(Bloomberg) – Bridgewater Associate founder Ray Dalio warned of the US republican parliamentarians about the dangers of increased US deficits and urged them to cut the budget deficit to only 3% of GDP (Gross Domestic Product) or risk debt service costs to press government spending.
Dalio’s austerity message arrives while the House and Senate Republicans debate about the size of spending cuts to be combined with a giant tax cut later this year. The US budget deficit was 6.6% of GDP in 2024, according to the congressional Budget Office.
“There was a good understanding of the choices and the possibilities of managing this terrible situation over time,” Dalio said in a statement after the meeting. “I look forward to keeping in touch on these issues and having similar discussions with others so that there are realistic assessments of the questions and what can be done to deal with them.”
The House has drafted a $ 4.5 trillion taxpayer, along with $ 2 trillion in spending cuts over ten years, which would add about trillion to the deficit over the decade. Senate Republicans want to implement a budgetary trick to allow them to add more trillions to tax cuts without further spending cuts. Republican leaders of the House and Senate will work to resolve their differences in a meeting with Treasury Secretary Scott Bessent later on Tuesday.
Following Dalio’s meeting, House Budget President Jodey Arrington said he is determined to block any Senate Tax Plan that does not have enough spending cuts, saying that the plan would be dead when he arrived in the House. But Arrington also acknowledged that the House’s own budget project does not reach the goal of 3% of Dalio’s GDP.
“This is not something that takes place on a bill,” he said. “We need to start exercising the spending cut muscles.”
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Representative David Schweikert, an Arizona Republican, said that Dalio’s message means that Congress must approve spending cuts to pay his plans to make President Donald Trump’s 2017 tax cuts permanent, as well as any new tax cuts.
Dalio has been warning for some time that the growing burden of US debt threatens the country’s financial stability, an argument he advances in a next book: How Countries Go Broke: The Big Cycle.
“We are in a precarious moment when I call Big Cycle, where there is a confluence of great forces acting in a similar way as many times in history,” said Dalio in a statement released before the meeting.
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Dalio, 75, left the position of Co-CEO of Bridgewater in 2017 and retired from the Hedge Fund in 2022. He has a shareholders’ equity of more than $ 16 billion, occupying 132nd position at Bloomberg Billionaires Index.
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