Billionaire Investor Ray Dalio Backs Trump's Interest Rate Cut, Proposes '3% Solution' To Tackle $36 Trillion America's Debt Crisis

Ray Dalio, founder of Bridgewater Associates, called for urgent measures to address the mounting U.S. federal debt crisis during an interview on The All-In Podcast, emphasizing the need to reduce the deficit to 3% of gross domestic product from its current level of nearly 7%.

What Happened: The U.S. federal debt has surged to $36.4 trillion against a GDP of $29.1 trillion, resulting in a debt-to-GDP ratio of 125%. Since the pandemic began in 2020, federal debt has increased by 80% while GDP grew by only 38%.

“Think of it as going to your doctor and getting your test results,” Dalio said, using a medical analogy to describe his risk assessment framework. While he sees no immediate risk to U.S. government debt, his long-term risk gauge stands at its maximum level, indicating severe structural concerns.

The Congressional Budget Office projects annual budget deficits to average 6.1% of GDP through 2035, significantly higher than the 3.8% average over the past 50 years. The national debt is expected to rise by nearly $24 trillion over the next decade.

Dalio’s proposed “3% solution” calls for immediate deficit reduction while the economy remains strong. “The sooner you do it, the less you have to cut,” he said.

The solution involves a combination of spending cuts, tax adjustments, and careful management of interest rates. Dalio noted that a 100-basis-point reduction in interest rates—aligning with President Donald Trump‘s proposal—could significantly ease the burden. He agreed, saying, ‘He’s right,’ but stressed that this must be accompanied by spending cuts to be effective.

“With oil prices going down, I’ll demand that interest rates drop immediately, and likewise they should be dropping all over the world,” Trump told the World Economic Forum on Thursday in Davos, Switzerland, Reuters reported on Friday.

See Also: Trump Slams Fed’s ‘Terrible Job’ On Bank Regulation After Rate Hold, Vows To ‘Unleash Lending For All American People’

Why It Matters: These concerns align with recent warnings from Goldman Sachs Group Inc. CEO David Solomon, who highlighted at a National Retail Federation conference that mounting government debt requires immediate attention, pointing to elevated Treasury yields as a market signal of concern over federal borrowing.

Dalio previously said that the core issue isn’t the deficit itself but rather “fragmented politics” hampering necessary reforms. He urged policymakers to unite behind the 3% target, suggesting that successful implementation could mirror the fiscal improvements achieved between 1991 and 1997.

Read Next:

• Mohamed El-Erian Says Fed Wants To ‘Fly Under The Radar,’ Expects No Rate Cut Until June At The Earliest

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.