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Politico
09-07-2025
- Business
- Politico
Wall Street's debt warnings went unheeded as GOP pushed megabill forward
In May, Moody's Ratings downgraded Treasuries from their prior top rating, citing 'persistent, large fiscal deficits [that] will drive the government's debt and interest burden higher.' In late March, a group of House Republicans heard directly from Dalio, who urged them in a private briefing to start bringing annual deficits down to 3 percent of GDP. Deficits are currently running more than twice that. Members were already spooked by the spike in Treasury yields after Trump rolled out his sweeping 'Liberation Day' tariffs in April. Dalio told them that an even steeper selloff could occur if they didn't get the nation's fiscal house in order. The concern seemed to be confirmed when yields for 20 and 30-year Treasuries closed out above 5 percent the day that the House passed the sweeping legislation. Still, the GOP did not end up heeding Dalio's warning, and last week he said on X that he now expects sizable increases of government debt relative to GDP. That, in turn, would lead to 'unimaginable' tax increases or spending cuts — or, perhaps more likely, inflationary money-printing. He said that 'big, painful disruptions will likely occur' if lawmakers can't bring the deficit down to 3 percent of GDP. Earlier on, GOP lawmakers on the House Budget Committee Republicans had taken Dalio's message to heart, and his March briefing was part of what led House Budget Chair Jodey Arrington (R-Texas) and Budget Vice Chair Lloyd Smucker (R-Pa.) to craft a provision in the House bill linking the amount of tax cuts to spending cuts in the domestic policy legislation. But when the Senate took up the House products, Senate Republicans added hundreds of billions in tax cuts to the legislation while jettisoning north of $200 billion in spending cuts because they didn't adhere to Senate budget rules. With pressure from the White House, Senate Republicans forced their product down the throats of fiscal hawks in the House. As a result, the bill ended up missing the mark on the House framework by around $600 billion dollars, according to the nonpartisan Committee for a Responsible Federal Budget. 'The one piece that I wish was stronger coming out of the Senate was the offset provision, the deficit-neutral principle that was hard-wired into our budget resolution,' Arrington said in an interview after the House passed the final legislation. Arrington, who authored an austere balanced budget he dubbed 'Reverse the Curse' before ultimately supporting Trump's deficit-busting bill, said he was 'not sure either party is unilaterally' capable of changing the nation's fiscal path. He suggested Congress would have to turn to a bipartisan commission, similar to one established in 2010 under former President Barack Obama, to address the issue. Outsourcing the hard trade-offs necessary for deficit reduction is one thing; mustering the political will to enact them is another. The megabill drama showed that the issue is hard to crack for even the most powerful lobbies, said Andrew Moylan of Arnold Ventures, a think tank endowed by billionaire investor John Arnold that advocated an array of policies to help close the fiscal gaps in the GOP's megabill. 'I think that it's going to be difficult for any actor, whether it's a Wall Street person or a policy organization or grassroots group or whatever, to have an impact on this debate that helps us reduce deficits unless constituents are feeling pain that they feel like Congress needs to help address.'
Miami Herald
05-07-2025
- Business
- Miami Herald
Legendary fund manager has blunt message on ‘Big Beautiful Bill'
It's official. The Big Beautiful Bill is law. President Donald Trump successfully arm-wrestled support in the House and Senate to get his signature tax cut and spending bill across the legislative finish line on July 4. It wasn't easy. The House only passed the bill initially after blue-state Congressmen successfully increased the State and Local Tax (SALT) Deduction substantially, providing much-hoped-for relief to homeowners in high-tax communities. The Senate was even more contentious. Some senators recoiled at the bill's size, forcing steep cuts to energy tax credits and Medicaid. Still, even with those offsets, the bill carries a staggering price tag. Ultimately, the bill squeaked through, with Vice President Vance's vote resulting in a 51-50 final vote tally. Related: Goldman Sachs revamps Fed interest rate cut forecast for 2025 That cost captured the attention of longtime Wall Street icon Ray Dalio. Dalio founded Bridgewater Associates, a hedge fund now managing more than $112 billion of assets. He's featured in the popular "Market Wizards" series of books, and his prescient economic and stock market predictions have made him a billionaire worth $16 billion, good enough to rank him 156th on Bloomberg's Billionaires Index. Over his 50-year investment career, Dalio has navigated his share of good and bad economic times, and many consider him among the most successful in predicting what could happen next to markets. Lately, he's focused on the U.S. debt level as a major crisis looms. Perhaps unsurprisingly, that's led to him offering a pretty blunt take on the Big Beautiful Bill Act. Image source:One of the biggest features of the law is that it extends tax cuts provided in the Tax Cuts and Jobs Act, which was passed in 2017 during President Trump's first term in office. That's not all it does, though. Related: Veteran analyst sets eye-popping S&P 500 target On the campaign