New Delhi: SpaceX Founder, and American billionaire entrepreneur, Elon Musk lamented the extremely high national debt on the USA, calling it a financial emergency as the national debt has touched a record $36 trillion dollar. In a recent rally, Musk also raised concerns about the potential impact of high national debt on the US economy.
Musk was participating in a rally to support Republican Party Presidential candidate and former US President Donald Trump. Later in a social media post, Elon Musk reiterated his concerns about the condition of the US economy and the high national debt that is estimated at around 35.82 trillion US dollars.
In a post on X, Musk said, "Just the interest payments on the debt are 23 per cent of all federal tax revenue," pointing out that interest payments alone now surpass the Defense Department’s $1 trillion annual budget.
In the rally, Musk described the US economic situation as a "financial emergency", later he reiterated his concerns on the social media platform.
What is the US National Debt?
The US national debt is the outstanding amount of loans that the US Federal government has accumulated over the nation's history. According to the US Treasury, at present the total national US debt is 35.82 US Dollars and the treasury updates the US national debt figures on a daily basis.
In the United States of America, the national debt is composed of several types of debt similar to an individual whose debt may consist of a mortgage, car loan, and credit card expenses, among other things.
These different types of debt include non-marketable or marketable securities and whether it is debt held by the public or debt held by the government itself (known as intra-governmental debt).
Since when the US Govt is under debt?
As per the data available with the US Treasury Department, the US government has carried debt since its inception. For example, debts incurred during the American Revolutionary War amounted to $75 million, namely borrowed from domestic investors and the French Government for war supplies.
The US Treasury says that the national debt enables the federal government to pay for important programs and services for the American public.
Why does the US Govt need to borrow money?
According to the US Treasury, the federal government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone.
There could be several reasons for it. For example, decreases in federal revenue are largely due to either a decrease in tax rates or individuals or corporations making less money and as a result, the US Federal Government’s expenditure exceeds its revenue collections.
The national debt in the USA enables the federal government to pay for important programs and services even if it does not have funds immediately available, often due to a decrease in revenue.
If any government is spending beyond its revenue collection in a financial year then it needs to borrow money to meet the shortfall between its expenditure in that particular year and its revenue collection which becomes deficit and that year’s budget becomes a deficit budget.
If this pattern of spending beyond revenue collection continues for several years then a large amount of debt is accumulated which becomes difficult to service and large amounts of revenue collection goes into interest payment alone.
For example, Elon Musk claimed that 23 per cent of total US federal taxes are being used in interest payments alone.
This situation is also similar to the Indian budget where nearly one-fourth of the total budget goes into interest payment alone.
More importantly, in India, interest payment alone accounts for over 45 per cent of the net revenue of the Union government. As per the budget documents, the Union government’s total revenue collection (net to the Centre) is estimated to be over Rs 25.83 lakh crores in the current financial year.
On the other hand, the Centre is expected to pay nearly Rs 11.63 lakh crore in the current fiscal in interest payment alone. It means a staggering 45 per cent of the total revenue collection (net to the Centre) of the Union government for the current financial year.
Is there a financial emergency in the USA?
Billionaire investor Elon Musk described the situation of high national debt (36 trillion US Dollars) as a financial emergency but this term emergency or financial emergency does not exist in the US Constitution, unlike the Indian Constitution where emergency provisions are included in Part XVIII.
In the case of the USA, the US Congress enacted a specific law in 1976 – the National Emergencies Act - to deal with emergency situations due to the absence of any emergency provision in the US Constitution.
However, unlike the US Constitution, the Indian Constitution not only has emergency provisions but it also defines and deals with financial emergencies separately.
Under Article 352, if the President is satisfied that a grave situation exists that threatens the security of India or any part of it, he may proclaim an emergency for the entire country or a part of the country.
Similarly, under Article 360, If the President is satisfied that a situation exists which threatens the financial stability or credit of India or any part of the country then he may proclaim a financial emergency.
