Billionaire Ray Dalio Says U.S. Will Be Forced To Raise Taxes

Topline: Billionaire hedge fund manager Ray Dalio said Tuesday that the U.S. will have to raise federal taxes in the near future due to mounting liabilities, at a time when the national debt has reached an all-time high and Democratic presidential candidates are campaigning on new tax policies to reduce inequality.

  • Dalio, whose net worth Forbes estimates to be $18.7 billion, said the liabilities are “promises that have to be paid—they will either be paid by higher taxes or they’ll be not paid and defaulted on.”
  • Those liabilities consist of the $22.9 trillion national debt, which includes entitlement programs like Social Security and Medicare.
  • One of President Trump’s campaign promises was to wipe out the national debt, which doubled from $10 trillion to over $21 trillion during the Obama administration.
  • Since Trump took office, the national debt has increased $2 trillion, and the 2019 federal deficit has ballooned to $984 billion, a 26% increase from the year before.
  • Meanwhile, several Democratic presidential candidates like Elizabeth Warren, Bernie Sanders and Kamala Harris have proposed new taxes as part of their campaigns, ranging from repealing Trump’s signature tax cut legislation to levying new taxes on the wealthy. 
  • Even traditionally anti-tax Republicans are proposing new tax policies, like adjusting the earned income tax credit to boost paychecks of low-income workers.

What to watch for: The Congressional Budget Office projects the national debt, currently at 103% of GDP, will grow to 105% of GDP by 2028. 

Surprising fact: Democrats’ tax proposals are targeted towards new programs like universal healthcare, free college education and universal child care, the latter of which would cost $30 trillion over a ten-year period, according to Bloomberg.

Crucial quote: “The world has gone mad and the system is broken. The reason it is broken is because it is not an equal opportunity system. It needs to be reformed in a way that works better,” said Dalio.

Key background: Dalio founded Bridgewater Associates, the world’s biggest hedge fund, in 1975. His Tuesday comments follow similar statements he’s made in the past. Dalio, along with fellow billionaires like JPMorgan chief executive Jamie Dimon, Starbucks founder Howard Schultz and Microsoft founder Bill Gates, have all called for ways to manage and respond to wealth disparity in the U.S. Dimon advocated new tax policies, while Schultz and Gates have proposed higher taxes on the wealthy.

Tangent: The U.S. national debt began with the Revolutionary War. By the time official recordkeeping began, the U.S. owed $43 million to governments in Europe. Loan certificates were issued to those governments to finance the war. 

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