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Whoever wins the U.S. election may well have an unenviable task on their hands: bringing back into balance the nation\u2019s public debt<\/a> compared to its GDP.<\/p>\n But JPMorgan CEO Jamie Dimon believes this work is absolutely critical<\/a> because if the White House doesn\u2019t get out in front of the problem<\/a>, its hand will be forced by the market.<\/a><\/p>\n The challenge of wrestling down America\u2019s debt-to-GDP ratio<\/a> will not be a popular one: it could result in cuts to existing public spending or a tightening of the growth-focused fiscal stimulus that the public has grown accustomed to in recent years.<\/p>\n Yet without a reckoning Dimon\u2014and many other high-profile market figures\u2014warn the U.S. economy is headed for a car crash<\/a>. <\/p>\n In an interview with Swiss magazine NZZ<\/a> released Wednesday, Dimon said \u201ceventually\u201d Western countries will need to cut their spending. <\/p>\n \u201cAt $6 trillion, we have the largest peacetime deficit we\u2019ve ever had. Is that too much? I don\u2019t know,\u201d he added. \u201cBut we shouldn\u2019t find out, and we shouldn\u2019t be forced to by the market\u2014that would be the worst way to go.\u201d<\/p>\n Experts have warned what this market mutiny would look like. Joao Gomes, a Wharton Business School finance professor, told Fortune<\/em> earlier this year<\/a> than in order to continue spending\u2014thus adding to its national debt\u2014America needs to find buyers for those dues.<\/p>\n In a June 2024 update the Congressional Research Service<\/a> found nations such as Japan, Mainland China, the U.K. and Luxemburg hold the highest amounts of Federal debts. <\/p>\n But Gomes warns: \u201cIf at some moment these folks that have so far been happy to buy government debt from major economies decide, \u2018You know what, I\u2019m not too sure if this is a good investment anymore. I\u2019m going to ask for a higher interest rate to be persuaded to hold this,\u2019 then we could have a real accident on our hands.\u201d<\/p>\n If higher repayment rates\u2014which would present an inflated bill in the longer term\u2014can\u2019t be agreed upon, then Uncle Sam could find himself cap in hand with nowhere to turn for a loan.<\/p>\n This eventuality is something the 68-year-old boss of America\u2019s biggest bank has previously warned about<\/a>. <\/p>\n Speaking at the Bipartisan Policy Centre in January, Dimon warned: \u201cIf you look at that 100% debt to GDP, by [2035] I think it\u2019s going to be 130%\u2014and it\u2019s a hockey stick. That hockey stick doesn\u2019t start yet but when it starts, markets around the world\u2026there will be a rebellion.\u201d<\/p>\n The CEO who was paid $36 million for his work in 2023<\/a> doubled down this week: \u201cNo matter who becomes the next U.S. president, he has to acknowledge that we have a problem.<\/p>\n \u201cAnd we need to fix it before it\u2019s too late.\u201d<\/p>\n According to Dimon, neither President Biden nor former President Trump want to be the political leaders who turn off the spending tap. <\/p>\n \u201cThey both want to spend a lot of money and that generally has positive implications in the short term,\u201d Dimon told NZZ. \u201cWhat it means down the road remains to be seen.\u201d<\/p>\n Analysts point out that a certain level of government debt is actually a good thing\u2014indeed higher spending in recent years has been absolutely critical to steer the economy through the likes of the COVID pandemic. <\/p>\n What has people like BlackRock CEO Larry Fink<\/a> and Bank of America CEO Brian Moynihan<\/a> so worried is America\u2019s debt-to-GDP ratio.<\/p>\n This factor indicates to potential lenders how much the country owes versus what it produces and as a result, how feasible it will be for the country to pay back the debt. <\/p>\n For experts like Dimon, as well as Tesla CEO Elon Musk<\/a>, the Congressional Budget Office doesn\u2019t have fantastic news. In its latest update<\/a> it wrote: \u201cIn CBO\u2019s current projections, the deficit for 2024 is $400 billion (or 27%) larger than it was in the agency\u2019s February\u00a02024 projections, and the cumulative deficit over the 2025\u20132034\u00a0period is larger by $2.1\u00a0trillion (10%).\u201d<\/p>\n Dimon, who has led America\u2019s biggest bank for nearly two decades, would not be drawn on whether he would be in the running to begin making some of these changes. <\/p>\n For many years the Wall Street veteran has been touted as a potential presidential nominee\u2014an idea he has repeatedly shut down<\/a>\u2014or for a position such as Treasury Secretary\u2014also a notion he has rejected<\/a>. <\/p>\n Following increasing speculation about the performance of President Biden, the self-professed \u201cbarely a Democrat\u201d has found himself roped into conversations about a potential replacement. <\/p>\n Speaking this week, Dimon once again shut down such speculation, saying \u201cboth Democrats and Republicans have picked their candidate.\u201d<\/p>\n He continued: \u201cI\u2019m hoping that the next president, whoever it is, reaches out to all Americans and brings in some capable people in the new government, some real experts across the fields. <\/p>\n \u201cIf it were me [as a Democratic nominee], I would also bring Republicans in, and meet consistently with the opposition.\u201d<\/p>\n<\/div>\n\nSpending problems<\/h2>\n
Dimon doing it himself?<\/h2>\n
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