Will Musk Trigger a Government Shutdown?
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Musk for all the kind of excitement he's caused among Republicans could actually be setting them up for a real problem that's going to hit when funding runs out on March 14th.

I'm Stephanie Flanders, head of government and economics at Bloomberg. And this is Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, and what on earth is going to happen next. This week, our question is, will Elon Musk's campaign to make the US government more efficient actually lead to it shutting down altogether in a few weeks' time?

On March 14th, the continuing resolution that funds the US federal government will run out and its work will shut down, unless the Republican Congress and President Donald Trump reach an agreement. Now, that was always going to be tough, but Elon Musk's scorched earth overhaul of the US government via the so-called Department of Government Efficiency, DOGE, appears to have made it a whole lot harder. So that's left me wanting to know...

What exactly are the chances the federal government shuts down in a few weeks? And if it does, will Doge shut down as well? Or will that be an opportunity for Elon Musk and his team to really go to town? Now, of course, nobody knows the answer to those questions, but I have two people here who can speculate much more wisely than most. Josh Green, national correspondent at Bloomberg Businessweek, author of the New York Times bestseller Devil's Bargain, Steve Bannon, Donald Trump and the National Uprising. Josh, great to have you back. Good to be with you.

And Laura Davison, our White House editor specializing in doge taxes and fiscal policy. I think of you as the doge czar, but it just doesn't sound like a very nice name, Laura, so I won't call you that. But very good to have you. Thanks for having me. ♪

So I think in a more normal year, we'd have talked about the prospect of a government shutdown long before now, since we're so close to that formal deadline. But frankly, there's just been too much going on. Josh, I mean, you did draw attention to this a few days ago in your excellent Businessweek newsletter.

But you describe there Elon Musk rampaging across Washington like Godzilla leveling Tokyo, hacking away at federal agencies and firing workers en masse through Doge. I think that's a very good visual image. You had fun there. Doge appears to be having quite a lot of blowback.

out in people's constituencies is certainly causing a lot of headlines, a lot of stories. But there's a very specific problem for the Republican leadership in Congress when it comes to these upcoming votes to keep the government running. So can you just take us through what they needed to happen and how Musk has made it harder? The vibe in Washington right now among Republicans is very positive and very excited. And a lot of Trump fans have really enjoyed watching Musk

agencies, fire workers, create all this chaos that has Democrats so upset. And of course, that's where all the news focus has been. But if you look right now, the conference is divided between a small group of hardline deficit hawks and the broader group, which includes moderate Republicans from districts that Joe Biden won, who are concerned about deep spending cuts. And so Republicans haven't been able to agree on a spending bill. This is not something that's new. In the past, Republicans

Republicans have run into the same problem. In 2023, Kevin McCarthy, the House speaker, had to rely on Democratic votes. Last December, Mike Johnson, his successor, again, had to rely on Democratic votes to avert a shutdown. So before Elon Musk, there had always been this kind of off-ramp, what I think of as an off-ramp, where a Republican House speaker who was in trouble could, at the last minute, cobble together some kind of a deal with Democrats to keep the government funded.

This time, however, the Democrats I've spoken to have been very angry about

what Elon Musk is doing and what Donald Trump is doing. And a couple of them had said to me in the last couple of weeks, why would we help out Speaker Johnson and Republicans and agree to any kind of a deal? How could we possibly trust it if Elon Musk and Trump could just go ahead and summarily tear apart anything that we'd agreed to? And to me, that raises an interesting tension that a lot of people aren't focused on yet, that Musk, for all the kind of excitement he's caused among Republicans, could

could actually be setting them up for a real problem that's going to hit when funding runs out on March 14th. You mentioned that they've needed Democratic votes in the past. Just to be specific about it, there are quite a few Republican congressmen and people who have never voted for one of these continuing resolutions. Even with larger majorities than they have now, they

they've always had to go to Democrats. Given that direct linkage that you're making with Elon Musk's unpopularity with Democrats and the need to get some Democrat votes, do you get the sense that they're going to link the two in any way, that they're trying to put some restraint on Doge or on President Trump more generally in return for that support? Or would that be too explicit for them?

No, that's exactly the question that I've been asking. And the feedback I've gotten has been twofold. On the one hand, there's the obvious worry, which you've mentioned, that how can we have

assurance that any deal we strike won't immediately be torn apart or ignored by Musk. The question I've been asking is, would you actually write legislative language into an agreement saying Elon Musk cannot cut this agency? Or perhaps Trump could do what's called a presidential signing statement. George W. Bush used to do these a lot that would specify

his intentions for what a bill means and how it should be interpreted to guard it against Elon Musk. There's got to be some kind of an assurance from Democrats that the deal they agree to is going to withstand Doge's attacks. But then the other factor in all of this is that

The Democratic Party is very unpopular. Its favorability rating is something like in the mid-30s. And so there's a lot of pressure on Democratic lawmakers from Democratic voters not to simply roll over and enable Trump and Republicans to continue what they view as an assault on government. So there are a lot of forces, I think, behind the scenes that are pushing the two sides toward what looks to me to be a pretty high chance of a government shutdown.

