a September rate cut, with the CME FedWatch Tool placing the odds at 100%, as of Aug. 14.
If he wins, what could Trump do to address overspending?
Get Rid of “Inefficient” Programs
One way to cut overspending would be through the annual appropriations process — the discretionary funding bills that “avoid a shutdown,” said The Heritage Foundation’s Stern.
These, which come up every year, provide a “perfect opportunity to get rid of duplicative and inefficient programs and to hold down the rate of growth of these accounts,” he said, adding that the casual year-over-year growth of these accounts has added trillions to the debt.
In addition, Stern argued that there may be opportunities over the next four years to do reconciliation bills that would allow a simple majority in both chambers of Congress and the President to make new laws with a direct budgetary impact.
“This could open up the possibility of removing poorly designed programs and strengthening, for example, work requirements for welfare programs or getting rid of industrial subsidies — trillions of dollars of which are laced throughout the tax code,” he said.
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Streamline Federal Agencies
Josh Thompson, CEO of Impact Health USA, also agreed with Musk’s premise that government spending contributes to inflation.
In turn, he said that streamlining federal agencies would be one effective way for Trump to tackle government overspending.
“The federal government is bloated with overlapping agencies and redundant programs,” he said. “Trump has the business acumen to streamline these agencies, cutting down on bureaucratic red tape and making the government more efficient.”
According to Thompson, this isn’t just about saving money — it’s about creating a government that works for the people, not against them.
Promote Pro-Growth Policies
Thompson said Trump could also tackle government inefficiency by advocating for policies that encourage growth.
He argued that when the economy expands, the government’s need to support it through expenditures is reduced.
“Trump’s tax cuts and deregulation efforts during his first term showed us that reducing the burden on businesses leads to job creation and economic expansion,” he said, noting that by doubling down on these policies, Trump can create a thriving economy that reduces the need for government intervention and spending.
Editor’s note on election 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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This article originally appeared on GOBankingRates.com: Musk Blames Inflation on Government Waste: 3 Ways Trump Can Address Overspending
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