Ray Dalio warns US debt-to-GDP ratio could hit 130% in 10 years

Billionaire investor Ray Dalio warned that US government debt is on track to reach unprecedented and alarming levels in the coming years, following the passage of a tax-and-spending bill supported by President Donald Trump.

Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, said in a post on X, that the budget legislation recently passed by Congress reveals troubling projections for federal deficits, debt levels, and debt servicing costs.

"Now that the budget bill has passed Congress, we can see what the projections look like for deficits, government debt, and debt service expenses," Dalio wrote.

He said the new legislation will likely result in federal spending of around $7 trillion annually, compared with just $5 trillion in yearly revenues. As a result, the national debt—which currently stands at six times annual revenue and equals 100% of GDP, or about $230,000 per American household—could grow over the next decade to 7.5 times revenue, 130% of GDP, and $425,000 per household.

Dalio warned that the cost of servicing this debt—interest and principal payments—could rise from roughly $10 trillion today ($1 trillion in interest and $9 trillion in principal) to $18 trillion, including $2 trillion in interest alone.

“That 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,” he wrote.

Dalio said such a scenario would be detrimental to bondholders and credit markets, noting that “what’s bad for bonds and US credit markets is bad for everyone, because the US Treasury market is the backbone of all capital markets, which are the backbones of our economic and social conditions.”

He called for urgent action to narrow the federal budget deficit from its current level of roughly 7% of GDP to about 3%, through adjustments to government spending, tax policy, and interest rates.

“Unless this path is soon rectified,” he warned, “big, painful disruptions will likely occur.”