Trump Treasury Contender Pledges to Work With Musk to Slash Spending
Investor John Paulson, a Trump ally, says he would also work on trade and energy if he became Treasury secretary
Billionaire investor John Paulson says he would work with Tesla CEO Elon Musk to enact massive federal spending cuts if Paulson were to become Treasury secretary in a second Trump administration.
Paulson, an ally of the former president, said in an interview his top priority would be extending Donald Trump’s expiring 2017 tax cuts, followed by “working with Musk to reduce federal spending,” particularly by getting rid of the subsidies for green energy in the Inflation Reduction Act, which he referred to as the Green New Deal.
“All of these tax subsidies for solar, for wind, inefficient, uneconomic energy sources,” said Paulson. “Eliminate that. That brings down spending.”
It is relatively unusual for an ally of a presidential candidate to talk openly about the role he or she might play in a future administration. Treasury secretary is one of the most prominent positions in the government, interfacing with Wall Street, business leaders and foreign heads of state.
Paulson, 68 years old, has been close to the former president for over a decade. He is one of several people Trump and his allies have considered for Treasury secretary, according to people familiar with the matter.
The Treasury secretary will likely be point person on several key Trump initiatives, including extension of the Tax Cuts and Jobs Act, portions of which expire at the end of 2025, and a broad range of new tax cuts. Financial markets worry that the resulting deficits could put upward pressure on interest rates.
Paulson’s views carry weight due to his closeness to the former president and yearslong involvement in GOP politics. He has donated to Republican political operations such as the Senate Leadership Fund. He is a trustee of the Manhattan Institute, a conservative-leaning think tank whose chairman is fellow Wall Street executive Paul Singer.
In the interview, Paulson indicated that he saw his potential remit extending to energy and trade. He said he would work with Trump to “encourage energy production so we become an energy dominant producer” and enact “strategic tariffs.”
Economists have predicted that if Trump carried through with plans to impose 60% tariffs on imports from China and 10% to 20% on all other imports, inflation would jump and growth suffer. It is unclear whether Trump would actually enact tariffs of that magnitude or is using them as a negotiating tool. In the interview, Paulson suggested the tariff threats are in part a tactic to elicit concessions, such as persuading Deere & Co. to keep production in the U.S.
Trump has promised to make Musk the head of a new “government efficiency commission” if he wins in November. The Musk-led group would advise Trump where to make cuts in federal spending. Paulson said he hasn’t spoken to Musk about teaming up.
Musk said this week he could cut at least $2 trillion from the federal budget, but didn’t say how. The U.S. government spent $6.75 trillion in the last fiscal year, according to the Congressional Budget Office, over half of which went to Social Security and Medicare—which Trump has promised not to touch—defense, and interest on the debt. Trump had promised to cut spending in his first term but instead presided over significant increases, even before the pandemic.
The Inflation Reduction Act, which President Biden signed into law in 2022, includes extensive tax credits for electric-vehicle purchases, renewable power, carbon capture and storage, hydrogen and nuclear energy. It paid for those credits by increasing tax collections via beefed-up Internal Revenue Service enforcement and a minimum tax on large corporations. Trump said at the Economic Club of New York in September he would “rescind all unspent funds under the misnamed Inflation Reduction Act.” His campaign hasn’t been specific about what that would mean.
While the 2022 law’s tax credits have helped Tesla, Musk said during his company’s second-quarter earnings call that a rollback of the incentives would only “slightly” hurt the company, but it would also be “devastating for our competitors” and in the “long term, it probably actually helps” Tesla.
Musk has been a crucial Trump supporter, campaigning with him, contributing nearly $120 million to a pro-Trump super political-action committee and offering $1 million to voters who sign a pledge to uphold the rights to free speech and bear arms.
Musk didn’t respond to a request for comment.
Repealing the clean-energy tax breaks could yield about $921 billion over a decade, according to the Tax Foundation. But Trump couldn’t do that unilaterally; repealing the law or any of its tax credits would require an act of Congress.
The next administration could revise some Treasury rules that increased usage of the law’s tax credits, for example allowing some leased electric vehicles to qualify for larger tax breaks than if purchased outright.
But in some cases, such as the clean-hydrogen tax credit, industry groups are pushing the administration for looser rules to expand eligibility.
Beyond scaling back the consumer tax credits for electric vehicles, any changes could prove challenging to get through even a Republican-led Congress.
That’s because many projects funded by the Inflation Reduction Act are spurring jobs and investment in the rural Republican districts that are most conducive to wind and solar energy or large manufacturing sites.
Republicans also tend to favor tax breaks for carbon capture that the oil-and-gas industry backs. Last year, when House Republicans tried to repeal the tax breaks, Midwestern lawmakers insisted that incentives for biofuels remain in place.
Paulson is one of several names under consideration for Treasury secretary. Others include Scott Bessent, a founder of Key Square Group and another Trump ally on Wall Street, former trade ambassador Robert Lighthizer, and former Securities and Exchange Commission Chairman Jay Clayton.
That Paulson is even a contender represents a striking ascension for the former hedge-fund manager who burst into prominence by reaping an estimated $3 billion betting against subprime mortgages during the 2007-09 financial crisis.
Trump first met Paulson as part of a group of investors that sold the Doral Golf Course to Trump. In April, he hosted Trump and dozens of donors at his Florida mansion for a fundraiser that drew in just over $50 million for Trump’s campaign, the Republican National Committee and dozens of state parties.
Paulson could face questions about his background during Senate confirmation. Some Democrats, including Sen. Elizabeth Warren (D., Mass.), could home in on his Wall Street ties and the money he made off the housing crisis.
“I wouldn’t expect a Senate fight,” Paulson said of a potential nomination. “I have good relationships with senators on both sides of the aisle. The review process is a rigorous process. That’s a hurdle that would have to be crossed before we get to the Senate. I think once we cross that review process, I wouldn’t expect opposition.”
Trump’s Treasury chief in his first term, Steven Mnuchin, was narrowly confirmed by the Senate in a 53-47 vote.