Elon Musk is President-elect Donald Trump’s new right hand man, and will soon begin trying to cut as much as $2 trillion from government spending.
The world’s richest man will head up the new Department of Government Efficiency (DOGE), with the aim of radically reducing government spending.
In his companies, including Tesla, SpaceX and X (formerly Twitter), Musk’s approach to cutting costs is as bold as it is unorthodox.
From firing top executives on day one to slashing janitorial services, the billionaire has honed a strategy that focuses on making deep cuts first and fixing problems later.
This frugality has drawn both praise for its results and criticism for its chaotic implementation.
Now, Musk is set to apply these tactics to an even bigger challenge: the federal government.
A Legacy of Ruthless Cost-Cutting
Musk’s penny-pinching habits date back to his early days as a tech entrepreneur.
When he founded Zip2 in 1995, he famously slept in the office to save on rent.
At SpaceX, he balked at paying $1 million for rocket fuel tanks, opting instead to build them in-house for a fraction of the cost.
This relentless focus on reducing expenses has become a defining feature of Musk’s leadership style.
One of Musk’s most notorious cost-cutting episodes came after his $44 billion purchase of Twitter in 2022.
Within weeks, he fired more than 75 percent of the staff, slashed non-labor expenses by hundreds of millions, and even shut down entire data centers against the advice of his employees.
While the drastic measures caused disruptions and multiple outages, Musk declared them a success, citing $100 million in annual savings.
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The Method: Cut First, Fix Later
Musk’s approach to cost-cutting is unconventional, often prioritizing immediate reductions over long-term planning. He has shown a willingness to go against industry norms and take risks that other CEOs might avoid.
For example:
- Mass Layoffs: At Tesla, Musk eliminated entire teams, including a unit responsible for building charging stations, only to rehire some employees weeks later when the cuts proved too deep.
- Vendor Pushback: Musk has a history of demanding significant price cuts from suppliers. At SpaceX, he refused to pay $100,000 for mechanical parts, opting instead to buy the designs and manufacture them internally for a fraction of the cost.
- Frugal Measures: From unplugging servers to avoid rent payments at X’s data center to cutting free cereal at Tesla’s offices, no expense is too small for Musk to scrutinize.
Former SpaceX employee Jim Cantrell, said:
“Musk doesn’t waste time on traditional processes.
He cuts everything to the bone and deals with the fallout later.”
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The Challenge of Government Efficiency
Now, Musk is taking his cost-cutting philosophy to the public sector.
President-elect Donald Trump recently appointed Musk and biotech entrepreneur Vivek Ramaswamy to lead the newly created Department of Government Efficiency.
The mandate is clear: slash federal spending by as much as $2 trillion by July 4, 2026.
Musk’s initial remarks have been characteristically blunt.
He has criticized the federal government’s “staggering” waste and inefficiency, even suggesting that government employees should provide weekly reports to justify their positions.
He has also floated the idea of reducing the number of federal agencies from over 400 to just 99.
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Can Musk’s Approach Work in Government?
While Musk’s tactics have delivered results at his private companies, applying them to the federal government will be a different challenge altogether.
The US budget is governed by a complex web of laws, regulations, and vested interests that are not easily circumvented.
Cutting into entitlement programs, for example, could trigger political backlash and legal challenges.
Lara Cohen, a former Twitter executive who was laid off after Musk’s takeover said:
“There’s a big difference between cutting costs at a tech company and cutting costs in a federal bureaucracy.
“The government doesn’t operate on the same timelines, and the stakes are much higher.”
Despite the skepticism, Musk’s success at Tesla and SpaceX has fueled his confidence.
Both companies faced bankruptcy risks at various points but emerged as industry leaders, thanks in part to Musk’s willingness to make deep cuts and pivot quickly.
The Potential Pitfalls
While Musk’s slash-first, fix-later approach has been effective in certain contexts, it has also led to notable missteps:
- Product Safety Risks: At Tesla, Musk’s decision to eliminate radar sensors from self-driving cars in favor of cheaper camera systems has been linked to several accidents and ongoing investigations by the National Highway Traffic Safety Administration (NHTSA).
- Disruptions at X: The drastic cuts at X led to a loss of institutional knowledge and multiple platform outages. Employees were left scrambling to fix issues that arose from hasty decisions, including the unplugging of a critical server during a data center shutdown.
- Vendor Relationships: Musk’s aggressive negotiations have strained relationships with suppliers. At SpaceX, for example, the company stopped buying from high-performance parts maker Moog after demanding an unsustainable price reduction.
Despite these issues, Musk has shown a willingness to backtrack when necessary.
He has rehired laid-off workers, reversed decisions that caused operational problems, and adjusted strategies based on feedback.
He said:
“I’m pretty good at improving efficiency.”
The Future of Federal Budget Cuts Under Musk
Musk’s appointment to DOGE has already sparked debate about whether his tactics can be successfully adapted to the public sector.
His promise to cut $2 trillion from the annual budget would require significant reductions across a wide range of programs, including defense, healthcare, and social services.
Supporters argue Musk’s outsider perspective and track record of streamlining operations make him an ideal candidate to tackle government waste.
Critics, however, warn that his aggressive cost-cutting could lead to unintended consequences, especially if he bypasses traditional checks and balances.
Eddie Perez, a former Twitter executive:
“Government waste is real, but slashing budgets without a clear plan can do more harm than good.
“The government isn’t a startup; it’s a massive, complex organization with far-reaching impacts.”
A Test of Musk’s Methods on a National Stage
As Musk prepares to bring his cost-cutting playbook to Washington, the stakes couldn’t be higher.
His approach has been successful in the tech industry, where speed and innovation are paramount, but it remains to be seen whether the same tactics can deliver results in the federal government.
If successful, Musk’s tenure at the Department of Government Efficiency could set a new standard for how the federal budget is managed, potentially reshaping the way government agencies operate.
If not, it could lead to significant disruptions and backlash, undermining the very efficiency he aims to achieve.
