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Yahoo
23-05-2025
- Business
- Yahoo
Ray Dalio says politicians addressing U.S. budget deficit are like passengers ‘on a boat that's headed for rocks'
Ray Dalio said Republicans and Democrats agree that the budget deficit needs to be addressed, but their political squabbling prevents a solution. Any bipartisan effort to reduce the budget wouldn't happen until after the 2026 midterms, at which point a commission would be put together to tackle the problem, Dalio predicted. Lawmakers won't address the deficit until after the midterm elections in November 2026, according to Ray Dalio. The legendary investor said on Thursday the problem of lowering America's growing budget deficit would be put off until after those elections, citing contacts in Washington, D.C. Early that morning, the Republican-led House passed a new budget bill that critics say will expand the country's budget deficit at a time when government officials should be focused on shrinking it. According to Dalio, Democrats and Republicans both agree on the gravity on the issues, but their political rivalry prevents them from finding a workable solution, he said. 'It's like being on a boat that's headed for rocks, and they agree that they should turn, but they can't agree on how to turn,' Dalio said during an event for the Paley Media Council in New York. That's why, he said, no serious attempts to reduce the deficit will happen until the 2026 midterms. 'So I'm told the way that this is going to go down is that we'll pass this [budget bill],' Dalio said . 'There won't be any important changes until after the 2026 elections.' After those midterms elections lawmakers plan to convene a special committee to address the deficit, according to Dalio. 'After 2026 the aspiration is to try to put together a bipartisan commission to try to be able to deal with this,' Dalio said. 'So there's no prospect of this being materially dealt with until after the 2026 election.' Dalio added that he was lukewarm on the outcomes of such a group, despite calling the need for 'bipartisanship and getting over political hurdles' the 'essence of the challenge of our country.' When asked about the prospects of finding a solution, Dalio said: 'I cannot be optimistic about it.' Thursday's budget bill passed the House of Representatives in a 215 to 214 vote, with no Democrats in favor of the legislation. Two Republican representatives—Thomas Massie of Kentucky and Warren Davidson of Ohio—joined the Democratic caucus in voting against the bill. In the past, Dalio has advocated for reducing the budget deficit with what he calls the 3% solution. The proposal would aim to lower the U.S. national debt to 3% of GDP from its current levels between 6.5% and 7%. The current bill puts that target even further out of reach, according to a report from the nonpartisan Committee for a Responsible Federal Budget. This story was originally featured on
CNBC
22-05-2025
- Business
- CNBC
Ray Dalio says to fear the bond market as deficit becomes critical
Billionaire investor Ray Dalio on Thursday sounded another alarm on soaring U.S. debt and deficits, saying it should make investors fearful of the government bond market. "I think we should be afraid of the bond market," Dalio said at an event for the Paley Media Council in New York. "It's like ... I'm a doctor, and I'm looking at the patient, and I've said, you're having this accumulation, and I can tell you that this is very, very serious, and I can't tell you the exact time. I would say that if we're really looking over the next three years, to give or take a year or two, that we're in that type of a critical, critical situation." The founder of Bridgewater Associates, one of the world's largest hedge funds, has warned about the ballooning U.S. deficit for years. Recently, investors have begun demanding lower prices to buy the bonds that cover the government's massive budget deficits, pushing up yields on the debt. Rising worries about the fiscal situation last week triggered a high-profile credit rating downgrade from Moody's. The yield on the 30-year Treasury yield on Thursday traded at levels not seen since 2023, around 5.14%. Rising financing costs along with continued spending growth and declining tax receipts have combined to send deficits spiraling, pushing the national debt past the $36 trillion mark. In 2024, the government spent more on interest payments than any other outlay other than Social Security, defense and health care. "We will have a deficit of about 6.5% of GDP — that that is more than the market can bear," Dalio said. Dalio said he's not hopeful politicians would be able to reconcile their differences and lessen the country's debt load. In a party line vote early Thursday, House members approved legilsation that lowers taxes and adds military spending. The bill — which now goes to the Senate — could increase the U.S. government's debt by trillions and widen the deficit at a time when fears of a flare-up in inflation due higher tariffs are already weighing on bond prices and boosting yields. "I'm not optimistic. I have to be realistic," Dalio said. "I think it's the essence of the challenge of our country that anything related to bipartisanship and getting over political hurdles ... essentially means 'give me more,' which leads to these deficits."
