Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, has issued a stark warning about the U.S. fiscal situation. He described the growing deficit, now exceeding $37 trillion, as a looming threat that could lead to an “economic heart attack.” In a recent interview on Fox Business, Dalio emphasized that the U.S. is spending 40% more than it earns, a chronic issue that is becoming increasingly unsustainable.
He likened the situation to plaque buildup in arteries, where rising debt service payments are squeezing available funds for other government priorities. Dalio warned that the U.S. is approaching a tipping point where new debt will be required just to cover interest on existing obligations, potentially triggering a financial crisis.
Dalio proposed a return to the fiscal discipline of the 1990s as a potential solution. During that period, bipartisan cooperation led to spending controls and targeted tax measures that restored economic balance. He suggested that reducing the federal deficit to 3% of GDP could stabilize markets and reduce interest costs. In a CNBC appearance, Dalio estimated that the probability of a financial “trauma” due to inaction exceeds 50%.
This is not the first time Dalio has raised alarms about the U.S. economy. Over the past five years, he has warned about pandemic-related debt, inflation, and the risk of stagflation. He has consistently criticized policymakers for delaying action until inflation becomes severe and the dollar’s value has significantly declined.
Despite offering a clear path forward, Dalio expressed skepticism about the current political climate’s ability to facilitate compromise. He fears that political gridlock will prevent the necessary spending cuts and tax adjustments. The consequences, he argues, could include sustained overspending, rising debt burdens, and a loss of confidence among investors in U.S. Treasuries.
A potential crisis could manifest as a supply-demand imbalance in the bond market, where investors refuse to fund U.S. borrowing at sustainable rates. This scenario could trigger a financial crisis with global repercussions. Dalio pointed to the April 2025 decline in the 10-year Treasury bond market as an early warning sign of investor unease, particularly in response to aggressive tariff proposals by former President Donald Trump.
His repeated references to the 1990s are not nostalgic but rather a call for pragmatic, bipartisan cooperation and shared sacrifice. He warned that delaying action while the economy remains stable will only increase the cost and difficulty of future reforms. Unfortunately, the deficit has continued to grow in 2025, with legislation such as Trump’s One Big Beautiful Bill Act projected to add $3.4 trillion to the deficit over the next decade, according to the Congressional Budget Office.
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Ray Dalio issues his most dire warning to America yet: The ballooning $37 trillion deficit will trigger an ‘economic heart attack’
Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, described America’s deficit spiral in dramatic—and visceral—terms. “We’re spending 40% more than we’re taking in and this is a chronic problem,” he said in a recent appearance on Fox Business. “What you’re seeing is the debt service payments … well into squeezing away, so it’s like plaque in the arteries squeezing away buying power.”
The analogy underscores a grim reality: debt service payments have ballooned as a share of government spending, increasingly crowding out funds for other priorities. Dalio warns the U.S. is near a tipping point where it must issue new debt merely to pay interest on existing obligations—a cycle he says could trigger not just a financial shock but a systemic breakdown reminiscent of cardiac arrest. We’ve got to go back, he argues—back to the ’90s.
A blueprint for recovery
Dalio contends that there is still a way out—as long as the country acts with unity and resolve. He points to the ’90s as a model for bipartisan problem-solving, fiscal restraint, and balanced economic growth. “If we change spending and income (tax returns) by 4% while the economy is still good,” he wrote on Twitter, “the interest rate will go down as a result and we’ll be in a much better situation.” He added that we know this kind of balance can happen because it happened before, from 1991 to 1998. Dalio wrote, referencing how both spending controls and targeted tax measures restored equilibrium in the 1990s .
Dalio suggests that by trimming the federal deficit to 3% of GDP—levels last sustained during the Clinton era—the U.S. could stabilize markets, tame interest payments, and avoid crisis. In a CNBC appearance in early July, Dalio put the odds at over 50% that a financial “trauma” will result from the debt not being dealt with properly.
Past warnings
This is far from the first dire warning to come from Dalio on the state of the U.S. economy. In the past five years, he has voiced concerns about the debt created to fight the financial effects of the pandemic, both inflation and stagflation, and even a looming recession. Although a recession has not set in since the COVID-related crash of 2020, Dalio warned that rising asset prices weren’t creating real wealth, as inflation was eroding purchasing power.
A consistent theme of Dalio’s warnings is that the disease may be worse than the cure, criticizing policymakers likely to act only when inflation became critical and the dollar’s value had materially eroded . He has voiced variations of his “heart attack” and “plaque” critique since 2024.
Despite offering a clear prescription, Dalio expresses skepticism that current political dynamics will allow for compromise or the hard choices required. “My fear is that we will probably not make these needed cuts due to political reasons,” he wrote on Twitter, warning that absolutism in Washington could doom efforts to put the country’s fiscal house in order .
The consequences, Dalio argues, would be severe and far-reaching: sustained government overspending, rising debt service burdens, and a loss of confidence among buyers of U.S. Treasuries. This scenario, he says, could escalate into what he calls a “serious supply-demand problem,” where the market refuses to fund America’s borrowing habits at sustainable rates, catalyzing a financial crisis with global shockwaves . The April fall in the 10-year Treasury bond market was a tremor of just such a refusal from foreign investors, who seemed to balk at President Donald Trump’s planned tariffs being much more aggressive than expected.
Dalio’s repeated invocations of the 1990s are more than nostalgia—they are a call to bipartisan pragmatism and shared sacrifice. He warns that failure to act now, with the economy still on stable footing, will only raise the costs (and pain) of inevitable reforms. Although Dalio did not comment on it, the debt situation has actually worsened throughout 2025, with legislation passing through Congress that is set to expand the debt for years to come. Trump’s One Big Beautiful Bill Act will add $3.4 trillion to deficits over the next decade, according to the Congressional Budget Office.
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.