I guess just to be clear, everyone in Congress is pretty unpopular, right? The Republicans in Congress are not super popular. Or you would say you think specifically it's the Democrats? I think the Democrats right now are more unpopular. I saw a poll the other day that had Democrats running about 20 points behind, I think, in popularity behind Republicans. And Donald Trump even got a bit of a honeymoon. He had higher favorability ratings and unfavorability ratings for the first month or so of his presidency. But it's the view of Democrats among

among their own voters, that is so worrisome to Democratic elected officials because they need this support in order to stay in their jobs. And they're very alert and attuned to the dissatisfaction in the Democratic base. And that, too, is a factor that's going to play into what Democrats are and aren't willing to agree on when it comes to cutting a spending deal with Republicans.

Okay, Josh, I'm making you do a lot of work. I have one more question. But I'm interested, do you think that Doge has changed the politics of a shutdown? Because we don't normally talk about federal workers very much, except if there's a shutdown. But I feel like we've spent the last two or three weeks reading loads of stories about federal workers debating whether they're all useless or whether any of them are really important. Do you think that maybe President Trump will be less frightened of a shutdown in this context? Will it just sort of

muddy the waters around Doge. They're eager to test the proposition that the government really doesn't need all these employees to function on. And so I think there would be some appetite for a shutdown. The danger with that is that in the past, Republicans have gone into shutdowns saying, oh, this isn't going to be a big deal. It will be fine. The government can continue to run. In my view, we had a test of that back during the first Trump administration in 2018 and 2019 when

Republicans allowed a shutdown to occur because Trump wanted to secure immediate funding for a border wall.

wall. And the shutdown lasted 35 days. Eventually, there was a lot of blowback from ordinary Americans. And Trump ended up agreeing to reopen the government without having secured that funding. Republicans and Trump lost that shutdown because the political pressure became too much for them to bear. I think the longer a shutdown goes on, regardless of how excited Republicans might be in the front end of that,

the political pressure on them to get the government running again is only going to increase. Elon Musk may not care. A lot of Republicans eager to fire government workers may not care. But at the end of the day, Republican elected officials want to keep their jobs and Trump wants to maintain his popularity. And it's very hard for me to see how they would be able to do that over an extended government shutdown.

I'm going to come back to you a bit later because I do want to think about the implications for Doge itself and their activities if the government shuts down. But first, I mean, we've had a lot of politics, which is only occasionally allowed on Trumponomics. But I wanted to also think about some of the numbers involved here and specifically have a quick look.

Think about whether all these firings and scary emails and all the fire and smoke coming out of federal government, thanks to Doge, has actually produced a lot of savings for the US taxpayer. So Laura, you and your team keep a close eye on all this. And I see that Doge itself has claimed recently that it's already found $55 billion worth of savings. Now, our chief economist pointed out, Anna Wong pointed out on this show not long ago,

that you'd need around eight times that. You'd need more like $400 billion to really make a dent on the U.S. borrowing trajectory. But still, in just a few weeks, $55 billion would be pretty impressive. Is it true? So far, no. And they actually recently updated that number to $65 billion, but we still haven't seen their accounting of how they got there. So in the last few days, it's gone up from $55 to $65? Yeah.

Yes, but the underlying sort of accounting doesn't bear that out. Doge has really made this claim that they are the most transparent agency out there, that they are doing this all in public view. For the first couple weeks, what this really was was just a X account just posting, hey, we canceled this contract, we canceled that contract. In the past week or so, they have put this all on a Doge website and basically listed, here are all the contracts that we have canceled.

If you go through, there's at this point about a couple thousand there. When we did the math last week on this, there were about $16 billion worth of contracts listed there. However, there was one that doesn't add up to the $55 billion that they were claiming at the top line. And then once you dug down into these contracts, we found one pretty major error that showed an $8 billion contract that was actually an $8 million contract.

That's the kind of mistake you make when you're the richest man in the world and you're just constantly getting your millions and billions mixed up. But truly, as you mentioned, that doesn't really move the dial. But it showed and caused a lot of, called into a question, Doge and how transparent they are being actually. They've accounted for about $8 billion worth of savings. That's not that much.

