The Blubber

Billionaire investor Ray Dalio emphasized the urgent need to reduce the U.S. deficit from its projected 7.2% of GDP to around 3%—a significant shift that would require major fiscal adjustments.

“That’s a big deal. You are going to see shocking developments in terms of how that’s going to be dealt with,” Dalio cautioned.

His warning comes amid recent market volatility driven by uncertainty over trade policies, compounding Wall Street’s broader concerns about global economic stability.

Why It Matters

At the World Governments Summit in February, Dalio compared the $36.4 trillion federal debt to plaque clogging the financial system’s arteries, warning of a possible “economic heart attack” without immediate action. The debt-to-GDP ratio now stands at approximately 125%, with federal debt soaring 80% since 2020 while GDP has grown only 38%.

Dalio has long promoted his “3% solution,” advocating for a combination of spending cuts, tax adjustments, and careful interest rate management. He recently expressed support for President Donald Trump’s call for lower interest rates but stressed that rate cuts must be paired with spending reductions to effectively address the deficit.

According to the Congressional Budget Office, annual budget deficits are expected to average 6.1% of GDP through 2035—far above the 50-year average of 3.8%—with national debt potentially increasing by nearly $24 trillion over the next decade.