Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Ray Dalio, founder of investment firm Bridgewater Associates, issued a stark diagnosis for economic health, suggesting a debt crisis is sneaking up like a “heart attack.” The billionaire investor prescribed halving the federal deficit as a potential remedy, although the treatment plan comes with a steep timeline of three years. If the government fails to adhere to this roadmap to fiscal recovery, bond markets won’t be able to keep up, leading to a financial death spiral.
The Preexisting Condition: Chronic Deficits
Every administration since 2001 (the last time the US achieved a balanced budget) has contributed to the compounding, decades-long issue of federal deficits. In 2024, the government expenses outpaced revenue by $1.84 trillion. That number is expected to rise to $1.9 trillion in 2025. These successive federal deficits have ballooned the national debt past $36 trillion.
There’s one thing bipartisan in Washington: spending money and not giving a care about what the result is on the other end.–
The Symptoms: Macroeconomic Pain & Rising Interest Costs
Rising Interest Payments — The cost of servicing the national debt is one of the most concerning symptoms of a growing debt problem. In 2024, debt interest payments surpassed defense spending, totaling over $1 trillion.
Elevated Inflation — The federal government was eagerly awaiting the Federal Reserve’s rate-cut cycle to offer much-needed relief from expanding interest payments. Sticky inflation has zapped those hopes as the fiscal czars hesitate to lower rates.
Slated Spending — Trump is on pace to add $7.75 trillion to the national debt over the next four years, exacerbating the debt burden. The Republican-led budget plan, which increases the debt limit by $4 trillion, and the party’s costly agenda suggest the administration is unlikely to significantly reduce spending or debt.
The Diagnosis: Halve the Deficit
Speaking at the World Governments Summit in Dubai, Dalio provided his professional prescription to correct the economy’s debt ailment: slashing the deficit from an expected 7.5% to 3% of GDP. According to the famed investor, Trump 2.0 will have to strike a balance between the austerity caused by rapid cost-cutting and leveraging the efficiency of AI technologies. Unfortunately, growing out of debt is mathematically improbable.
The treatment plan requires immediate implementation due to the “paramount importance” of slashing the deficit with Dalio explaining the government can “find out what’s tolerable” later.
While this aligns with DOGE’s “break now, fix later” approach, the Bridgewater Associates founder specifically warned, “The United States will run a deficit of about 7.5% of GDP if the Trump tax cuts continue, which I expect.”
The Outdated Solution: More Bonds
Thus far, the government’s get-out-of-debt-free card has been the issuance of bonds. However, this remedy is proving less effective as the debt crisis worsens. Investors are factoring in fewer rate cuts in 2025 as inflation remains elevated. The rise in prices is accompanied by an increase in yield expectations from bondholders. Meeting these higher returns would require the government to contribute more of the budget to servicing higher debt costs. At the current pace of supply and demand, Dalio thinks the US had around three years before suffering a debt-induced “economic heart attack.”