STEVE INSKEEP, HOST:
Ray Dalio has been prominent in the business world for decades. Now he's reached the stage where he says it's time to give advice.
RAY DALIO: I'm in the transition phase of life. I'm in the mentoring phase of life. I'm in the pass-it-along phase of life.
INSKEEP: Dalio founded Bridgewater Associates, the giant investment management company. Long ago, he promoted U.S. investment in China, perceiving its future value. Now he's thinking about the United States and its future economic risks. His book called "How Countries Go Broke" describes cycles of economic growth and collapse, countries borrowing more and more until a crisis strikes. The U.S. government has $38 trillion in debt, and Congress recently obeyed President Trump's command to pass a budget that adds more. As we borrow, Dalio talks of five forces that shape the broader economy.
DALIO: The first four are worsening. In other words, there's the debt money cycle. There's the internal disorder, in a sense the deterioration of our democracy, the greater fighting between the right and the left and not believing in the system in the same way. No. 3 is the breaking down of the world order. And then, of course, No. 4 is climate and nature, and that's going to get worse before it gets better. No. 5 is a two-edged sword. Technology has the capacity to raise people's living standards, longevity, many, many, many good things. But like all new technologies, it depends how it's used. It could also be used for war or cyberwars or breaking computer codes, all of that.
INSKEEP: I want to come back to some of these big factors. There's one of them I want to zero in on, and it has to do with debt and specifically U.S. government debt, which has risen dramatically in recent years. Typically, the party out of power is the only party that cares about debt, and the party that's in power is happy to cut taxes or raise spending and borrow more. Are we heading for a crisis?
DALIO: I believe that we are heading for a crisis. Just to put the numbers in perspective, U.S. government is spending $7 trillion a year and taking in $5 trillion a year. So it's spending 40% more than it's taking in. And it's selling into a world that does not really want to buy the amount of debt anymore because they have a lot of it. And that's why you're seeing a shift to, for example, gold.
INSKEEP: What you're describing is alarming because traditionally, the United States government has been able to borrow anything it needs. I think about the financial crisis years ago when Henry Paulson, the Treasury secretary, was able to try to reassure the world and say we have tremendous resources, meaning the U.S. government could borrow anything. I think you're telling me we may be approaching a point where that's no longer true.
DALIO: We're approaching a point where that's no longer true because we're getting to the point where the debt service payments are so large that taking on more debt is a problem. It's really a political problem. Speaking to, you know, leaders of both parties, they agree on the finances as I've described pretty much, but the issue is political because they say that there really is two promises that are required politically. You have to give one, if not both. And that is, I promise I will not raise your taxes, and I promise that I will not cut your benefits. And as long as that's the case, then we're going to have this problem.
INSKEEP: What have you thought about as the Trump administration, the U.S. government has become ever more directly involved in specific companies, taking a golden share of U.S. Steel, taking 10% of Intel? We could go on with the list. Does that bother you?
DALIO: No. It's a sign of the times. You have to consider that the times is very similar to the 1930s and that there needs to be directions. What is the direction of the economy such as AI, and what is necessary to be effective in that? So you're now having much more of an intervention to build data centers and to make American entities competitive in that environment. Normally, I think that the government's management of things, the government's intrusion in companies is normally a very bad thing. I really believe in the free market. However, when you have a situation like now, where there's a national competition and resources really have to be directed and they need help, you're seeing in all countries the need for that kind of direction.
INSKEEP: You're reminding me that President Biden also had an industrial policy, and the CHIPS Act was all about encouraging companies, not by taking a share in them, but by incentivizing them to locate chip manufacturing in the United States and so forth. I think you're telling me you believe that whoever was president right now, they'd be doing something a little like this.
DALIO: Even who is president is a reflection of the times. In other words, just look at the times and look at the circumstances. And those circumstances will produce certain types of leaders and certain types of actions.
INSKEEP: Ray Dalio, it's a pleasure talking with you. Thank you so much.
DALIO: My pleasure. Transcript provided by NPR, Copyright NPR.
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