Danny Moses, the investor who rose to fame after predicting the 2008 financial crisis, is once again raising red flags—this time over massive government spending cuts championed by Elon Musk and supported by President Donald Trump.
Moses believes the Department of Government Efficiency (DOGE), which Musk oversees, is slashing spending too aggressively. The department says it’s saved taxpayers $115 billion so far. But Moses warns those savings might come at a big cost.
“I think we are underestimating the impact to the economy of the cuts we’re making at the federal government, and what that might mean [for] the knock-on effects into the economy,” Moses said in an interview with CNBC.
He argued that the cuts go beyond eliminating waste and fraud. “It’s not just about the federal workers, and it’s not just about the expenses out of those programs. It’s about the contracts with the private sector,” he also told Fortune.
More than 24,000 federal employees have been fired, and another 75,000 took early resignation offers that extend pay and benefits through September.
Many of those workers might struggle to find jobs in the private sector, especially those in specialized roles.
Impact on Businesses and Confidence
Moses said the cuts are already affecting small businesses and contractors that depend on government projects. Consulting giant Accenture said it lost U.S. government contracts as a result of DOGE’s audit, which caused its stock to fall by 7.3%.
“Private contractors that are doing legitimate work services are now being forced to make decisions on their business,” Moses said.
He added that consumer confidence is already falling and could drop further, which would hurt spending—a major driver of the U.S. economy. “We’re going to start to hear, when first quarter earnings are reported, that there is a market slowdown potentially, and a hit to consumer confidence.”
Uncertainty Adds to the Problem
Trump’s tariff policy shifts have also shaken investor confidence. Companies are hesitating on future plans due to questions around trade, labor supply, and the job market.
Meanwhile, the Federal Reserve has kept interest rates steady, waiting to see how everything plays out. But Moses argues that the full impact of DOGE’s actions hasn’t been priced into the market yet. “I think we are being overly optimistic [as to] how this is going to play out.”
Although Musk’s companies like SpaceX continue to benefit from government funding—they’ve received over $38 billion through contracts, subsidies, and loans—Moses pointed out that many other businesses won’t be as lucky.
With so many moving parts, Moses warned that we could be heading into an “unvirtuous cycle” of layoffs, reduced spending, and declining business activity.
“The economy is indisputably made up of people and their wallets,” said Ritholtz Wealth Management’s Callie Cox.
“Disrupt our spending, and growth will sputter, no matter how worthy you think the cause of the disruption is.”
Moses’ message is this: the market may be celebrating budget cuts now, but it could be ignoring the long-term damage they might result in.