Ray Dalio puts a “three” to Biden and McCarthy

The founder of the largest hedge fund, billionaire Ray Dalio, criticized the agreement between President Joe Biden and Speaker of the House of Representatives Kevin McCarthy to freeze the US national debt ceiling. “They are trying to solve the current problem by adding even more liabilities to the debt pile, which is already too big,” Dalio said on his Twitter account on Thursday. The legendary investor gave the decision of the authorities a three (corresponding to a D according to the American system). In his opinion, freezing the ceiling is unlikely to change anything.

At the same time, the billionaire highly appreciated the cooperation of Republicans and Democrats in solving the problem of an impending default. “They managed to find a compromise and not succumb to the influence of radical members of their parties. It is very important. Can we talk about the emergence of a strong compromise position of the two parties, opposing the radicals? Let’s see,” he said. Dalio added that postponing necessary financial reforms by two years, until 2025, is a smart decision, as it will avoid partisan conflicts that could prevent this.

On Thursday, the US House of Representatives by a majority vote approved an agreement to freeze the national debt. 314 members of the House voted in favor of the bill, including 165 Democrats and 149 Republicans, 117 opposed – among them 71 Republicans and 46 Democrats. The Republicans control the House with a majority of 222 votes to the Democrats’ 213. Now the bill is heading for a vote in the Senate, Joe Biden called for it to be passed as soon as possible. After that, he will be able to sign it and consolidate the agreement into law.

The Biden-McCarthy Agreement provides for the suspension until January 1, 2025 of Section 3101(b) of Title 31 “Currency and Finance” of the US Code. It states that the nominal amount of liabilities, together with interest guaranteed by the US government, cannot exceed “$14.294 trillion at a time” (this is the original ceiling, which has been revised many times since its introduction in the code). It also states that the limit can be changed by Congress. The last time this happened was in 2021, when the national debt ceiling was raised by $2.5 trillion to $31.4 trillion.

At the end of the freeze period, from January 2, 2025, the ceiling can be increased in accordance with the current need, follows from the agreement between Biden and McCarthy.

The document also establishes the boundaries of the US federal budget for 2024 and 2025 fiscal years. Thus, the defense part of the budget in 2024 will be limited to $886.35 billion, non-defense – $703.65 billion. The defense budget for 2025 was fixed at $895.21 billion, non-defense – at $710.69 billion.

Earlier, US Treasury Secretary Janet Yellen said that if the national debt ceiling is not raised or suspended, her department will not have enough resources to fulfill the obligations of the government, which would mean a default.

“If Congress fails to increase the debt limit, it will create serious hardship for American families, harm our global leadership, and call into question our ability to protect national security interests,” the head of the department said in a message to members of Congress.