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Kimberly Amadeo

Dimon Says Once Fiscal Cliff Is Solved, Economy Will Grow 4%

By December 12, 2012

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Today, JPMorgan Chase CEO Jamie Dimon said at an interview on CNBC that the business community would easily accept a higher tax rate IF entitlement spending is curbed. He added that both Obama and Boehner know that this will be the deal. All that remains is to outline exactly what the rate will be and what specific cuts will be made. He predicted that, once the fiscal cliff is resolved, the economy will grow at a robust 3-4% rate.

Let's keep in mind that "entitlement spending," which sounds like something the government is giving to people who feel entitled, is really mostly spending that will support you when you turn 65. For everyone in the U.S. is "entitled" to receive Medicare, which is $523 billion in the FY 2013 budget. Most people are also entitled to receive Social Security, which is $820 billion.

When most people think of entitlement spending, they think of programs to help lower income families, which totals $654 billion. This includes a whole series of programs, such as Food Stamps, Unemployment Compensation, Child Nutrition and Tax Credits, Supplemental Security for the Disabled and Student Loans. The other program for the lower income folks is Medicaid, which is only $283 billion. This is unlikely to be cut, since it is being expanded through Obamacare.

However, the single largest budget item is not even on the table. That's military spending, at $851 billion in FY 2013.  Can anybody explain to me why this isn't even on the table for discussion? Naturally, we want to stay safe from any other terrorist attacks, like 9/11. However, shouldn't we be talking about slicing some from this budget before we talk about cutting programs for seniors? Shouldn't we be challenging the Defense department to be more efficient?

In fact, a group of retired Generals advocate cutting Pentagon spending, saying that future wars will not require investment in expensive equipment like the F-35 joint strike fighter. In fact, more was spent on that development than on all veterans in the last 20 years. (Source: CNN, Generals: Cut Pentagon Spending, December 12, 2012)

Dimon made an unrelated good point about income inequality. He said he didn't like that the U.S. was so unequal, but that the problem wasn't because bankers were paid what they were worth. It was because opportunities for education weren't equal.  He wanted to expand education to as many people as possible to increase the mental capital of the U.S. He said that immigration needs to be fixed, to allow the smartest people in the world to not only get educated, but to continue to work in the U.S. instead of sending them home. (Source: Live testimony on CNBC)

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Comments

December 16, 2012 at 8:04 pm
(1) Chan says:

The question of clearing the big fiscal cliff is the big Trillion dollar question. The whole point of struggle in America is struggling the fiscal cliff.It is not that easy as they say to clear the fiscal cliff.That means Americans should not borrow any money untill they clear fiscal cliff to zero which is highly impossible without making the further debt.

December 17, 2012 at 1:23 pm
(2) useconomy says:

Chan, I completely disagree. The fiscal cliff is a result of the elected officials putting off the conversation they are trying to have now. It is basically a budget issue…how do we bring down the deficit? You either cut spending, raise income (ie taxes) or both. It’s really not that difficult a problem to solve. It’s just the process has become really dysfunctional. Which leads me to wonder if they have the ability to solve greater problems — like how to reduce the number of violent attacks like the one in Sandy Hook Elementary School and the Aurora movie theater.

December 18, 2012 at 1:56 pm
(3) Chan says:

You came to the point that these kind of violent attacks at sandy hook elementary hook school also conributes to the downfall economy,this is the exact thing i am telling that the crime is too much in US and when these type gun violence occurs the public money is not in use properly towards development and each violence creates dent in the economy and this kind of violence has taken place very frequently from the past at least two decades causing billions of dollars loss. Thse gun culture has been taken very easily to kill each other in public no matter what kind of talks take place it is not justified for the citizens to right to carry a gun.The budget on the crime is 5 billion dollars which may not even the budget of european countries.these ammounts to big loss for the economy and like this has been taken place continiously for so many decades.i hope you agree that this kind of activity is also a cause to deficit.this is one sort of example and like this there are so many.i think these are not the ways to build the economy.i am not an economist but out of my commonsense i wrote like this.i hope this s correct to some extent.there are so many problems to be solve.to correct this and several other problems at least it takes not less than five years.no problem is by itself but as obama said it is cascaded.do you agree this kim.

December 18, 2012 at 2:17 pm
(4) Kimberly says:

Hi Chan,

You raise a good point. I haven’t researched the economic cost of gun violence, but I know the cost of domestic violence is $67 billion. Of course, the cost of defending our country using violence (aka war) is $800 billion a year.

As I said, the resolution of the so-called fiscal cliff is easy. For example, if we just focused on reducing violence, and we’d be well on our way.

Kimberly

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