By David Randall

NEW YORK, April 4 (Reuters) - Widening income inequality and under-investment in public education "pose an existential risk for the U.S.," hedge fund billionaire Ray Dalio wrote in a paper released Thursday.

Dalio, who Forbes lists as the 57th-richest person in the world with an estimated fortune of $18.4 billion from founding hedge fund giant Bridgewater Associates, released a report Thursday in which he spells out the ways he sees capitalism as failing in the United States. In the report, Dalio advocates for an increase in investments in early childhood education, per-pupil spending, infrastructure, and public health measures in order to save it.

Chief among Dalio's criticisms are the widening wealth gap in the United States, which he links to lower high school graduation rates, greater disparity in test scores, and lower teacher pay compared with those with similar education levels over the last three decades.

"To me, leaving so many children in poverty and not educating them well is the equivalent of child abuse, and it is economically stupid," Dalio wrote.

The increasing use of automation to replace workers and the wealth-effect of lower interest rate policies by the Federal Reserve which have increased the value of equities and property will continue to compound this problem, which will make the 2020 presidential election "a hell of a battle," Dalio wrote. Yet by taxing pollution and other societal ills, the United States can strengthen the capitalist system without replacing it, Dalio argued.

The move by Dalio to publish his essay comes approximately two months after Starbucks founder Howard Schultz, who Forbes estimates has a net worth of $3.7 billion, said he was considering a bid for the White House as an independent in order to address the "crisis of capitalism in this country." (Reporting by David Randall; Editing by Jennifer Ablan and Diane Craft)