President Trump’s Big, Beautiful Bill — a package of sweeping tax cuts and spending increases — cleared its final hurdle last week when the House of Representatives narrowly approved it in a 218-214 vote.
While Republicans celebrated the victory, billionaire investor Ray Dalio warned that the legislation could lay the groundwork for America’s financial ruin.
Dalio wrote in a social media post that the bill is expected to push the federal debt from about 100% of GDP to 130% over the next decade.
This increase would drive the total debt — interest and principal payments combined — from around $10 trillion today to $18 trillion within ten years, with $2 trillion of interest payments alone.
In the long run, the bill will either force massive spending cuts, trigger “unimaginable” tax hikes, lead to excessive money printing and currency devaluation, or push interest rates down to extremely low levels, Dalio said.
“This printing and devaluing is not good for those holding bonds as a storehold of wealth, and what’s bad for bonds and US credit markets is bad for everyone because the U.S. Treasury market is the backbone of all capital markets,” he said.
The crux of Dalio’s argument has long been that federal spending must be kept under control as a percentage of GDP.
In addition to the overall debt-to-GDP ratio, America’s annual federal deficit currently sits above 6% of GDP and would need to drop to around 3% to avoid severe economic disruptions.
If Washington fails to meet that target, foreign investors and central banks may scale back their purchases of U.S. Treasury bonds, Dalio warned.
The start of Trump’s second presidency has already been marked by a bondholder revolt.
Will the bond vigilantes return?
As the details of Trump’s Big, Beautiful Bill came into focus, bond yields began to surge as investors priced in the impact of the legislation on America’s already massive fiscal imbalance. Yields on the benchmark 10-year Treasury spiked in the second quarter, climbing to nearly 4.6%.
The damage in the 30-year bond market was even more severe, with yields reaching 5% for the first time since 2023.
At the time, economists said bond vigilantes were punishing Washington for its reckless fiscal mismanagement, a view reinforced when demand for a 20-year bond auction came in much weaker than expected.
Although investors’ reaction to the Big, Beautiful Bill’s passage has been muted so far, that could change as Washington’s finances return to the spotlight.
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