Musk Mutiny is Large by Those in Charge

Inflation is still the driving story in recent economic news, as it has been for a couple of years now. The stock market continues to indicate investors are nervous about tariffs and their impact on inflation. Markets are nervous because consumers are nervous. Consumer confidence took a big dive in this week’s report—its sharpest drop in 3-1/2 years.

When you consider what caused the drop 3-1/2 years ago, that is pretty significant. That is when all of this searing inflation got started in the first place, due to the combination of lockdowns, tariffs the year before that badly broke supply chains, and massive stimulus money to consumers at the same time massive bailouts were being given to businesses. It was a time of great chaos, and consumers were truly frightened to the point of hoarding.

The Conference Board survey on Tuesday noted that "comments on the current administration and its policies dominated the responses." It followed on the heels of surveys last week showing steep declines in business and consumer sentiment in February. Tariffs on imports, which Trump has already imposed or is planning to, have been singled out as the major issue in almost every survey of households and businesses.

This, of course, is the start of the recessionary impact and inflation impact that I’ve predicted we will see from these tariffs because they are being implemented in an already overcharged inflationary environment where consumers and businesses are weary from the inflation we’ve already had to deal with. There is no room for tolerating more in many people’s minds—probably most people’s minds. They were hoping we were done with it. Trump’s tariff policies are hitting consumers like a brick to the forehead.

Another factor I laid out in my recent Deeper Dive and in another article or two:

Economists said unprecedented layoffs of federal government workers were also taking a toll on consumers' psyche, which they said posed a risk to spending, the main engine of the economy.

"Americans are increasingly pessimistic about the outlook. No Federal government has ever before threatened government workers with mass firings and it is starting to scare the daylights out of consumers," said Christopher Rupkey, chief economist at FWDBONDS. "The economy could well ground to a halt in the first quarter of the year as consumers stay home."

Scare tactics by the Left, you could argue; but I don’t think so. There is abundant reason to believe tariffs will be inflationary in this already heated inflationary environment where the Fed is now failing, and consumers get it.

The tightening of the government purse needs to happen, but the rapid and seemingly poorly thought-out manner in which it is happening is highly concerning to a lot of people. The pain of undoing years of debt spending would be harsh enough if done with precision, but undoing it with these big swings of a wrecking ball and reading that Congress is still taking us toward a budget with higher deficits is scarier still. Doing it almost instantly with what appears to be little knowledge of what you’re actually cutting, has already led to firing people that had to be immediately rehired the same day they were fired as the mistake of letting go of people running our nuclear waste and nuclear warheads program was discovered by surprise among the dimwits who fired them.

Schlock and awe

The surprises that I predicted we could expect due to the ham-fisted manner in which things are being done by a youth group with no experience in government and not a lot of wisdom from age is already happening. Evidence of trouble showed up broadly in this week’s Musk Mutiny, as I shall call it, where the people Trump, himself, has appointed to lead various government departments, are rebelling against Musk and telling their employees to ignore him.

On Monday, several cabinet members sent out memos telling their staff to ignore Musk’s demands that they send him a brief report on what they have accomplished with a Monday deadline. As a result of the countermand by other Musk cabinet members, vast numbers of staffers did not respond; so, Musk reissued his demand with a clear statement that they respond or be immediately fired. Most have not responded, and, again, Trump’s own appointed leaders told them not to. Trump, on the other hand, said everyone must do as Musk says.

Right off the cuff, one has to wonder about how intelligent and informed the firing process is, if the decisions on whom to terminate come down to a simple test of did they give Musk what he demanded, even when their new Trump-appointed leaders told them not to. That hardly seems like the way you make a wise decision about who are the smartest and most essential employees. It may well be that the smartest ones are smart enough to listen to their own boss and not Musk, who is not their boss. (Read on to see who we are talking about before forming a conclusion.)

One group of 21 staffers resigned, saying they would not participate in destroying US government systems and dismantling “critical government services” under what they described (as did I last week) the present haphazard approach. Musk fired back publicly that all of them were Obama appointees, and this is how you could expect the Deep State to rebel.

