The Musk budget-cutting commission
It’s official: President-elect Donald Trump is setting up a Department of Government Efficiency, to be led by Elon Musk and the financier Vivek Ramaswamy to “dismantle Government Bureaucracy.”
The move appears to give Musk a perch to make drastic cuts to government spending, and raises concerns about giving him so much sway when many of his businesses hold federal contracts. But there are lots of other questions — including how much power the commission would actually have.
“This will send shockwaves through the system,” Trump said in a statement announcing the initiative, calling it a potential modern-day Manhattan Project. The president-elect’s description of its goals — “slash excess regulations, cut wasteful expenditures and restructure Federal Agencies” — mirrors Musk’s publicly stated plans, which include cutting $2 trillion from the federal budget. (He hasn’t clarified how he’d get there.)
The tech mogul celebrated the news on X by reposting scores of memes and declaring that “either we get government efficient or America goes bankrupt.”
It’s a reminder of the huge influence Musk carries with Trump, earned after he spent millions to re-elect the Republican and turned his X account into a campaign megaphone. Since Trump won last week, the two have huddled together at Mar-a-Lago, where, Axios reports, Musk has sat in on meetings to select cabinet members and joined a phone call with President Volodymyr Zelensky of Ukraine.
The project even adopts Musk’s name for such an initiative, whose acronym alludes to the dog-themed cryptocurrency he has promoted. Coincidentally, Dogecoin is up 147 percent since Election Day, outpacing other digital tokens over that period.
But how will the initiative actually work? Trump said that the group would operate outside the government, partnering with the White House and the Office of Management and Budget. NBC News’s Garrett Haake questioned whether Musk and Ramaswamy were “basically going to be consultants for OMB.” To be fair, the office, which oversees and promotes the president’s budgets and weighs in on many federal regulations, can be powerful.
But federal spending plans must pass Congress, and it’s unclear how much cutting lawmakers will tolerate. (Especially if Republicans’ control of the House is smaller than originally anticipated.) And even Musk has conceded that the kinds of big cuts he’s seeking could lead to deep short-term economic pain.
More prosaically, how much time can Musk, who effectively runs about a half-dozen companies, devote to this?
How will the initiative even be funded? The Washington Post’s Jeff Stein reports that some Trump advisers have weighed asking Congress for up to $50 million to pay for the commission. A more likely alternative, Stein speculated, was raising the money from private investors.
In other transition news: The financier John Paulson withdrew from consideration as Treasury secretary; bettors on Polymarket increasingly believe the hedge fund mogul Scott Bessent will get the nod. And Trump named Pete Hegseth, a veteran and a Fox News host, as defense secretary.
HERE’S WHAT’S HAPPENING
An OpenAI co-founder comes back to work after a three-month absence. Greg Brockman’s return after a sabbatical comes as the start-up has been stung by a series of high-level departures. The exodus has not scared off investors, but the company is assigning Brockman the task of addressing OpenAI’s biggest technical challenges.
Disney is said to be looking outside the company for Bob Iger’s successor. James Gorman, the former Morgan Stanley C.E.O. and Disney’s incoming chairman, wants to widen the list of candidates, The Wall Street Journal reports. (One person being floated is Andrew Wilson, the C.E.O. of Electronic Arts.) Iger’s replacement is expected to be named in early 2026.
How Trump U-turned on TikTok
Not long ago, TikTok was expected to be in Donald Trump’s firing line if he were re-elected. Instead, the video app is increasingly confident that the president-elect will spare it from being banned in the United States.
It’s a remarkable U-turn for Trump, after he targeted the app over national security concerns during his first term. But it raises two wider questions: How will Trump deal with Beijing when he takes office, and how will China seek to influence him?
A recap: In 2020, Trump signed an executive order to block TikTok in the United States unless ByteDance, its Chinese parent, sold TikTok’s American assets and handed over the data of American users.
Federal judges blocked that effort, but President Biden signed a law in April that would ban TikTok unless ByteDance sells it to a non-Chinese entity by Jan. 19 — a day before Inauguration Day.
Trump came out against the TikTok ban during the election campaign, after the company courted him and his allies, The Times’s Sapna Maheshwari reports. The reversal came shortly after he met Jeff Yass, a Republican megadonor and a founder of Susquehanna International Group, which has a big stake in ByteDance.
Tony Sayegh, an official in the first Trump administration who now works at Susquehanna, was a key go-between. And Kellyanne Conway, a Trump adviser, lobbied for the company.
Trump may decide that TikTok has done enough to show it’s outside China’s control. One way: ByteDance making changes to the platform could give Trump the cover to extend the deadline.
Trump supporters who backed a TikTok ban, such as Jacob Helberg, an adviser to the data-mining company Palantir, think a workaround is possible.
Could Trump’s TikTok 180 signal a different approach to China? The president-elect has promised to raise tariffs on Chinese imports. He’s eyeing China hawks for key cabinet positions, including Representative Michael Waltz of Florida as his national security adviser; Senator Marco Rubio of Florida is expected to be nominated to be secretary of state; and Trump is said to want Robert Lighthizer to be his top trade official again.
