Musk Clashed With Trump Cabinet Over Cuts

Musk at a Cabinet meeting last week
Reuters
By Yuval Rosenberg and Michael Rainey

Happy Friday! Congress has just one week left to avert a government shutdown. House Speaker Mike Johnson says he will bring up a "clean" bill next week to fund the government through September, but he may have to pass it with only Republican votes because House Democrats have slammed the GOP plan. One Republican, Rep. Thomas Massie, has already come out against Johnson's spending patch, too, meaning that Johnson can't afford to lose another member of his conference. And even if the House can pass the bill, it's not clear whether Senate Democrats will help the resolution clear the upper chamber. So come back next week for all the Capitol drama. Until then, here's what's going on.

Musk Clashed With Trump Cabinet Members Over Cuts: Report

President Donald Trump's comments yesterday empowering his Cabinet members to take charge of staffing and firing decisions at their departments - and seeming to limit the power of Elon Musk and his DOGE team, while calling for more surgical job cuts - came after an "explosive" meeting in which some officials openly clashed with Musk, The New York Times reports.

"Cabinet officials almost uniformly like the concept of what Mr. Musk set out to do — reducing waste, fraud and abuse in government — but have been frustrated by the chain saw approach to upending the government and the lack of consistent coordination," write Jonathan Swan and Maggie Haberman of the Times.

Secretary of State Marco Rubio and Transportation Secretary Sean Duffy both reportedly faced off with Musk over his push for more firings. Rubio "had been privately furious" with Musk for weeks, they write, and "got his grievances off his chest" at the meeting. The transportation secretary reportedly claimed Musk's team was trying to lay off air traffic controllers even as Duffy was trying to deal with plane crashes.

Trump reportedly praised Musk and his Cabinet secretaries but also explicitly put the secretaries in charge of the staffing reduction efforts on their turf. The White House called the meeting "great and productive" and said that everyone on Trump team is working together to make the government more efficient. Trump told media members in the Oval Office on Friday that there is no clash between Musk and Rubio, contrary to the detailed Times report.

The bottom line: Politicos love the juicy details and blow-by-blow exposing the intrapersonal dynamics and simmering tensions at the top levels of the Trump administration. But while it's noteworthy that Trump chose to rein in Musk and do so publicly, it remains to be seen just how much of a turning point Thursday's meeting might be. Trump said yesterday he will hold similar Cabinet meetings every two weeks.

Treasury Secretary Warns Economy Needs a 'Detox'

The labor market is holding up at the start of 2025, but the Trump administration is warning there could be trouble ahead, at least in the short run.

U.S. payrolls grew by 151,000 jobs in February and the unemployment rate moved up a tenth of a percentage point to 4.1%, the Labor Department announced Friday. The economy has now added jobs for 50 consecutive months, but both numbers were modestly worse than expected, as analysts had been looking for job growth of about 160,000 and an unemployment rate of 4.0%, unchanged from the month before. Growth was stronger in February than it was in January, easing concerns that the labor market has entered a downturn.

RSM Chief Economist Joseph Brusuelas said the report indicates that the U.S. continues to be at full employment, and the underlying trend looks quite healthy. "The American economy is resilient and is strong enough to absorb the body blows that are coming from higher trade taxes and slower government spending and hiring," he wrote Friday.

Painful "detox" ahead? Despite the solid jobs report, some economists are worried that the labor market may have shifted to a lower gear, and some fear it has reached an inflection point driven by the new Trump administration but not yet captured by the monthly reports.

"There were fears that today's jobs report would reveal some deeply unsettling news around the health of the labor market," Seema Shah, chief global strategist at Principal Asset Management, said in a statement, per NBC News. "Yet, while the worst fears were not met, the report does confirm that the labor market is cooling."

The February data includes 10,000 layoffs by the federal government - larger than usual, but much smaller than the reductions in staffing the Trump administration says it is aiming for in the weeks and months ahead, and the federal job losses were more than made up for by 21,000 jobs gained at the state and local level. Moving forward, however, the federal government layoff number is expected to rise sharply.

Economists worry that hundreds of thousands of layoffs could weigh heavily on the labor market and the broader economy, and the negative pressure could be amplified by other parts of President Trump's agenda.

