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Bridgewater Associates founder Ray Dalio has written that to sustainably address the US “deficit/debt bomb” problem, there is no alternative to bipartisan cooperation, a mix of tax increases and spending cuts.

The billionaire said that both Republicans and Democrats understand that the deficit needs to be reduced by “having both sides contribute something.” Dalio said this would improve the supply-demand balance for US Treasuries, thereby lowering interest rates.

“But because politics has become so extreme, they feel they can’t go down that obvious best path because if they explore that more balanced approach, their constituents and their own party would throw them out. To me, that’s a tragedy,” Dalio said.

According to an estimate from the nonpartisan Congressional Budget Office (CBO), the Senate version of US President Trump’s tax and spending bill—which was undergoing a series of amendment votes on Monday—would add nearly $3.3 trillion to the US deficit over a decade.

Notably, Dalio has long worried that massive government debt will crowd out spending on essential services, leaving a hollowed-out economy that can’t serve its citizens and scares off global investors.

In a recent discussion of his new book, *Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail*, Dalio has been warning about the unsustainable deficit problem, likening the situation to an impending “financial heart attack.”

“It’s like plaque building up in the arteries,” Dalio said at an event in New York last Thursday, speaking of debt service problems. “You can see interest rates and debt service expenses start to squeeze out other spending.”

Dalio said that this year, the US is expected to take in about $5 trillion in fiscal revenue but will spend $7 trillion, adding $2 trillion to the national deficit. On top of that, interest expenses to service the debt will amount to $1 trillion.

“We have to issue about $12 trillion of Treasuries next year. We have $1 trillion to pay interest. We have $9 trillion of principal that has to be rolled over, and then we have to issue another $2 trillion because we have a deficit,” Dalio said.

Dalio said that to restore fiscal health, the US must reduce its budget deficit from 6.5% of GDP to 3% through a mix of spending cuts, tax increases, and lower interest rates.

This puts the US in a difficult position, because all three parts of the solution are both difficult and controversial, with the “Department of Government Efficiency” (DOGE), ongoing debates about the “Big Beautiful Bill,” and Trump’s spats with Powell all making it extremely difficult to take viable measures.

Dalio said the debt situation could get worse as the US faces recession risks, because government borrowing tends to increase in times of economic downturn.

Ever-increasing debt creates a supply and demand problem, where the government either has to raise interest rates to make US Treasuries attractive to investors or print more money.

“When faced with the choice, they (the government) will print money,” Dalio said.

For investors, Dalio believes the two most important things are to hedge a portfolio’s inflation risks and to be diversified.

“Look at your portfolio value in inflation-adjusted terms, not nominal terms,” Dalio told the audience.

Dalio is a big proponent of Treasury Inflation-Protected Securities (TIPS), a type of government bond that returns more when inflation is high. In his view, for a risk-averse American middle class seeking inflation protection, it’s the best investment vehicle.

“The safest investment you can get right now is inflation-protected bonds,” Dalio said. “You’re going to get a real return of a little over 2% above inflation.”

Gold is Dalio’s other top pick. The precious metal has been a store of value that has stood the test of time, and today is no different. Gold offers diversification, inflation protection, and a hedge against geopolitical risks. It often has a negative correlation with other investments, meaning it may perform well in times of economic recession.

“There’s an old saying that gold is the only asset you can own that is not somebody else’s liability,” Dalio said. “Allocating 10% to 15% of your portfolio to gold is prudent.”