Billionaire investor and founder of Bridgewater Associates, Ray Dalio, has sounded the alarm on the U.S. fiscal trajectory following the passage of the ‘One Big, Beautiful Bill Act.’
What Happened: In a post on X, Dalio projected that the new budget, with annual spending of $7 trillion against $5 trillion in revenue, will balloon the national debt to a staggering $425,000 per American family over the next decade.
Currently at $230,000 per family, this represents a debt-to-GDP ratio climbing from 100% to 130%, with interest payments expected to surge from $1 trillion to $2 trillion annually.
According to Dalio, this “will lead to either a big squeezing out (and cutting off) of spending and/or unimaginable tax increases, or a lot of printing and devaluing of money and pushing interest rates to unattractively low levels.”
In the three possibilities mentioned by Dalio, one hinted at the economic theory of Ricardian equivalence at play, suggesting that rational individuals would anticipate that a debt-financed tax cut would lead to future tax increases to pay off the debt.
He explains that this printing and devaluing is not good for those holding bonds as a store of wealth.
Adding, “What's bad for bonds and U.S. credit markets is bad for everyone because the U.S. Treasury market is the backbone of all capital markets, which are the backbones of our economic and social conditions.”
Dalio warns that without corrective action—reducing the deficit from 7% to 3% of GDP through spending cuts, tax hikes, or interest rate adjustments—severe economic disruptions loom.
“Unless this path is soon rectified to bring the budget deficit from roughly 7% of GDP to about 3% by making adjustments to spending, taxes, and interest rates, big, painful disruptions will likely occur,” Dalio warns.
Why It Matters: Adding to Dalio’s post, economist Peter Schiff said that “The bill will add much more than that to the national debt. The economy will grow more slowly, tax collections will be lower, and spending and interest rates will be higher than what is built into the rosy assumptions.”
Meanwhile, Peter Brandt, the CEO of Factor LLC, quoted Dalio’s post and said, “America is heading down the tubes. Perhaps what will be reconstructed after the national bankruptcy will be kinder to Z and M generations.”
Price Action: On the truncated trading day of July 3rd, the SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, scaled fresh records and ended higher. The SPY was up 0.79% at $625.34, while the QQQ advanced 0.98% to $556.22, according to Benzinga Pro data.
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