Tesla CEO Elon Musk has described his foray into the world of politics as a “really fun side mission.” The world’s richest man, who has poured hundreds of millions of dollars into President Trump’s campaign, stormed into the capital and detonated administrative grenades with the Department of Government Effectiveness (DOGE). He quickly fell out of favor with the White House and was fired back to Texas.
The breakup between Trump and Musk was something almost everyone saw coming. That’s partly due to “a big, beautiful bill” in the Oval Office, the tech giant said said it undermined DOGE’s cost-cutting efforts. Musk is one of many business leaders concerned about U.S. spending habits. and national debt The total now exceeds $38 trillion.
Economists aren’t necessarily worried about national debt levels – countries actually need it to prop up bond markets and keep the global economy going – but they are worried about interest payments on the debt and how that affects the all-important debt-to-GDP ratio. The ratio indicates how quickly a country’s economy is growing and its ability to repay its debt or pay interest on borrowed money.
These payments are skyrocketing: Until October 2025maintaining debt costs $104 billion, accounting for 15% of total debt federal spending Debt interest payments total $1.22 trillion in fiscal 2026.
To rebalance the debt-to-GDP ratio and avoid higher borrowing rates, a country can reduce spending or stimulate the economy to rebalance the balance of payments. Musk seems to think the latter is the best option, ushering in a new era of growth through artificial intelligence.
“As long as civilization continues to advance, we will have large-scale artificial intelligence and robots,” Musk said. Nikhil Kamath’s Podcast In an episode that aired yesterday. “I think that’s pretty much the only way to solve the U.S. debt crisis.”
He added: “The current U.S. debt is ridiculously high, with interest payments on the debt exceeding the entire U.S. military budget (interest payments alone) and will continue to rise, at least in the short term.”
Musk may be referring to by 2024, committee for a responsible budget Borrowing costs exceeded defense and Medicaid expenses for the first time, the report said.
deflation problem
“I think the only real solution to the debt problem is artificial intelligence and robotics,” Musk continued, before warning that increased output of goods and services from transformative technologies could lead to “significant deflation.”
“If you have artificial intelligence and robotics and you have a sharp increase in the production of goods and services, then you could have deflation. That seems likely because you simply can’t increase the money supply as fast as you can increase the production of goods and services,” he explained.
Some economists agree with Musk, although perhaps to a less extreme degree. Ron Insana is a senior consultant at Schroders. write in column As early as 2023, “With every technological advance, workers are displaced and the cost of specific goods and services declines.” Likewise, in August of this year, Rick Rieder, senior managing director at BlackRock Writing AI can prove it Become “a force that drives down unit costs and raises output. In economic terms: deflationary growth. In investment terms: higher returns on equity, expanding margins and a re-rating of productivity leaders.”
That said, there is widespread belief that artificial intelligence may be deflationary (price increases slow down) instead of deflationary (a radical decrease in the price level).
Musk added that the productivity growth needed to offset the current 3% inflation rate has not yet been achieved, but is not far away. He added: “If you ask ‘How long will it take us to get there?’ I would say three years. In three years or less, my guess is that output of goods and services will exceed the rate of inflation … just like money supply growth. Maybe after three years, you’ll have deflation and then interest rates go to zero, and then the debt problem becomes smaller than it is now.”