Ray Dalio Explains How Trump and DOGE Can Solve the American Debt Crisis
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I just want to highlight the CBO...

Right? So this is the US government's debt as a percent of the US government's revenue, which you indicate in your book is more important than debt to GDP. You've got to look at the actual revenue being generated by the government and how much debt they have. And the CBO highlights this expansion to 700%, meaning the government is going to have a debt level that's seven times the income it's making every year over the next, I believe this is a 10-year chart.

And you propose a bunch of actions that can keep it flat over the next 10 years. So number one is, I call it my 3% solution. The solution is you must cut the deficit, which is the equivalent of bonds selling, down to 3% of GDP.

And it's 7.5% expected. That's about $900 billion a year. Yeah. Roughly. And that means cutting it, as you point out, by cutting the deficit by more than half from where it sits. Yeah. Well, it's, yes, because with the...

continuing the tax cuts, that'll be 7.5%, and you want to get it down to 3%. It sounds draconian, but we did that kind of change from 1991 till 1997, and there are three keys to this. Do it

soon, fast, when the time is good, when the economy's good. In other words, do it now. Now. The temptation is going to say, well, we're going to ease into this and we're going to be there and we're going to do it in three years from now. But if you have a bad economy, you cannot do it. Okay. And that's the worst. So we have the best economy and the sooner you do it, the more you're going to do it. So 3% solution,

Do it now and recognize that you have to deliver it. So if you're having, let's say, cost cuts in government, you have to own the number. So everybody's got to pledge 3%. Now, the argument says how to get there, but you have to own the number so much so that you'd say, if it's not 3%, throw me out of office. And you can't make it any one thing. Right.

But you also have to realize, like, if you did it spread out, nothing's going to be insurmountable. But the main thing is you take the things you can cut from or build from. So what can you cut from? And you look at government expenditures. Roughly 70% of government expenditures are you can't cut.

So it comes down to a small percentage that you can cut, but you find out how much can you cut. So the important thing is 3%. The other thing about it is to realize that if you make those moves, the bond market will benefit.

You see, and so interest rates- And then interest rates will go down. Right. And interest rates going down, interest rate expense is most important. If the federal government were to cut spending significantly and quickly, the market would naturally react to lower rates. That's right.

I think that is so important for everyone to hear. If you look at my calculations, if you get 100 basis points cut in rates, that's equivalent to significant cutting in spending. So he's right. But if you do that without the other parts, you're going to make it less desirable to own these things, these bonds. Right.

because that's going to be a problem. Where if you do these things together, they can support each other. So in other words, fine, cut it from spending. And by the way, Ray, the longer we wait-

The more interest accumulates, because it's at a higher rate, the more the debt accumulates. And ultimately, this is the arithmetic death spiral that you get into. The longer we wait, the more you have to cut in the future to get out of the hole. It's not linear. It's a nonlinear cutting that's needed. So the faster you do it, the less you have to cut. I think that is so important. Let me just say that again. For any person in government listening, the faster you cut, the less you have to cut.

Yes, and you can do it in a manageable way. You know, a bit here, a bit there, these bits add up. And if you don't, you're going to have this arc of compounding. So let's talk politics for a second. Is Doge and the concept of Doge enough, or do we need legislative action here? There's a combination of a question. It's not just Doge. It's a matter of

less regulation, productivity changes that might come from AI, which then translate to profits. That might be capital gains profits. They might be profits and all of that. But when I look at it, it looks...

It looks very tough. But there's also, you know, revenue also tariffs produce revenue. So but yeah, people think on the tariffs, people don't think of taxes as inflation, but taxes are inflation. Right. Because it costs you more. So.

The real question, as you play with the numbers, is it's very, very difficult to know and be precise about how much is going to come from productivity and profit increases, from the efficiencies gained by AI and new technologies, how much is going to come from this and that. We don't honestly know.

But the important thing is we're at the edge and not to make it a crapshoot. So and to get the if the number must be three percent. And so you should have a clear passage to that three percent number.