Adding student athlete pay to the college sports equation
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Is all this borrowing by Congress on track to what one famous investor calls a bond market heart attack? I'm David Brancaccio in Los Angeles. The big tax-cutting and program-cutting bill getting hammered out in Congress is not on track to be a free lunch. The Congressional Budget Office calculates it would add $2.4 trillion to America's budget deficit over 10 years, even more if you factor in interest on the debt.

A billionaire investor who takes a very long view of how the government borrows worries the wheels could come off this thing if Congress doesn't start making harder choices. Ray Dalio is founder of the biggest of hedge fund firms, Bridgewater Associates. His latest book just published is called How Countries Go Broke, subtitled The Big Cycle. Mr. Dalio, good to reconnect here.

It's good to be back. You and I have talked about this before, Ray. There are business cycles, boom and recession, every, I don't know, six years or so. Administrations come and go, borrowing more, maybe borrowing less. But you're more concerned with what you see as the long debt cycles. Do you see us as getting close? Are we at one of these inflection points for the big cycles? Yes, we're approaching the inflection points. And let me describe what that's like.

The big cycle is when debt and debt service rise relative to incomes.

Think of the credit market system like the circulatory system in your body, and it brings credit to all different parts of the body. And those are like nutrients. And if they're used well, they'll produce productivity and incomes. But when you're in a position where the debt accumulates relative to the income, then debt service payments,

squeeze out spending. So you can see that happen. And in fact, if it becomes a serious situation like it is becoming, the holders of that debt can sell that debt. And so you have a supply demand problem. A regular person is not going to say, oh, my goodness, we're at an inflection point. They're going to be worried about a financial crisis. I mean, that's what you're talking about if we don't get this right. And in order to

get it right, because we are approaching one of those. That's what I mean by an inflection point. It's like a bond market heart attack. We have to cut the deficit down to 3% of GDP. And there are three ways of doing that.

The first, of course, has to do with taxes, tax revenue, not necessarily tax rates, but tax revenue. Number two is spending. And number three are interest rates. If you cut those expenses down or cut the budget deficit down to about 3% of GDP, you will have interest rate relief and all three can work for you.

a sustainable situation. These processes are certainly not happening in a vacuum. There's kind of a dialogue between the markets and maybe policymakers. Let me put it this way. Could it be argued that the main check on executive power in America, the president's power, you could say is the bond market these days? Because the bond market

calls it as it sees it. Yes, certainly. And unfortunately, because when that happens is the worst possible time to try to deal with it. In other words, it's to have the heart attack and then to be trying to deal with it. When you see the bonds,

go down at the same time as the dollar weakens and you see gold prices going up and you see stock prices going up. That is reflecting the withdrawal of capital from the bond market. I'm hoping that people will look at the supply-demand

and mechanical aspects of this to see where we are. Treat it as though you're at your doctor and the doctor is saying this plaque is building up. You're getting to a very serious situation. Please deal with it now before you have a heart attack. Ray Dalio, founder of the largest of hedge fund firms, Bridgewater Associates. His new book is called How Countries Go Broke, The Big Cycle. Thank you very much. Thank you very much.

Marketplace's Kristen Schwab is also tracking effects on the labor market of the federal government raids on businesses to deport people in the U.S. without permission. Marketplace Morning Report podcast feed will have that later this morning. ♪

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If you work in quality control at a candy factory, you know strict safety regulations come with the job. It's why you partner with Grainger. Grainger helps you find the high quality and compliant products your business needs to inspect, detect, and help correct issues. And the sweetest part is, everyone gets a product that's as safe to eat as it is delicious. Call 1-800-GRAINGER, clickgrainger.com, or just stop by. Grainger, for the ones who get it done.

College athletes are about to get paid. After over a decade of litigation, a federal judge has signed off on an arrangement allowing schools in the top conferences to make direct revenue-sharing payments to athletes. Each school could pay out up to $20.5 million a year to start, and players of some sports will get the lion's share. Here's Marketplace's Savannah Peters.

The NCAA was founded on amateurism, but players argued that model was exploiting them in an era when media rights for big-time college sports can fetch billions. In football, men's basketball, and now increasingly women's basketball. Maureen Weston is an expert in sports law at Pepperdine. She says universities use that money to subsidize sports that don't bring in cash.

Now Weston says they'll have to reevaluate. How do we fund all of our sports if we are in this feeding frenzy? Where it could cost tens of millions to field a competitive football team. A really important question that those institutions are facing will be where the money's coming from. Amy Privet-Parco is with the Knight Commission on Intercollegiate Athletics. She says some programs are already tightening their belts.

Since the potential new rules were negotiated, more than 37 teams have been dropped. In sports like swimming and diving, men's volleyball, and women's tennis. Privet-Parko says the NCAA will face lawsuits from athletes in less lucrative programs, and particularly women athletes, as it's not yet clear how Title IX gender equity rules apply to revenue sharing. I'm Savannah Peters for Marketplace.

Our producers are James Graham, Craig Henderson, Linda Walker, Ariana Rosas, and Erica Soderstrom. Our senior producer is Alex Schroeder. Our supervisory senior producer is Meredith Gerritsen-Morby. You're listening to the Marketplace Morning Report from APM American Public Media. Hey, David Brancaccio here. Over the last few months, you may have heard me talk about the home that my family lost in the California wildfires this year.

Well, I recently chatted about rebuilding our Altadena, California, cottage with the team over at This Old House Radio Hour, a radio program and a podcast from American Public Media. So for a tale of new beginnings or if you need any tips for your own home improvement projects, this episode has you covered. You can find episodes of This Old House Radio Hour wherever you get your podcasts.