Here at Bloomberg, when we're talking about tax policies, we sometimes don't even really start talking about them until they're about $100 billion. Get out of bed for less than a few billion. Other colleagues have noted for various tax savings that in this bill that Republicans are looking to pass later this year, Elon Musk personally could benefit by hundreds of billions of dollars. So the fact that his group is only saving $8 billion really just goes to show just how they're barely denting the surface.

And it's weird. I mean, that particular example, the million billion one, I mean, we joke around it, but actually it's also one of those ones where it's just on its face. It's mad. You sort of wonder how, if you could just tell us a bit more about the detail of what the claim is in terms of how this contract would be bigger than anything that this company has had anything to do with ever.

Yeah, so this was a contractor that's out in a Washington suburb. Their average contract going back was about a million dollars. So having an $8 billion contract would just be wildly out of proportion. And it was a DEI contract, right? Of course, you want to claim that you were wasting lots and lots of money on DEI. Yes. And even for the agency this contract was going to, their entire budget was only about $9 billion. So the fact that they would have one single contract being $8 billion on DEI just doesn't stand up.

And it was $8 million. It was for $8 million. The other thing that was really called into question, even if, okay, say you make that accounting change, you have $8 billion in what they say they've saved. All of these contracts that are listed basically have a maximum value, and that doesn't mean that top line number is actually what's spent. So that $8 billion is probably actually much less after you go through and discount all of these contracts across the board.

Doge is quick to point out that, look, this doesn't account for all of the leases that we've canceled, all the personnel that we have culled from the federal government rolls. But even still, even if you give a very generous estimate to all of those, we're still just talking a couple more billion dollars here and there. This claim that Musk started with a $2 trillion goal of cutting $2 trillion from the federal deficit, he's now decreased that to $1 trillion. So the goalposts really keep moving here just week by week.

I guess you could say he's providing the open goal by making all this transparent on the website, given that a lot of people seem to be quite happy to take at face value the claims he's been making on X. I guess they deserve some credit for the transparency of the website, especially if it means we find all these errors and we can constantly criticize them.

The other criticism, though, is that there's really not a lot of transparency requirements for Doge. It is not a department as all the other Department of Homeland Security. It's really just an office within the White House. Musk himself doesn't have to disclose his finances publicly.

They also don't have the same sort of scrutiny from a watchdog or an inspector general that would have the same sort of oversight. They don't have to report who the people are. There's questions of, are these doge kids, as they've been called, going to these different agencies, a lot of them very young? Have they completed their ethics training, their IT training? There's been some cases we've reported on lapses there that have cropped up. So they really aren't subject to the same hiring practices and scrutiny as any other of the federal workers that they're going in and auditing. And to your point about the website, they don't seem to have done a lot of basic arithmetic. No.

This actually takes us to the status of Doge and the fact that it's not subject to a lot of these things actually raises this much intriguing question of what happens to Doge efforts themselves in the case of a government shutdown. And I go back to you, Josh. What's your sense...

Would we consider the Doge effort to now be enough part of the federal government that all of its people have to go home? Or would it count as essential workers? It's essential to be cutting the government even as you shut it down? Yeah, it's a great question. It's one that Democrats and Republicans have started to ask themselves. I spent yesterday talking to a couple of House and Senate staffers just asking the basic question, would Doge be allowed to continue operating in a government shutdown?

There isn't a clear answer, but the general sense that I got was that staffers, both in the House and Senate, think that it probably would be because the president does have a lot of leeway to declare certain workers essential to the government. And so as one Democratic House staffer put it to me, I don't think Doge would even pause. I did get an interesting kind of illustration of the way that presidents use this power to manipulate public opinion. I think it might come into play with Trump and Doge if there is a government shutdown.

Back in 2013, when Barack Obama was president, there was a shutdown and Obama shut the national parks down. And Republicans got very angry about that because they said, Obama has the power to keep this open. He's doing this for political purposes to get people mad at Republicans.

And he was. Malicious compliance, right? Malicious compliance. Yeah, yeah, exactly. But then during the 2018 government shutdown, when Trump was president, Trump made a point of keeping a bunch of stuff open, including the national parks, in order to underscore the argument that shutdowns aren't that bad. And it wasn't his fault when things got messed up during a shutdown. I think if you flip that around and put it in a Doge context, Trump

I don't see why Trump couldn't argue that Doge are essential workers. They're actually helping to balance the budget by continuing to kind of fire people and do these things that Trump and Musk think is so important. And I don't know what power Democrats would have to stop them. So while we don't have a clear and definitive answer yet, the assumption among people I talk to on the Hill is that Doge probably would be able to continue operating in a shutdown.

