What is Elon Musk trying to do?
As the founder of Tesla and SpaceX pursues his quixotic effort to launch a new political party – the America Party – you have to wonder – does Musk really care about our government debt or is he very, very angry that President Donald Trump’s big, beautiful bill eliminated tax credits for Teslas and other electric vehicles? After all, ditching the tax breaks for EV helps cut spending. Musk can’t have it both ways.
After donating hundreds of millions of dollars to help elect Trump, being celebrated as the president’s right-hand man and spearheading the controversial effort to help cut government fraud and waste, Musk is likely irate – understandably– that he is not getting preferential treatment from the White House. Trump’s cavalier disregard of Musk’s concerns must have come as a hurtful shock.
As a result, Musk is lashing out – as he has done before – by insinuating that Trump had dealings with Jeffrey Epstein, for instance – determined to undermine the president and his agenda. Musk has given a lot to this administration. Tesla came under ruthless attack because Musk volunteered to guide DOGE; dealerships were firebombed and cars vandalized. Worse, customers walked away.
But launching a new political party is an especially risky way to go. Tesla’s stock sold off sharply on the news, ending up 40% off its 52-week high. The car company’s shareholders have already signaled they want CEO Musk to spend less time on politics and more on reviving Tesla’s mojo. While Musk has indicated that Tesla’s robotaxis are the wave of the future, and they may well be, the company today is not thriving.
The Wall Street Journal is reporting that Tesla is struggling in China, its second-largest market, losing market share to more advanced and cheaper EVs. In May, sales were down 30% from the year earlier, even as the sector overall grew 28%. In Europe, Tesla is suffering the same Trump-related reputational issues as here in the U.S. It is not a good time for Musk to become distracted.
It is also not a good idea for Trump to further inflame his former sidekick, as he recently did by calling Musk’s venture ‘ridiculous.’ Musk’s strategy for how he can gain significant political power (and sabotage Republicans) is clever and could damage Republicans. As he posted on X: ‘One way to execute on this would be to laser-focus on just 2 or 3 Senate seats and 8 to 10 House districts. Given the razor-thin legislative margins, that would be enough to serve as the deciding vote on contentious laws, ensuring that they serve the true will of the people.’
The SpaceX owner explained in yet another post, ‘The way we’re going to crack the uniparty system is by using a variant of how Epaminondas shattered the myth of Spartan invincibility at Leuctra: Extremely concentrated force at a precise location on the battlefield.’
Musk has the money to influence a few races and, on today’s closely contested political battlefield, a few seats could give the America Party considerable influence. It could also eliminate the slim GOP majority in the House and Senate.
But … to what end? If edging out some Republicans hands control of Congress over to Democrats, Musk will have enabled even greater deficits. Has he forgotten the spending spree undertaken by Democrats while President Joe Biden was in the Oval Office? Does he remember how they treated him? Because Musk does not employ union labor, the Biden White House shunned him, and launched investigations into his businesses. Surely, he cannot pine for those days.
Musk’s party may be new, but the idea is not. Throughout history candidates and policymakers have railed at the inadequacies of our two main political parties, but few third-party ventures have made it out of the starting gate.
The most successful such effort in modern times was billionaire H. Ross Perot’s 1995 creation of the Reform Party of the United States. Three years earlier, Perot had run for president as an Independent, outspending both major party candidates and winning 19% of the vote. His participation in the race drained votes from the GOP candidate and gave the win to President Bill Clinton, who captured 43% of the vote and defeated incumbent President George H. W. Bush.
But when Perot ran again in 1996, representing his Reform Party, he attracted only 6% of the vote. The Reform Party’s biggest victory was the election of Jesse Ventura, who became governor of Minnesota in 1998. Its most important legacy was helping to inspire Republican Rep. Newt Gingrich’s Contract with America, which reset the GOP agenda and focused on many of the issues raised by Perot, including excess government spending.
U.S. debt, as a percentage of GDP, peaked just after World War II at 106%, declined steadily until 1974, when it stood at 23%; between 1974 and 1992, it more than doubled to 47%, a trend that energized Perot’s battle against government deficits and also delivered Gingrich’s call for a balanced budget amendment.
Today, rising deficits and debt are again driving discontent with our political establishment. Under President Barack Obama, our debt to GDP rose from 77% to 103%, Under Donald Trump, debt stabilized but then jumped to 133% of GDP when Congress adopted bipartisan bills designed to keep COVID-19 shutdowns from destroying the economy. Unhappily, emergency spending measures that were meant to be temporary were kept in place and even expanded under Joe Biden. Debt as a percentage of GDP has since declined only modestly, and at the end of last year totaled 121%. Musk and Republican deficit hawks are correct that spending must come down.
President Trump needs to reach out to Musk and settle their differences. Musk has caved before when Trump offered an olive branch; he will do so again. Both men can help each other, but both can also do significant damage – to each other and to the country.