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If the federal deficit is a dark cloud hanging over the U.S. government, JPMorgan’s Jamie Dimon wants someone to do something about it before it starts to pour.
Since the onset of the COVID-19 pandemic, the Trump and Biden administrations have spent trillions of dollars on fiscalsupport to help keep the economy not just afloat, but growing. The surge in spending quickly pulled the U.S. economy out of a recession in the early days of the pandemic and has kept it humming along since — but it’s time to get serious about the government’s ballooning debts, according to the JPMorgan Chase CEO.
“Any country can borrow money and drive some growth, but it may not always lead to good growth,” Dimon told British television news channel Sky News Wednesday.
Read more: Everything JPMorgan CEO Jamie Dimon has said about the economy this year
The U.S. federal government booked a $1.7 trillion deficit last year — a $320 billion increase from 2022. This year, the government has already spent $855 billion more than it has collected. The U.S. Congressional Budget Office projects that the federal budget deficit will grow another $1.6 trillion this year.
The ratio of public debt to gross domestic product is also expected to hit 99% by the end of this year — meaning the government’s debts will be about the same size as the U.S. economy — and could reach an all-time high of 116% by 2034. In contrast, the average debt-to-GDP ratio over the last 50 years was approximately 48%.
Inflation woes
Dimon blamed the outsize borrowing for sticky inflation, which ticked upwards in the first few months of 2024, coming in at 3.4% in April — still well above the Federal Reserve’s 2% target. While he noted that this may not be a problem this year, or even over the next few years, the issues a prolonged massive federal deficit could bring should be dealt with sooner rather than later.
“At one point, it’ll cause a problem, and why should you wait?” Dimon said. “The problem would be caused by the market, and then you’ll be forced to deal with it and probably in a far more uncomfortable way than if you’d dealt with it to start.”
Citadel CEO Ken Griffin sounded similar alarm bells last month in his year-end letter to investors, calling the “surging U.S. public debt” a “growing concern that cannot be overlooked.” Griffin labeled the U.S. government as“irresponsible” for running a 6.4% deficit while unemployment sits at 54-year lows.