Maybe … but read on.

The 21 also pointed out the inexperience of those who are demanding deep access to secured data systems as I warned about:

The employees also warned that many of those enlisted by Musk to help him slash the size of the federal government under President Donald Trump’s administration were political ideologues who did not have the necessary skills or experience for the task ahead of them.

Courts, too, are starting to fire back:

The mass resignation of engineers, data scientists, designers and product managers is a temporary setback for Musk and the Republican president’s tech-driven purge of the federal workforce. It comes amid a flurry of court challenges that have sought to stall, stop or unwind their efforts to fire or coerce thousands of government workers out of jobs.

White House press secretary Karoline Leavitt responded,

“Anyone who thinks protests, lawsuits, and lawfare will deter President Trump must have been sleeping under a rock for the past several years,” Leavitt said.

That may be true, except that it is people like Marco Rubio who are telling their staffers to ignore Elon Musk on the basis, according to Rubio, that Musk is a Trump advisor and not their boss.

The day after Trump’s inauguration, the staffers wrote, they were called into a series of interviews that foreshadowed the secretive and disruptive work of Musk’s’ Department of Government Efficiency, or DOGE.

This is how inquisitions work.

According to the staffers, people wearing White House visitors’ badges, some of whom would not give their names, grilled the nonpartisan employees about their qualifications and politics. Some made statements that indicated they had a limited technical understanding. Many were young and seemed guided by ideology and fandom of Musk — not improving government technology.

No doubt these departments are full of Deep State people who can be expected to rebel, but when the Trump-appointed leadership starts immediately countering the Trump plan, it looks like the Keystone Cops, as I said a week or so ago we were starting to see. Either Musk is doing damage -or- those sharply countering him are wrong to be stopping him. Either way, it is the Don’s people against the Don’s people.

“These highly skilled civil servants [the 21] were working to modernize Social Security, veterans’ services, tax filing, health care, disaster relief, student aid, and other critical services,” the resignation letter states. “Their removal endangers millions of Americans who rely on these services every day. The sudden loss of their technology expertise makes critical systems and American’s data less safe.”

That could be alarmism by those who don’t want to be fired and don’t want to comply, or it could be a very real risk as it was with the terminated nuclear people.

What if Musk & Men break something badly due to the apparent ineptitude that has some of Trump’s cabinet members telling Musk to stand down? Something big, such as no one in America being able to get their Social Security checks? Or no veterans getting their benefits. Not for a few weeks, but for a few months because so many people who were running that part of the system got fired or resigned and are unwilling to come back because, like these 21 who resigned, they’d rather let the system go down than help Musk correct his missteps and continue on as he is doing, given how they feel their government has treated them?

Those who quit may be, as Musk claims, grandstanding Obama hires who are deeply part of the deep problem, except that it appears several other top Trump leaders are not comfortable with what they see Musk doing to the departments they were just appointed to lead.

What if Musk has ulterior motives for how he will use the vast stores of data being given to him to give his own businesses a leg up with China or other nations where he is doing business or an advantage over other competitors? What if some of his underlings see the advantage to making a billion-dollar private deal with China?

U.S. Digital Service veterans, who spoke on the condition of anonymity out of fear of reprisal, recalled experiencing a similar sort of shock about how government processes worked that Musk and his team are discovering. Over time, many developed an appreciation for why certain things in government had to be treated with more care than in the private sector.

“‘Move fast and break things’ may be acceptable to someone who owns a business and owns the risk. And if things don’t go well, the damage is compartmentalized. But when you break things in government, you’re breaking things that belong to people who didn’t sign up for that,” said Cordell Schachter, who until last month was the chief information officer at the U.S. Department of Transportation.

Again, one can argue this is just old Dems who are rebelling against being cut off at the knees, but why are so many Trump designees raising their own alarms if that is all that is happening? For example:

Despite his [Elon’s] claims, some members of Trump’s Cabinet told their employees not to respond, while other agencies said answering was optional.