There's a lot of thought also within the Doge that a shutdown would actually be very beneficial because they wouldn't be encumbered by all of the career staff that would be in the office. They've run into lots of issues where they want to access a data set. They want access to certain files. And the staff that's there says no. Suddenly, if you remove all those people from the building for an extended period of time, Doge has a lot more leeway to just run roughshod and grab what they want.

So you've raised the other sort of big question out of all this. I started off asking, will Republicans now be less scared of a shutdown? Will Democrats actually wonder about, if they're really concerned about the federal government, should they be pretty concerned about a shutdown, if you guys are right?

It's a good question. I think everybody's trying to figure this out. The impression I have in talking to Democrats is that they're just very frustrated with the way all this is going. And so I don't imagine that a lot of them are going to be eager to just keep things rolling along.

There's certainly an appetite among at least some Democratic staffers that I've talked to that Trump just needs to get a taste of his own medicine and he wants to shut the government down. Let's go ahead and do it and let him deal with all the political blowback that happens as a result of that. But one other thing I think is worth mentioning is this is a concern among Democrats I spoke to is that.

There is a lot of fear of what could Doge and Musk do during a shutdown if they were allowed to continue operating. And one particular area of concern is the Treasury payment system. There's been talk in the past among Republicans that a shutdown wouldn't be so bad because they could sort of decide which bills to pay and which bills not to pay and keep things rolling for a long time. So you wouldn't, government wouldn't default on Treasury bonds, but it might shut down other payments.

That is something that a lot of people view as very dangerous to the market, to global markets. If there were a shutdown, we now know that the Doge folks do have access to a lot of these payment systems. Nobody really knows what could happen, what kind of mischief they could get up to if this kind of scenario were to unfold.

I guess we should say at this point, Scott Besson, who we've interviewed a couple of times, Bloomberg in the last couple of weeks, he comes from Wall Street. He's been very clear that we're all getting ahead of ourselves in worrying about specifically those functions and the running of the Treasury market. He thinks all of that is...

is hysterical. I think what you stated in terms of the possible levers they would have and the lack of clarity we would have in the event of a shutdown, I think is all true. But we should say there is supposedly someone who cares about these things sitting inside 1500 Pennsylvania Avenue, the Treasury Department. I guess one last question is just...

goes back to this broader environment, the rather febrile environment we have. If we have a shutdown, rightly or wrongly, is it seen to be the sort of defining battle between Congress and the executive, this sort of ongoing tussle we've had with President Trump over who actually controls the power of the purse, who can control whether to actually spend money or not? You were hinting at it just now, Josh. Josh

Is this how it's going to come to a head, perhaps even more than all the court orders and all the cases that have gone out? I really don't know. I mean, right now, there's not a lot of contention between Trump, Doge and House Republicans. Trump's own cabinet secretaries, Republicans in Congress have basically been willing to let Trump and Musk operate as they wish. It's at some point maybe that

battle comes to a head and it becomes more visible, more publicly contentious. I just don't know the answer to the question yet. I'd say we've just seen a glimmer of the sort of fissures starting to form between Trump allies and Musk. This really came to a head in this email that went out over the weekend where Musk said, every federal worker send in five bullet points of what you've been doing over the past week. This caused a lot of alarm, ruined a lot of cabinet secretaries' weekends as they were trying to figure out how to respond to

And a lot of agencies said, ignore it. Do not reply. We'll handle this. Musk late last night got upset over this and said, OK, if you didn't reply this time, fine, but we're going to send another email. And this time you have to reply or else you'll be fired. This runs in contrast of all of the guidance that both agency heads have given. And these are Trump's handpicked people to run these places.

as well as OPM with the Office of Personnel Management, sort of the HR for the federal government. So we're starting to see this power struggle forming. We'll see where we are. The shutdown is, if it happens, is about 15 days away. A lot can happen between now and then.

Yeah, we talk about the battle between different arms of government, Congress and the White House. But if it's between Elon Musk and everyone else, that's what it seems to be coming down to. Laura, it occurs to me, you're not even, I think when you're on shutdown, you're not even allowed to check your email. So I guess if we do get a shutdown, Elon Musk is not going to be able to send a lot more emails to federal workers that they're supposed to reply to within a day or whatever. Yeah.

That would be a key point that would harm his strategy here. They would say, look, couldn't respond because you didn't let me. All right. Well, Josh Green and Laura Davison, thank you very much. That was great. Thank you. Thanks so much.

Thanks for listening to this episode of Trumponomics from Bloomberg. It was hosted by me, Stephanie Flanders, and I was joined by Laura Davidson and Josh Green. Trumponomics is produced by Samar Saadi and Moses Andam, with sound design by Blake Maples. Brendan Francis Newnham is our executive producer. And please do rate and review us wherever you listen to podcasts so a lot more people can listen. ♪

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