Bridgewater founder Ray Dalio on Wednesday warned that “shocking developments” could come from growing U.S. debt.
“Some people think, ‘oh we’ll handle it because we’ve handled it so far,'” he said. “I don’t think they understand the mechanics of debt. There’s a supply-demand problem, so that they have to sell a quantity of debt that the world is not going to want to buy and that’s a set of circumstances that is imminent.”
Bridgewater is a highly successful American investment management firm.
Asked if the U.S. debt problem could lead to a period of austerity, Dalio said the U.S. could restructure its debt, pressure other countries to buy the debt, or cut off payments to creditor nations for political reasons.
“That’s a big deal,” he said. “You are going to see shocking developments in terms of how that’s going to be dealt with – things that may not have happened in our lifetimes, but things that have happened throughout history.”
Dalio’s warning during a televised media event in Singapore comes just weeks after President Donald Trump promised to balance the federal budget.
Trump said in his address to a joint session of Congress that he wanted a balanced budget, which would be a historic accomplishment.
“In the near future, I want to do what has not been done in 24 years: Balance the federal budget,” he said. “We are going to balance it.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said Trump’s plan to balance the federal budget was “a claim at utter and complete odds with fiscal reality and the policies he is promising.”
The U.S. deficit needs to fall from a projected level of 7.2% of gross domestic product to about 3% of GDP, Dalio said. Gross domestic product is a measurement of economic output.
MacGuineas and U.S. Treasury Secretary Scott Bessent has made similar suggestions on the 3% figure Dalio mentioned.
MacGuineas said a more reasonable goal – proposed by Bessent – would bring the deficit down to 3% of GDP. Doing that would require deep cuts.
“This requires $7.5 trillion of savings over ten years, and while aggressive, it is doable if Congress starts immediately and scours all parts of the budget, including both spending and taxes,” MacGuineas said.
Republicans have all but ruled out tax increases other than tariffs. The House has proposed a $4.5 trillion bill that extends the tax cuts brokered during Trump’s first term in office. The House proposal would allow $2.8 trillion in deficit increases through 2034.
In the past 50 years, the federal government has ended with a fiscal year-end budget surplus four times, most recently in 2001. Congress has run a deficit every year since then.
U.S. interest spending is expected to increase in the coming years. In March 2024, the Congressional Budget Office projected “interest costs more than double in relation to GDP between 2024 and 2054, driven by rising interest rates and growing debt.”
The CBO’s most recent report estimated that public debt will rise to $52 trillion by 2035. It is currently $36.6 trillion. That 2035 estimate is about 118% of U.S. gross domestic product, a measure of economic output. By 2029, debt as a percentage of GDP will exceed the prior record set just after World War II in 1946.