"We are likely to see some headwinds as we move through the year," Wells Fargo economist Sarah House said earlier this week. "It's not just tariffs we're contending with but also slower immigration. That's going to affect labor force growth, and then we now have pretty aggressive efforts to curtail government spending."

Treasury Secretary Scott Bessent did little to ease those concerns Friday. "Could we be seeing that this economy that we inherited starting to roll a bit? Sure," he told CNBC. "And look, there's going to be a natural adjustment as we move away from public spending to private spending."

Bessent said the Trump agenda is forcing a fundamental change in the role of federal spending in the economy. "The market and the economy have just become hooked," he said. "We've become addicted to this government spending, and there's going to be a detox period."

Part of the detox will involve pushing back against the economic inequality that has defined the U.S. for years, Bessent said. He blamed the Biden administration for creating "an unstable equilibrium" in which the top 10% of income earners accounted for 40% to 50% of consumption while "the bottom 50% of working Americans have gotten killed."

The bottom line: The labor market is still chugging long, but enormous challenges lie ahead as the Trump administration attempts to use mass public employee layoffs, high tariffs and more tax cuts, largely benefitting the rich, as a means of reshaping the U.S. economy.

Quote of the Day

"The new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy. While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their likely effects remains high. As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry, and are well positioned to wait for greater clarity."

– Federal Reserve Chairman Jerome Powell, in a speech at the University of Chicago Booth School of Business on Friday, discussing the balancing act the central bank faces as it tries to assess the effects of Trump administration policies and they uncertainty they have created.

The Fed has paused a rate-cutting campaign after three reductions in late 2024. Powell said that the Fed could "maintain policy restraint for longer" if the economy stays strong but inflation fails to move lower or cut rates further if the job market weakens or inflation plunges faster than expected.

A Challenge for Republicans Seeking Cuts: Americans Like Medicaid

As Republican lawmakers consider making changes or cuts to Medicaid as part of their push to offset the cost of their tax plans, a new poll from healthcare foundation KFF highlights a simple truth they'll have to contend with: Americans, including Trump supporters, like the program and overwhelmingly want to see funding for it increase or stay about the same.

Just 17% of adults surveyed said they want to see Medicaid funding decreased compared to 42% who want an increase and 40% who want spending to stay around current levels. "Majorities of Democrats, Republicans, independents, Trump voters, and adults living in rural areas say Medicaid funding should either increase or be kept about the same, though about one-third of Republicans want spending to decrease," KFF notes. "The public's staunch opposition to Medicaid cuts likely reflects the fact that most people have a connection to the program. About half (53%) of adults, including a similar share of those living in rural areas, say they or a family member has received help from Medicaid at some point."

Nearly all those surveyed, 97%, say that Medicaid is at least somewhat important to their local community, and 73% call it very important - perhaps unsurprising given that Medicaid covers about one in five people in the United States.

Republicans including House Speaker Mike Johnson insist that they are not going to cut Medicaid benefits for deserving recipients and are focused on rooting out waste, fraud and abuse and making the program more efficient. Republicans have also discussed implementing work requirements and undoing or cutting back the Affordable Care Act's expansion of the program, including enhanced payment rates to states.

KFF's poll finds that 62% of Americans support the idea of work requirements and a similar percentage oppose eliminating a 90% federal matching rate created under the ACA.

"However, public opinion on both proposals is malleable when people hear arguments or are given more information," KFF's team says. "Overall support for work requirements drops from 62% to 32% when those who initially support the proposal hear that most people on Medicaid are already working and many would risk losing coverage because of the burden of proving eligibility through paperwork. Overall support also drops to 40% after supporters hear that there would be an increase in state administrative costs to oversee the work requirement. On the other hand, when opponents of work requirements hear the argument made by supporters that imposing such requirements could allow Medicaid to be reserved for groups like the elderly, people with disabilities, and low-income children, support for work requirements increases from 62% to 77%."

The poll was of 1,322 U.S. adults was conducted from February 18 to 25. The margin of error for the full group is plus or minus 3 percentage points.

The bottom line: Republicans insist that they are only targeting "waste, fraud and abuse," but that alone is unlikely to generate the cost savings they want to be able to enact t heir full tax-cut agenda. And as the poll suggests, proposing deeper cuts to Medicaid would carry extreme political risk.

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