“Given the inherently sensitive and classified nature of our work, I.C. employees should not respond to the OPM email,” Trump’s Director of National Intelligence Tulsi Gabbard wrote in an email to intelligence officials….

-and-

“The FBI, through the Office of the Director, is in charge of all of our review processes and will conduct reviews in accordance with FBI procedures,” FBI Director Kash Patel wrote to his employees, advising them to “pause” any responses….

-and-

The Department of Justice [Pam Bondi] and State Department [Marco Rubio] also told employees not to respond. Meanwhile, the Department of Agriculture and Department of Health and Human Services told employees that responding was voluntary….

Musk & Men could do massive damage to the entire US government with their wrecking-ball approach if they don’t know enough about what they are dealing with and if they are not all people of extremely high integrity and trustworthiness. I have heard no reason to think they are:

HHS also warned employees who did choose to respond to “assume that what you write will be read by malign foreign actors, and tailor your response accordingly,” according to an email obtained by NBC. Over the past few years, hackers from China and Russia have managed to access email accounts at the State Department and Department of Homeland Security….

Despite the chaos and security concerns, Trump endorsed the productivity email during a press conference on Monday.

Musk tried to claim that the information/responses he was demanding, which would be fed into an AI system to decide who gets fired and who does not, was “utterly trivial”

Which begs the question of why, legal or not, federal employment would depend on an “utterly trivial” and “inane” test.

No Fed rescue

The threat of inflation also means the Fed will be much more reluctant to come to the rescue if all this breaks bad, having fought an inflation battle that no one loved the Fed for foisting upon us in the first place. Lighting inflation back on fire to do it all over again is likely more than most of the populace will bear. So, that may be making concerns rockier among investors, too.

Fresh off the worst inflation shock in decades, Americans are once again bracing for higher prices….

The recent jump has been significant enough to warrant attention, stoking yet more uncertainty about an economic outlook already clouded by President Trump’s ever-evolving approach to trade, immigration, taxation and other policy areas. On Tuesday, a survey from the Conference Board showed that consumer confidence fell sharply in February and inflation expectations rose as Americans fretted about the surging price of eggs and the potential impact of tariffs.

The Fed has warned in the past that rising inflation expectations are self-fulfilling. People hoard now to get ahead of inflation, driving prices up more now. Merchants start raising prices more quickly anticipating more costs to rise for them and wanting to make sure they have some room to absorb the next price hike they see on the wholesale side.

“This is the kind of thing that can unnerve a policymaker,” Jonathan Pingle, who used to work at the Fed and is now chief economist at UBS, said about the overarching trend in inflation expectations. “We don’t want inflation expectations moving up so much that it makes the Fed’s job harder to get inflation back to 2 percent.”

Most economists see keeping inflation expectations in check as crucial to controlling inflation itself. That’s because beliefs about where prices are headed can become a self-fulfilling prophecy: If workers expect the cost of living to rise, they will demand raises to compensate; if businesses expect the cost of materials and labor to rise, they will increase their own prices in anticipation. That can make it much harder for the Fed to bring inflation to heel.

We are on the cusp of that forming up.

That’s what happened in the 1960s and 1970s: Years of high inflation led consumers and businesses to expect prices to keep rising rapidly. Only by raising interest rates to a punishing level and causing a severe recession was the Fed able to bring inflation fully back under control….

Now, though, there are hints that Americans are anticipating higher inflation in the years ahead. Persistent price pressures driven in part by a surge in the costs of eggs and energy-related expenses coupled with concerns about the impact of tariffs are among the factors to have pushed consumers’ expectations for inflation over the next 12 months to their highest level in more than a year, according to the long-running survey from the University of Michigan.

So, inflation is rising when inflation is already too hot, consumer sentiment is plunging, and the government is being fired left and right with little apparent knowledge about the people being terminated by a group of Boy Scouts with questionable security clearances against the will and better judgment of Trump’s’ top cabinet members. What could go wrong?

(Due to another long trip on Wednesday to the U.W. Medical Center, there will be no Wednesday issue, but things should be back to normal after that.)