Billionaire investor Ray Dalio warns US debt nearing a breaking point

The hedge fund veteran emphasised that the issue is widely acknowledged among policymakers and economists.

Billionaire investor Ray Dalio has issued a stark warning about America’s mounting debt burden, cautioning that the U.S. is nearing a dangerous “edge” where the sheer volume of government borrowing could outstrip demand and trigger a crisis beyond repair.

In a conversation with Scott Galloway on his podcast, Dalio laid out the math bluntly: the federal government is set to spend about $7 trillion this year while collecting only $5 trillion in revenue — meaning expenditures exceed income by roughly 40%. He pointed out that the country’s debt now equals about six times its annual revenues.

Looking ahead, Dalio said the Treasury will need to refinance or raise about $12 trillion in 2025 alone — including nearly $9 trillion in maturing debt and another $2 trillion to cover the deficit. On top of that, about $1 trillion will be consumed by interest payments, a sum equal to half the size of the current budget gap. “The government has to move an enormous amount of debt,” Dalio cautioned. “We’re close to a breaking point.”

The hedge fund veteran emphasised that the issue is widely acknowledged among policymakers and economists. “Everyone I’ve spoken to agrees on the numbers and the mechanics,” he noted, referencing conversations with former Fed chairs, central bankers, and Treasury officials. The obstacle, he stressed, is political: reining in deficits would mean both higher taxes and reduced spending, but campaign promises to avoid raising taxes or cutting benefits make such steps politically toxic.

As a corrective, Dalio proposed what he called a “3% solution” — reducing the deficit to roughly 3% of GDP, down from its current 6–7%. That would require a combination of about 4% more in taxes and 4% less in spending. While not a perfect fix, he said it would at least ease pressure in the debt market and help bring down interest rates. However, he warned that artificially forcing rates lower could scare off investors.

Turning to trade policy, Dalio observed that the administration is using tariffs both as a revenue tool and as a way to protect domestic industries while attracting foreign money into U.S. debt. But he cautioned that tariffs cannot solve the underlying imbalance. “As debt continues to grow, the supply-demand dynamics will worsen to a point where they can’t be corrected,” he said.

His conclusion was blunt: unless leaders confront the hard choices of fiscal reform, the U.S. risks crossing a line where global confidence in America’s ability to manage its debt evaporates.