Musk and Trump: Ethical concerns and conflicts of interest

A lot has been written about the budding friendship between President-elect Donald Trump and the world's richest man, Elon Musk.

What seemed like a strange pairing has turned into a job opportunity for Musk and, in the past week, the two have been seen together in Palm Beach, Florida, ringside at an Ultimate Fighting Championship match in New York and eating McDonald's on a jet.

Before the election, Trump announced he would put the South Africa-born Tesla CEO in charge of a government efficiency commission. Last week, Trump made it more concrete and confirmed the new agency will be called the Department of Government Efficiency, or DOGE.

What is Musk's new job?

Since it will be a new agency, no one really knows what it will do and what authority it will have. In the end, it will likely be a small advisory group that operates outside of the government without any real regulatory authority. What it is likely to have is influence and a loud mouthpiece in the form of Musk.

The Department of Government Efficiency aims to slash the US federal budget — which totals roughly $6.8 trillion (€6.4 trillion) in fiscal 2024 — by $2 trillion in an effort to permanently downsize the federal government, cutting bureaucracy, regulations and wasteful expenditures.

Though Musk is known for cutting costs at his own businesses, reducing federal spending will be a big challenge. The project is supposed to wrap up by July 2026.

Donald Moynihan, a professor of public policy at the Ford School of Public Policy at the University of Michigan, thinks Musk has "no real experience with government beyond suing it or spreading conspiracy theories about it." He told DW that the federal government needs to be modernized, "but the only thing Musk has talked about is cutting costs and punishing people he disagrees with. His basic math does not add up."

In 2023, a third of the then $6.1 trillion budget went to social security and Medicare — programs Trump has said he would not touch. Overall, only $1.7 trillion was discretionary spending that lawmakers control through appropriation acts, according to the nonpartisan Congressional Budget Office.

SpaceX and a billion-dollar conflict of interest

Musk already has much on his plate running six companies like Tesla, SpaceX and social media platform X. Such a new position is rife with conflicts of interest, especially since a number of his companies receive government subsidies or direct federal contracts, making them government contractors. They also develop and use innovations and technology that have pushed regulatory boundaries.

"I cannot think of another instance of someone with such clear and obvious conflicts with a public official offering advice on the budget, structure and removal of employees that directly affect his businesses," said Moynihan. "It is cartoonishly corrupt." 

Over the years, SpaceX has received billions in contracts from NASA and the Department of Defense to launch satellites, service the International Space Station or use its Starlink satellite communication network.

Over the past decade, these SpaceX contracts came in at more than $15 billion, according to numbers crunched by The New York Times. Last year alone, Musk's companies signed 100 different contracts with 17 federal agencies totaling $3 billion.

Some other conflicts of interest

Musk has a record of very public altercations with federal departments and other regulators. An investigation by US financial market regulator, the Securities and Exchange Commission (SEC), led to charges of securities fraud in 2018. Stepping down as Tesla's chairman was part of the later settlement.

Tesla has received huge tax breaks and other incentives from various states. On the federal level, it has a small government contract to supply some vehicles. But Musk could convince Trump to keep tax credits for electric vehicles (EVs) in place to keep up sales, or increase tariffs on competitors that make vehicles in Mexico or anywhere else.

He could influence regulators who want to look closer at Tesla's self-driving push. He could also convince those in power to keep emission rules in place that allow Tesla to sell credits worth billions of dollars to other automakers that do not produce enough EVs.

Musk's other companies, xAI, The Boring Co, Neuralink and X, have no government contracts. Still, they have a lot to gain from being close to Trump. This closeness could propel artificial intelligence, influence other regulations or help block social media rival TikTok.

Could the Trump-Musk friendship end?

Trump is not the first president who has wanted to cut spending or has called in efficiency experts. What is different this time is who the president-elect is calling on and the possibilities of personal gain.

So far, Trump has been careful to say that Musk would not be an official part of the executive branch of government and only "provide advice and guidance from outside of government, and will partner with the White House and Office of Management & Budget to drive large scale structural reform."

This is important, because federal law prohibits people from taking part in government matters where they have a financial interest.

The most unpredictable part of this whole project is Trump himself. He has a long track record of picking favorites and then suddenly dropping them. Dropping the world's richest man could be an irresistible ego boost to Trump one day.

They are two big personalities who love the limelight, but Trump "cannot stand to be upstaged," said Moynihan.

Keeping this unlikely relationship going could be a challenge equal to cutting trillions.

"In some ways, assigning Musk to an advisory committee might be seen as a demotion, since it is not clear if it will get anything done," he said.

Edited by: Uwe Hessler