trail, President Trump made a series of promises, including more tax breaks for Americans and rolling back much of former President Biden's green energy initiatives. The over 900-page One Big Beautiful Bill Act makes good on promises to reduce taxes on Social Security and tips. However, it falls short of entirely removing taxes on them. For example, rather than eliminating income taxes on Social Security, the act provides a Social Security bonus deduction by increasing the deduction to $6,000 from $2,000 previously. Tips are also excluded from Federal income taxes; however, there is a $25,000 deduction limit. The act also eliminates tax credits for electric vehicles, energy-efficient heating and cooling, and other green energy breaks on solar and wind power. To reduce the cost of income tax cuts, the One Big Beautiful Bill Act makes steep cuts to Medicaid, including expanding work requirements. It also shifts the cost of SNAP benefits to states with an error rate above 6%. Those moves have proven highly controversial. The CBO estimates that changes to Medicaid will result in 11.8 million people losing health insurance over the next decade. Dalio has focused much of his time researching the rise and fall of economies. This research has led him to a worrisome prediction for America. Specifically, Dalio believes that our substantial and growing debt pile has us on a collision course with an economic Armageddon. He predicts that as our spending increases, people and governments will balk at buying our debt, causing a spiral that could result in either Treasury debt defaults or restructuring. Unfortunately, Dalio sees little political will in Washington, D.C., to cut the spending cord, as evidenced by Congress passing the One Big Beautiful Bill. "After spending time in Washington, D.C., discussing the budget deficit with senior people on both sides of the aisle, it's clear to me that we are unlikely to change the debt trajectory we're on and avoid the painful consequences," wrote Dalio on X. The toll taken by passing the One Big Beautiful Bill is a stiff one. The CBO estimates that the bill adds a whopping $7 trillion a year in spending and only generates about $5 trillion in revenue. As a result, debt relative to GDP will surge, adding more pressure to the economy. "The debt, which is now about 6x of the money taken in, 100 percent of GDP, and about $230,000 per American family, will rise over 10 years to about 7.5x the money taken in, 130 percent of GDP, and $425,000 per family," noted Dalio. "That will increase interest and principal payments on the debt from about $10 trillion ($1 trillion in interest, $9 trillion in principal) to about $18 trillion (of which $2 trillion is interest payments)." That's a lot of money. And Dalio thinks it will require some pretty uncomfortable fixes down the road. "[It] 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. This printing and devaluing is not good for those holding bonds as a storehold of wealth, and what's bad for bonds and U.S. credit markets is bad for everyone," said Dalio. "Unless this path is soon rectified to bring the budget deficit from roughly 7% of GDP to about 3% by making adjustments to spending, taxes, and interest rates, big, painful disruptions will likely occur." The challenge, however, will remain business as usual in D.C. Politicians eager to continue to win elections will continue to make big promises, and cash-strapped Americans can't be faulted for wanting relief. However, kicking the can down the road on our debt may create a bigger problem that will be harder to fix. "While virtually everyone agrees on the need to address our debt problem in a balanced way that includes tax increases and cuts to benefits, they also agree that they cannot speak up because politics have become absolutist," wrote Dalio. "We must find a solution around absolutist pledges like, 'I will not raise taxes,' or 'I will not reduce benefits,' when they are desperately needed." Related: Legendary fund manager issues stock market prediction as S&P 500 tests all-time highs The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Time of India
04-07-2025
- Business
- Time of India
$425K debt/family: How Trump's bill could gut US - Wall Street waves red flag
AI image for representation only. President Donald Trump's newly passed $3.4 trillion tax and spending package - dubbed by supporters as 'One Big Beautiful Bill' - is being denounced by Wall Street figures, economists, and bond market analysts as a fiscal time bomb. Among the most vocal: Ray Dalio, founder of Bridgewater Associates, who says the bill will lead to 'big, painful disruptions' for American families and the global financial system if not urgently reversed. Why it matters The legislation, passed with razor-thin margins in Congress, is expected to add $3.4 trillion to the national deficit over the next decade, according to the Congressional Budget Office. It comes at a time of relative economic stability - not a war, recession, or pandemic. Critics argue that deficit spending without crisis justification marks a dangerous shift in American fiscal policy. Dalio breaks it down in stark terms: annual federal spending will balloon to around $7 trillion, while revenues will hover near $5 trillion. 