JPMorgan Chase CEO Jamie Dimon warned in a new interview that the U.S. government’s rising debt and budget deficits are a problem that will eventually cause bond market issues, and offered his thoughts on how reforms should move forward.
Dimon, in an interview aired on Monday on FOX Business Network’s “Mornings with Maria,” was asked by host Maria Bartiromo how focused he is on the more than $36 trillion national debt and widening budget deficits.
“It’s a big deal, you know it is a real problem, but one day… the bond markets are gonna have a tough time,” Dimon said. “I don’t know if it’s six months or six years.”
“The real focus should be growth, pro-business, proper deregulation, permitting reform, getting rid of blue tape, getting skills in schools, get that growth going – that’s the best way,” he said.
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“Then reform some of these programs that everybody knows can be reformed properly,” Dimon said, adding that those reforms can be structured in a way to lower the cost of those programs while mitigating the impact on the poor, elderly or those dealing with illnesses while ensuring those programs are sustainable.
“I think some reform can take place. We’re not taking benefits out of poor people or sick people or old people,” he said. “You’re just putting rules in place that make it more reasonable – you know, less fraud, less waste, less abuse.”
“I think all of those things need to be done, and then we can conquer that problem,” Dimon said of the U.S. government’s fiscal challenges.
CBO SAYS US BUDGET DEFICITS TO WIDEN, NATIONAL DEBT TO SURGE TO 156% OF GDP
The federal government is projected to run roughly $2 trillion budget deficits annually in the next few years, which is historically large considering the deficit was $1 trillion in fiscal year 2019, the last pre-pandemic fiscal year.
Deficits have widened in part due to rising spending on Social Security and Medicare amid the aging of America’s population.
Higher interest expenses on the national debt, which stem from the size and growth of the debt as well as higher interest rates, are the other primary drivers of the deficit. In the last fiscal year, interest expenses were a larger cost than the Department of Defense’s discretionary budget as well as Medicare.
MOODY’S DOWNGRADED US CREDIT RATING: WHAT DOES IT MEAN?
The challenging budget situation the federal government is in led to a U.S. credit rating downgrade by Moody’s Ratings last month, which lowered the rating one notch from the highest tier, Aaa, to Aa1.
The firm said the downgrade “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.”
“Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” the firm said. “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”
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