There’s no shortage of people warning about America’s debt problem. The real question is—why now? Why is this the moment we should take those warnings seriously?
According to Goldman Sachs’ latest Top of Mind1 report, it’s because the risks have finally caught up with the rhetoric. And when you’ve got three heavyweights—Ray Dalio, Kenneth Rogoff, and Niall Ferguson—all sounding the alarm in unison, it’s time to listen.
At the heart of this fiscal unease is the Trump Administration’s “One Big Beautiful Bill Act”—a massive policy package projected to add $2.4 trillion to the deficit over the next decade. Goldman’s report digs into the implications of that plan, placing America’s fiscal outlook under a global microscope. Spoiler: it’s not a flattering picture.
The Dalio Diagnosis: A Debt “Heart Attack” in the Making
Ray Dalio makes his case. The Bridgewater founder sees the U.S. nearing the final stage of a long-term debt cycle—a phase where things usually break.
“We should be very worried as all the previously mentioned conditions and my indicators that reflect them point toward an impending crisis.”
Dalio’s checklist is grim: debt servicing is crowding out other spending, bond buyers are thinning out, and central banks are papering over the cracks with freshly printed money. It’s a dangerous loop, and history shows how it ends.
He likens the mood to a heart patient ignoring the symptoms: “You’ve warned me, but I feel fine.” Until you don’t.
And if you think the U.S. dollar’s status as the global reserve currency will protect us? Think again.
“They are missing an understanding of the mechanics and the lessons of history that have taught us that currency and debt must be effective stores of wealth or else they are devalued and abandoned.”
Dalio’s advice? Spread your bets across strong countries, trim bond exposure, and hold some gold—and yes, even “a bit of bitcoin.”
Rogoff: Higher Rates, Higher Stakes
For Harvard’s Kenneth Rogoff, the issue comes down to one simple fact: interest rates are up, and they’re likely staying there.
“Higher rates are the primary reason the fiscal outlook is so concerning. If rates were to fall sharply, I would become far less worried.”
But they’re not. Rogoff sees the era of cheap money as over, with big geopolitical and technological forces keeping rates elevated. The U.S., already buried under debt, is now shoveling on more.
He warns that a fiscal crisis could be just 4–5 years away, sparked not by default, but by a combo of spiking inflation and economic shock—something even more painful than the COVID inflation hit.
He also doesn’t see politics offering a solution.
“Neither party can remain in power by trying to bring down deficits—no politician, save for a couple of mavericks, is willing to draw a line in the sand on this issue.”
And as for the dollar?
“Much of that cushion is now exhausted.”
Ferguson’s Law: When Interest Payments Outgun the Pentagon
Niall Ferguson, the historian known for connecting financial dots across centuries, introduces a sobering benchmark: when a country spends more on interest than it does on defense, its superpower status is on borrowed time.
“History is ripe with examples of superpowers that have spent more on debt service than defense and subsequently were no longer super or powerful. That’s exactly the position the US is in today.”
Sound dramatic? Ferguson backs it with history—from imperial Spain to Cold War Britain. Today, the U.S. is in a similar bind. Military readiness is being squeezed by debt costs, just as new threats—China’s rise, next-gen warfare, unstable alliances—demand more, not less.
“Any great power that pursues a reckless fiscal policy by allowing the cost of its debt to exceed the cost of its armed services is opening itself up to challenge.”
And he’s not hopeful that Washington gets it:
“The only consensus around this issue seems to be to not do anything about it. So, I worry.”
Goldman’s Take: Tariffs Can’t Plug the Hole
Goldman’s Alec Phillips agrees that the numbers don’t lie. Yes, tariff revenues might partially offset tax cuts in the new fiscal package—but the big picture remains dire.
“Not getting worse is not good enough.”
The primary deficit is already 5% of GDP in a supposedly strong economy. A recession—always lurking—would blow that out even further. And with no clear legislative moment ahead to force tough decisions, markets may eventually lose patience.
A Global Problem, Not Just an American One
This isn’t just a U.S. story. Goldman’s economists highlight similar concerns in France, the UK, Japan, and China. Yet there’s a key difference: countries like Japan still have deep domestic savings, and emerging markets have made strides in limiting their vulnerabilities.
Still, Goldman’s Kamakshya Trivedi notes that U.S. markets are flashing warning signs: the dollar is weakening, bonds aren’t playing their usual safe-haven role, and long-term yields remain stubbornly high.
“The Dollar has continued to depreciate… US bonds and the Dollar have provided less of a hedge to risky investments in recent months.”
Translation: the old rules—like the 60/40 portfolio—might not work the way they used to.
Avoiding the Cliff: Realism, Reform, or Reckoning
The experts agree: this doesn’t have to end in disaster. But avoiding that fate will take discipline, honesty, and political courage—none of which are in abundant supply.
Dalio says bring the deficit down to 3% of GDP. Rogoff says face the new rate reality. Ferguson says re-prioritize defense before it’s too late.
“If US leaders recognize this reality and act swiftly to address the debt problem and modernize the military, America just might be able to replicate Britain’s example,” Ferguson says.
But time is short—and the clock is loud.
Is This Time Different?
We’ve heard fiscal warnings before. What makes today different is that the conditions are finally ripe for those warnings to come true. The complacency is cracking. The costs are mounting. And the consequences may soon move from theoretical to real.
“The worst case is not inevitable.” But the window to prevent it? It’s narrowing fast.
Footnotes:
1 Goldman Sachs Global Investment Research. “Top of Mind: US Fiscal Worries—Is This Time Different?” Issue 140, 12 June 2025. Goldman Sachs & Co. LLC, 12 June 2025. ↩︎
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