'The debt... is now about 6x of the money taken in, 100 percent of GDP, and about $230,000 per American family,' Dalio wrote. In ten years, those numbers could rise to '7.5x the money taken in, 130 percent of GDP, and $425,000 per family.' by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Giao dịch CFD với công nghệ và tốc độ tốt hơn IC Markets Đăng ký Undo The big picture This isn't just theoretical. Rising federal debt will demand more borrowing, and that means higher interest and principal payments. Dalio estimates that those costs will soar from $10 trillion today to $18 trillion - with annual interest alone doubling to $2 trillion. What happens next, he warns, could be one of three scenarios: A politically unpopular slashing of spending. A massive increase in taxes. Or a monetary intervention involving printing more money and lowering interest rates - which would 'devalue the dollar and hurt bondholders.' Between the lines The bond market - where the US borrows money - has already begun sending distress signals. Yields on long-term Treasurys jumped in May, nearing their highest levels in two decades, reflecting unease over the government's fiscal trajectory. Bill Gross, founder of Pimco and one of the bond market's most respected voices, likened the US to 'a teenager with a credit card that has no limits.' He warned that the payment is coming - not via default, but through 'a weak dollar and higher interest rates.' Zoom in The Wall Street Journal, in an in-depth analysis, highlighted the extraordinary nature of the moment: a historic deficit without a national emergency. Typically, large-scale federal borrowing is reserved for times of crisis - like the 2008 financial collapse or the Covid pandemic. This time is different. 'The market has been willing to tolerate spikes in borrowing during crises... What stands out now... is that America is bingeing on debt when there's no such emergency requiring it,' the WSJ noted. Moody's projects that the deficit, already at $1.8 trillion (6% of GDP), will climb to nearly 9% by 2035. That would push the national debt from just under 100% of GDP today to more than 130% - surpassing even World War II-era highs. What they are saying Dalio sees systemic risk not just for America, but for the global economy: 'The US Treasury market is the backbone of all capital markets, which are the backbones of our economic and social conditions.' If confidence in US debt erodes, the entire financial architecture could wobble. Ken Rogoff, former chief economist of the IMF, agrees: 'It's not clear markets will tolerate' further borrowing sprees when a real crisis hits. He warned that the US is leaving itself without fiscal headroom to respond to future emergencies. Even the dollar - long considered a safe haven - is starting to reflect these jitters. It just posted its worst first-half performance since 1973, a signal that foreign investors may be losing confidence in the US fiscal trajectory. The Trump administration's view President Trump and Republican lawmakers say the bill's $4.5 trillion in tax cuts will supercharge economic growth. They argue that cuts to Medicaid, food stamps, and green energy subsidies are essential to "rightsizing" government. 'For all cost-cutting Republicans, of which I am one, REMEMBER, you still have to get reelected,' Trump posted online. 'We will make it all up, times 10, with GROWTH, more than ever before.' They also tout provisions such as new deductions for tips and overtime, a hike in the child tax credit, and business incentives to spur investment. Trump calls the bill 'a phenomenal victory' and plans to sign it on July 4th. The math doesn't add up - at least not for Dalio Dalio doesn't buy the growth-will-save-us logic. He warns that the exploding interest burden will force the Fed to either crush the economy with higher rates or suppress rates artificially - triggering inflation and dollar devaluation. The scenario he paints is bleak: 'Unless this path is soon rectified to bring the budget deficit from roughly 7% of GDP to about 3%... big, painful disruptions will likely occur.' That includes a potential bond market revolt, skyrocketing borrowing costs for households and businesses, and a shrinking safety net just as economic headwinds build. Catch up quick Congress passed the bill 218–214 after weeks of internal GOP wrangling. The Senate version was made law with Vice President JD Vance casting the tie-breaking vote. The CBO estimates 11.8 million Americans will lose health coverage and 3 million will lose food stamp eligibility by 2034. Some Republicans expressed discomfort with the deficits - then voted yes anyway. What's next Markets are watching closely. The Fed, already navigating post-pandemic economic turbulence, may have to intervene if long-term rates spike. That could limit its ability to fight inflation or support growth. Foreign investors, who hold nearly one-third of US public debt, may start reallocating to other safer assets. As Harvard economist Jeremy Stein puts it, 'I wouldn't be surprised... if they start shifting that reinvestment more towards, say, Europe or German bonds.' The cost of Trump's 'big, beautiful' bill may not be fully visible today - but Dalio and Wall Street are betting we'll all feel it tomorrow. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Mint
04-07-2025
- Business
- Mint
Big Beautiful Bill: Ray Dalio sounds alarm on soaring US debt, warns of ‘big, painful disruptions'