But Trump’s change of heart shows that there are ways to influence his thinking. Beijing is wooing its American corporate allies as a counterbalance, The Wall Street Journal reports. A key target: Elon Musk, whose Tesla is heavily dependent on China.
The inflation genie is back out of the bottle
Inflation concerns are weighing on investors again as economists warn that Donald Trump’s plan for lower taxes, new tariffs and less regulation could undercut the Fed’s efforts to bring down prices.
The Consumer Price Index report, due out at 8:30 a.m. Eastern, is expected to show that progress on taming inflation has stalled. That most likely contributed to Tuesday’s rise in U.S. Treasury bond yields — a sign of debt investors’ worries — and the end of a post-election stock rally.
Here’s what to watch for in Wednesday’s C.P.I. report:
The reading for October is expected to show that headline inflation grew by 2.6 percent on an annual basis, a hotter pace than September’s 2.4 percent. Rising prices on apparel and used cars could be two categories to pay attention to.
Expect similar results for core inflation, which strips out volatile food and fuel prices, which would add to data showing inflation stuck above the Fed’s 2 percent target.
Economists are on alert for potential “reflation,” or a rebound in price increases, driven more by Trump policies than by consumer spending.
“We see pro-growth fiscal policy, tariffs and tighter immigration as potential sources of upside inflation risk over the coming years if they are implemented,” Stephen Juneau and Jeseo Park, economists at Bank of America, wrote in a research note on Monday.
The odds for a December rate cut are dwindling. Jay Powell, the Fed chair, has said the central bank won’t model the effects of Trump’s economic initiatives until they’re official. But the futures market on Wednesday was pricing in a roughly 60 percent chance of another reduction of borrowing costs, far lower odds than a month ago.
And a higher-than-expected inflation reading on Wednesday could leave the door open for the Fed to take a breather.
Loretta Mester, the former president of the Cleveland Fed, said yesterday that “the market is right” to lower its outlook for the pace of rate cuts.
Why Trump could bolster shareholder activism
Shares in Honeywell rose more than 3.8 percent on Tuesday after the activist investor Elliott Investment Management unveiled a more than $5 billion stake in the industrial conglomerate, one of its largest ever.
Given the size of the position, Elliott most likely amassed it over weeks, if not months. But the nascent campaign is the latest sign of what Wall Street believes will be a major trend: Donald Trump’s election will probably clear the way for a resurgence of shareholder activism.
A big reason: M.&A. is back in play. Given the Biden administration’s heightened opposition to many deals, activist investors have been limited in what they can push companies to do. Many recent campaigns — including Elliott’s efforts at Southwest Airlines and Starbucks — have focused on smaller goals, such as C.E.O. changes and operational improvements.
But the widespread belief that the second Trump administration will go easier on M.&A. means that activists will get a favored tool back. “For the last four years, while we had still a lot of activism pushing for M.&A. transactions, it was, to some degree, chilled by the current administration,” Kai Liekefett, a co-chair of the corporate defense practice at the law firm Sidley Austin, told DealBook.
Elliott wants Honeywell to do a big deal: break itself up. In particular, the hedge fund has advised Honeywell to separate out its aerospace and automation businesses, following similar moves by United Technologies and General Electric. “The conglomerate structure that once suited Honeywell no longer does,” Elliott wrote in its letter to the company, adding that each business would do better as a more streamlined and focused company.
That said, Elliott may be hoping for further M.&A. for each business. G.E. could be a natural buyer for the aerospace business, to combine its big jet engines with Honeywell’s small jet engines. And Rockwell Automation could be a logical acquirer for Honeywell’s automation business.
Honeywell is keeping its options open. A spokeswoman, who said the company had first heard from Elliott on Tuesday, told DealBook that its board and management “appreciate the perspectives of all our shareholders.”
In other activist investor news: ValueAct has taken a $1 billion stake in Meta, though the hedge fund is betting on the success of the tech giant’s artificial intelligence efforts rather than seeking to shake things up.
THE SPEED READ
Deals
The Justice Department and four Democratic state attorneys general sued to try to block UnitedHealth Group’s $3.3 billion acquisition of Amedisys over competition concerns in the home health and hospice services sectors. (NYT)
Volkswagen will increase its investment in Rivian to $5.8 billion, and the two carmakers have formed a joint venture that involves jointly developing software and electronics. (NYT)
Politics and policy
How the crypto industry is maneuvering to influence Donald Trump after the election. (NYT)
The big reason President-elect Donald Trump may refrain from seeking to fire Jay Powell: to avoid stock market turmoil. (Politico)
AARP, one of the most influential interest groups in Washington, hired Dr. Myechia Minter-Jordan, who has led several health nonprofits, as its next C.E.O. (AARP)
Best of the rest
23andMe, the embattled genetics-testing company, warned of “substantial doubt” that it can continue as a going concern without additional funding. (FT)
Apple and A24 have reportedly hired Lena Dunham to write the script for a Sam Bankman-Fried movie based on “Going Infinite,” Michael Lewis’s best seller. (Variety)
We’d like your feedback! Please email thoughts and suggestions to [email protected].
The post Mr. Musk Goes to Washington — With a $2 Trillion Agenda appeared first on New York Times.
