What this borrowing (and its related interest payments) will ultimately mean for the economy remains to be seen: Theories range from a market “reckoning” through to public investment being crowded out by spending on debt maintenance. Others suggest inflation will merely be allowed to rise, ultimately lowering the real value of the debt.
JPMorgan Chase CEO Jamie Dimon, however, is alarmed: The Wall Street veteran knows better than to predict when the issue may come to a head—but he is certain that the nation’s fiscal trajectory cannot be ignored forever.
“The best way to deal with the problem is to actually deal with the problem, to acknowledge it, to work on it,” Dimon told NPR’s Newsmakers podcast. “Years ago, we had a solution, the Simpson-Bowles Commission. It didn’t get done. I wish it had gotten done. It would have been a home run for all of Americans, and it would have resolved some of these issues.”
Dimon was referring to the work of President Obama, who oversaw the creation of the bipartisan National Commission on Fiscal Responsibility and Reform, commonly known as the Simpson-Bowles (or Bowles-Simpson) Commission. The ensuing report made several recommendations: cutting discretionary spending, reforming tax law, and reshaping health care spending.
While many of the suggestions from the commission have proved a basis for policy arguments when it comes to government spending, none of the conclusions of the report were ever formally brought into law.
Dimon highlighted that a vast chunk of government spending (and hence, borrowing) is “set in stone” because it relates to Medicare, Medicaid, and Social Security. According to the Congressional Budget Office’s (CBO) most recent full-year calculations, this mandatory spending accounted for $4.2 trillion of a total $7 trillion spending for 2025.
“I think we should work on it, but I don’t know—and again, I don’t think anyone can predict: Does it become a real problem in six months, six years? I don’t know—I do know it will become a problem, and the way it would exhibit itself is volatile markets, rates going up … bond vigilantes, people not wanting to buy United States Treasuries, [the U.S.] will still be the best economy, but they’ll not want to own U.S. Treasuries,” Dimon explained. “So we should deal with it sooner than later maybe, and if it gets done that way, it’ll be kind of crisis management which we’ll get through—it’s just not the right way to do it.”
A bipartisan issue
Over the years, both Republicans and Democrats have failed to meaningfully address the issue.
Proposals have been put forward by independent groups: The Committee for a Responsible Federal Budget has continually advocated for a federal unified budget deficit at or below 3% of GDP. (At the moment it’s around 6%.) This idea has been backed by Rep. Bill Huizenga (R-Mich.) and Rep. Scott Peters (D-Calif.), the cochairs of the Bipartisan Fiscal Forum. Indeed, the entire steering committee for the forum has supported the notion and introduced a resolution to that effect.
“Neither Democrats or Republicans have really focused on this for a while. It comes up all the time and you talk and you walk the halls of Congress, I mean, almost everyone knows,” Dimon added. “It’s just we haven’t had the will yet to actually deal with it, and it’s unfortunate because it can end up with a real problem, worse than it would otherwise have been. Good policy is free.”
Indeed, economists and analysts aren’t necessarily worried about the level of government debt, rather the debt-to-GDP ratio. Depending on who you ask, the debt-to-GDP ratio stands at around 122% of GDP at present. This measure demonstrates an economy’s spending versus its growth, and the risk associated with lending to a nation that isn’t growing fast enough to handle its spending. To rebalance that ratio, an economy could either cut spending or increase growth—the latter being by far the less painful option.
Dimon is bullish on the strength of the U.S. economy, saying it should aspire to hit 3% growth if not “even better than that.”
“If we grew at 3% and not 2% … the debt to GDP would start going down,” he added. “This is the most innovative nation the world’s ever seen. And so I think we should focus a little bit in that to solve the problem too, not just raise taxes or cut expenditures.”
