JPMorgan Chase CEO Jamie Dimon said on May 23 that President Donald Trump's large tax and spending bill could bring some stability to the economy, but does not support the goal of reducing the budget deficit.
This bill has passed an important hurdle as the U.S. House of Representatives voted to approve the initial step on May 22, mainly along party lines, paving the way for an official vote expected to take place the next day.
"I think they should pass the tax bill. It will help stabilize the situation to some extent, but is likely to increase the budget deficit," Mr. Dimon shared at JPMorgan's Global China Conference held in Shanghai.
According to Reuters, a recording of Mr. Dimon's speech at the closed event has been noted. JPMorgan has not yet made an official comment.
The new bill is expected to add an additional $3.8 trillion to the current U.S. national debt of $36.2 trillion over the next 10 years. Previously, the credit rating agency Moody's downgraded the U.S. national rating due to concerns about the rising public debt.
"I believe that the deficit will be large and will tend to continue to increase," Mr. Dimon said from Shanghai – where JPMorgan's business office in China is located.
He called on governments to spend "responsibly," while warning that ineffective spending and rigid regulations could hinder growth.
"Not only in the U.S., but many governments around the world are showing surprising ability to spend inefficiently, imposing regulations that slow down growth," he said.
Mr. Dimon believes that effective budgeting, planning, and investing will drive growth and thereby support the goal of reducing the deficit. However, he added: "I don't see that appearing in this big, flashy bill," referring to the legislation proposed by President Trump.
On the same day, Mr. Dimon shared with Bloomberg that he does not rule out the possibility that the U.S. economy will fall into a state of 'stagflation,' amid significant risks from geopolitical issues, deficits, and price pressures.
He also supported the Federal Reserve's (Fed) wait-and-see approach before any new monetary policy adjustments. Earlier this month, the Fed kept interest rates unchanged but warned that higher inflation risks and rising unemployment rates are casting a shadow over the U.S. economic outlook.
"I think the chances of increasing inflation and the economy falling into stagflation are much higher than many people think," Mr. Dimon once remarked.
