Billionaire investor Ray Dalio is sounding the alarm about the US economy. He believes the country is on a collision course with disaster unless it drastically reduces its deficit.
The “3% Solution”
Dalio’s proposed fix? A “3% solution.” This plan aims to lower the annual deficit-to-GDP ratio from around 7% to 3%. He says this is achievable through a three-pronged approach:
- Spending Cuts: Reducing government expenditure.
- Tax Increases: Raising revenue through higher taxes.
- Lower Interest Rates: Easing borrowing costs.
Dalio points to past successes, noting that a similar approach worked in the US between 1991 and 1998.
A Looming Crisis?
Dalio is adamant that action is needed, warning of a potentially “terrible outcome” if the deficit isn’t addressed. He claims that even politicians across the political spectrum agree on the severity of the situation, but are too focused on arguing about the best approach. He suggests a major debt crisis might be the only thing to force them to act.
