JPMorgan Chase CEO Jamie Dimon weighed in on fiscal policy under a new Congress and voiced concerns around rising debt’s macroeconomic impact in an exclusive four-part interview that aired on “Mornings with Maria” Tuesday.
While the U.S. government’s debt sits at $31 trillion and isn’t “today’s problem,” according to Dimon, trying to pay it off one day will be a “hockey stick” to the economy and Americans’ pocketbooks.
“I’m talking about on the day that America can’t pay its debt, that has potentially disastrous outcomes. Once American debt goes into default, a lot of people can’t own it anymore and American debt doesn’t cross-default, but it’s cumulative,” the CEO told host Maria Bartiromo.
“The [Treasury bill] defaults, and the next week T-bill defaults, the next week T-bill defaults, pension plans have to sell,” Dimon continued. “It is so potentially dangerous we shouldn’t get anywhere near it. And after all the shenanigans of politics, we’re going to have to fix this. I think it’s very bad for the nation to constantly be looking at this type of thing.”
Dimon further expressed worries about the fiscal regulatory system in America but argued “strong” consumer sentiment and balance sheets – combined with the “right” policy – could help the economy grow by 3%.
“I’m a little more worried about the regulatory system in America, the litigious system, the regulatory system. We’re slowing down the formation of business, growth, permitting infrastructure projects. We shouldn’t have infrastructure projects take five or seven years,” JPMorgan Chase’s CEO argued. “So think, if you’re about to put $1 billion into offshore wind and all of a sudden you thought you can do it in two years, but it’s going to be 7 to 10 and you don’t know and you have to have a lot of litigation aside, are you going to do the $1 billion? And that has become a far bigger problem than dealing with certain types of smaller regulations.”
One of the problematic systems involves U.S. energy, according to Dimon, who doubled down on his support for investing in domestic producers’ plans for more pipelines and drilling permits. During a House Financial Services Committee hearing last year, the CEO had said halting funds for new oil and gas products “would be the road to hell for America.”
“I believe we should be doing things about climate, CO2, but it’s not a simple thing like just stop financing them,” Dimon said. “So if I can stop financing a good oil company, that isn’t going to help. What we need is pipelines, permits. We can’t even get the permits to build solar… we need very comprehensive policy, and I don’t think we have that right yet. I think we’re spending too much time just yelling and screaming at each other as opposed to what we need to accomplish these very important goals of climate sustainability and resiliency, and efficient and effective oil price and delivery.”
Dimon explained he doesn’t publicly blame or support one party over the other, but that the newly sworn-in Congress should put forward other “competent” policies in education, health care, infrastructure and even immigration.
“We need an immigration policy. We need to stop illegal immigration. We need more legal immigration,” the CEO said. “I would have a heart for DACA and things like that. So if we do those things right, we’re going to grow 3%.”
Rising interest rates and unwinding balance sheets from the Federal Reserve could also create an economic “problem,” according to Dimon. The Fed has indicated taking $2 or $3 trillion of cash out of its balance sheet by selling securities.
“At one point, that may cause all of this volatility in the markets and stuff like that. And they’ll have to deal with it when they get there,” Dimon said. “And part of it is rules and regulations, part of it’s the money, part of it’s the fiscal stimulus. It’s kind of a complex type of thing. But I do expect at one point they’ll cause a problem.”
Preparing for an economic “crisis” means gathering the best weapons in your personal arsenal to avoid economic volatility fueled by policy, Dimon noted.
“In terms of crisis, it’s having the army to fight it beforehand, proper margins, proper accounting, and then when they happen, you better move very quickly and kind of do the right thing,” he said. “It’s the type of thing that Warren Buffett refers to, it doesn’t go backward, it may stop going forward sometimes, but it’s always growing and innovating. And part of it is this enormously prosperous economy, which we need to make sure we keep prosperous.”