What Might be Motivating Musk

Recently, Shadow President Elon Musk posted a tweet that began, "All government spending is taxation." That's the sort of statement that, if you didn't spend at least a few seconds thinking about it, you might believe to be intelligent. But if you do think about it, you really have to wonder what he means. Lucky for us, Musk went on to explain further. "Whatever is not directly taxed is taxed in the form of inflation, as the government prints more money," he wrote. The revelation here is that Musk apparently considers government spending to be inflationary, almost by definition. Musk's thinking can be disputed from a number of different angles, but I am not going to do that. Instead, I am going to explain why I think this bit of thinking on Musk's part explains his desperate moves to chainsaw the U.S. government.

One thing that I have noticed over the years is that Musk has a near obsession with interest rates. He frequently cloaks his worries about high rates as being a concern about their impact on other people. For instance, he will argue that high interest rates make paying credit card debt difficult for some people or he will contend that high interest rates contribute to making cars unaffordable. But, once in a while, we will see why interest rates are really of such importance to Musk. He has a lot of loans. Lots and lots of loans. Just to buy Twitter, Musk had to borrow an estimated $13 billion. The interest on those funds is significant and even small fluctuations in the interest rate can have a big impact on what he owes. Not surprisingly, Musk has been a strong proponent of the Federal Reserve lowering rates.

Think back over the last few years and consider why interest rates have been high. It was because the Federal Reserve saw raising interest rates as a means of combating inflation. Why was there inflation? Conventional wisdom is that it was due to government money spent due to the pandemic. Personally, I am not convinced that government spending is always a cause of inflation or, even if it is, such inflation is necessarily a bad thing. If prices drop because of a collapsed economy and government spending is a means to either stabilize prices or causes a small increase and prevent the economy from collapsing, I think most people would consider that to be the better option. Moreover, I believe that there are other ways to combat inflation that our political system is reluctant to use and, therefore, interest rates become the primary tool. If all you have is a hammer, everything looks like a nail. From the Fed's point of view, the only tool they have for combatting inflation is interest rates. Musk seems to be convinced that government spending caused inflation which led to high interest rates and, therefore, he is determined to cut government spending in order to lower interest rates.

Musk supporters argue that he simply wants to make government more efficient and more financially sound. His detractors argue that he is interested in preserving tax cuts for the wealthy. I obviously don't believe the first argument and I am increasingly skeptical of the second. The ultra-wealthy such as Musk simply don't pay that much in taxes. Most years, Musk basically doesn't pay any income tax at all. Some years, due to exercising stock options, he does get hit with sizable bills, but those years are few and far between. I am not convinced that tax rates matter that much to Musk. What does matter, however, is interest rates. Therefore, I suggest that Musk's motivations for cutting government spending are tied to his belief that government spending causes inflation which he further believes leads to higher interest rates. If so, we are seeing our government destroyed not because Musk wants to pay lower taxes, but because he wants to pay lower interest rates.

Update on "What did you do last week?" email

One of the first blog articles that I wrote about Shadow President Elon Musk and the U.S. DOGE Service mentioned emails sent using the Government-Wide Email System (GWES) that DOGE installed in the Office of Personnel Management. One of these emails was a demand that all federal employees provide a list of five bullet points describing what they had done the previous week. In a tweet about the email, Musk said that failure to respond to the email would be considered a resignation. However, the email itself did not include this threat, and several departments told their employees not to respond. A few hours before the deadline, OPM itself said that responding to the email was purely voluntary. I have now learned some background to this controversy.

In late January, unidentified litigants sued OPM because of the DOGE email server. They argued that the mail system violated the E-Government Act because, among other things, OPM had not provided a Privacy Impact Assessment. After the court filing, OPM conducted a Privacy Impact Assessment which included a paragraph saying that response "is explicitly voluntary" and that "employees can opt out simply by not responding to the email." The judge hearing the case declined to issue a temporary restraining order partially because he believed the voluntary nature of the system removed the threat of irreparable harm. However, after Musk's tweet which suggested that responses were not voluntary, the lawyer for the plaintiffs requested that the court sanction the government attorneys due to their apparent misrepresentation of the email system. It is likely that the court case provoked the creation of the privacy impact assessment in the first place and that this threat of sanctions motivated the email from OPM saying that responses were voluntary.

On Friday evening, a second email from OPM using GWES was sent asking employees what they did the previous week. This followed representations by both Musk and cult leader, convicted felon, and failed President Donald Trump that employees would be required to respond to the emails. Moreover, the OPM Privacy Impact Statement for GWES was modified. Where it had previously stated that responses were voluntary, it now says, "The consequences for failure to provide the requested information will vary depending on the particular email at issue." This puts the voluntary nature of the system in doubt. I assume that this will renew the request for sanctions on the government lawyers and could motivate the judge to take action against the email system. This could end up in a struggle between Trump and Musk, who care nothing about the law, and government lawyers who probably prefer not to be sanctioned. That will be a drama worth watching.

Update on the FAA and Starlink

On Thursday, I wrote about efforts by the DOGE team embedded with the Federal Aviation Administration to seize a $2.4 billion contract for ground communications modernization from Verizon and give it to Musk-owned SpaceX. Musk has been criticizing Verizon on X, tweeting that "The Verizon system is not working and so is putting air travelers at serious risk". I noted that Verizon had just started working on the project and that it was too early to judge the company's performance. But Musk apparently doesn't follow this blog and subsequently tweeted that "the Verizon communication system to air traffic control is breaking down very rapidly." Someone apparently informed Musk of his error, and a couple of hours later, he tweeted again saying, "Correction: the ancient system that is rapidly declining in capability was made L3Harris. The new system that is not yet operational is from Verizon." Now that Musk seems to understand what is going on with this project, it is not clear why he still believes SpaceX should get the contract. Verizon is obviously not putting air travelers at risk but rather engaged in installing a new system that will increase safety and reliability. That would seem to moot Musk's objection. But, SpaceX is still pursuing the contract which suggests that concerns about safety are not Musk's true motivation. It is also concerning that a guy who runs a parenting website was better informed than Musk about the project.