In a stark warning following the passage of President Donald Trump's sweeping tax-and-spending package, billionaire investor Ray Dalio has raised red flags about the long-term sustainability of America's fiscal path, forecasting rising debt burdens and severe economic consequences. The US House of Representatives has approved what Trump has termed 'One Big Beautiful Bill' — legislation that permanently extends his 2017 tax cuts, introduces new tax breaks, and significantly boosts funding for immigration enforcement. But the bill comes at a heavy cost: it will add about $3.4 trillion to the nation's existing $36.2 trillion debt, according to estimates by the nonpartisan Congressional Budget Office. Reacting to the development, Dalio, the founder of the world's largest hedge fund, Bridgewater Associates, took to social media to highlight what he described as alarming projections. 'The bill is expected to lead to spending of about $7 trillion a year with inflows of about $5 trillion a year,' he wrote in a detailed post on X (formerly Twitter). 'So the debt… will rise over ten years to about 7.5x the money taken in, 130% of GDP, and $425,000 per family.' Dalio warned that such a trajectory would push the US further into a debt spiral, with annual debt service costs ballooning from $1 trillion in interest today to $2 trillion within a decade. In total, the country would face $18 trillion in interest and principal repayments — a scale of obligation that could force policymakers into difficult choices. 'Either we face a big squeezing out (and cutting off) of spending and/or unimaginable tax increases,' he wrote, 'or a lot of printing and devaluing of money and pushing interest rates to unattractively low levels.' Dalio cautioned that such monetary measures — essentially debasing the dollar to manage the debt load — would undermine confidence in US bonds and the broader credit markets. 'What's bad for bonds and US credit markets is bad for everyone,' he said, noting that the US Treasury market underpins the global financial system. 'These markets are the backbone of our economic and social conditions.' He urged swift action to narrow the federal deficit from the current 7% of GDP to a more manageable 3%, advocating for a mix of spending cuts, tax reforms, and interest rate adjustments. Without decisive steps, he warned, 'big, painful disruptions will likely occur.' Dalio's sobering analysis adds to a growing chorus of concern among economists and market observers about America's fiscal direction, particularly at a time when interest payments are crowding out investments in infrastructure, defense, and social programs. As debates continue over debt ceilings, entitlement reform, and the Federal Reserve's monetary stance, Dalio's warning underscores the gravity of the choices facing policymakers — and the risks of delay. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Yahoo
04-07-2025
- Business
- Yahoo
Billionaire Ray Dalio warns of 'big, painful disruptions' after Congress passes Trump's spending bill
Congress officially passed President Donald Trump's "big, beautiful bill," and billionaire Ray Dalio is warning about the possible economic consequences, which could include spending cuts, major tax increases and massive money printing. "Unless this path is soon rectified to bring the budget deficit from roughly 7% of [gross domestic product] to about 3% by making adjustments to spending, taxes, and interest rates, big, painful disruptions will likely occur," Dalio, the founder of Bridgewater Associates, wrote in a post on X Thursday. Dalio said the bill, which now heads to the president's desk to be signed into law, is expected to result in yearly deficits of $2 trillion with revenues of about $5 trillion exceeded by spending of about $7 trillion. This deficit would increase the national debt over the next decade, pushing the debt, currently the equivalent of about $230,000 per U.S. family, to about $425,000 per family, he warned. America Headed For 'Economic Heart Attack' On Government Debt, Spending Warns Billionaire Paying off this debt will also become increasingly expensive. Interest and principal payments on the debt would rise from around $10 trillion, $1 trillion of which is interest, to around $18 trillion, $2 trillion of which would be interest. This would result in either spending being slashed, "unimaginable" tax increases or a lot of "printing and devaluing of money and pushing interest rates to unattractively low levels," he said. Read On The Fox Business App Billionaire Ray Dalio Raises Alarm Over China, Says Trump Renegotiating Trade Deals 'Has To Happen' "This printing and devaluing is not good for those holding bonds as a storehold of wealth, and what's bad for bonds and U.S. credit markets is bad for everyone, because the U.S. Treasury market is the backbone of all capital markets, which are the backbones of our economic and social conditions," Dalio said. Last month, Dalio similarly sounded the alarm on America's chronic spending on FOX Business Network's "The Claman Countdown," saying the U.S. is headed for an "economic heart attack." Billionaire Hedge Fund Manager Warns Tariffs Could Trigger Conditions 'Worse Than A Recession' "We're spending 40% more than we're taking in, and this is a chronic problem," he said. "So, what you're seeing is the debt service payments beginning to squeeze away, not beginning, well, into squeezing away. So, it's like plaque in the arteries squeezing away buying power. And, as you can do the numbers, you will see that you can have an economic heart attack as a result of that." On Thursday afternoon, Congress passed Trump's "big, beautiful bill" after back-to-back sleepless sessions for both the House and Senate. The bill, which advances Trump's policies on taxes, the border, defense, energy and the national debt, narrowly passed the House of Representatives in a mostly party-line vote. All but two House Republicans, Thomas Massie, R-Ky., and Brian Fitzpatrick, R-Pa., voted for the bill, which passed article source: Billionaire Ray Dalio warns of 'big, painful disruptions' after Congress passes Trump's spending bill Sign in to access your portfolio
