Recently, JPMorgan Chase CEO Jamie Dimon made the news when he expressed feelings of frustration towards the U.S. government during the company’s earnings conference call. His agitation? That the present status quo of political bickering, discord, and red tape, in Dimon’s assessment, is hobbling the American economy. Instead of rocketing ahead, Dimon sees us as moving at a snail’s pace.
His exact words painted a grim portrayal of prosperity hitting a brick wall: “Since the Great Recession, which is now 8 years old, we’ve been growing at 1.5 to 2 percent in spite of stupidity and political gridlock, because the American business sector is powerful and strong,” he said. “What I’m saying is it would be much stronger growth had we made intelligent decisions and were there not gridlock.”
Dimon’s outburst came on the heels of a question from an analyst during the earnings call about our current policy and tax reform. In a moment of ire, Dimon used the opportunity to chastise Congress for being unable to agree on anything – issues like health care, a budget, tax reform, and repatriation of foreign assets.
The diatribe could be seen by some as Dimon positioning himself for a run for office, but the reality is that his comments weren’t that calculated. Instead, they just gave voice to Americans who are irritated at the pace of business in the U.S. under the current regime of bureaucracy, regulation, and gridlock.
We’ve seen this type of frustration in voters across the U.S., the European Union, the UK, and other places around the world. Think about it. In the UK, Niegel Farage garnered enough support to drive the UK to leave the EU. In the Philippines, there was Rodrigo. In France, there was Le Pen. And in the U.S., there were droves of supporters for both Bernie Sanders and President Trump.
Plainly and simply, the common thread among all these movements is and was pushback against the establishment. And the genesis of this pushback is clear – it’s rooted in the economy. A lack of prosperity, growth, or progress in any economy – from South American to Russia to the U.S. – can engender real feelings of frustration. And these feelings can incite change.
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So how poorly is the U.S. economy currently performing?
When we consider where we are now, it’s important to also look to where we were. From 1965 until 2008, the U.S. economy grew 3.1% per year on average. Since the Great Recession, we’ve been growing at 1.9% – 2.0%. While these numbers at first glance don’t seem disparate, consider that they represent a 35% slow down in what was a more than 40-year trend.
You could say that, economically, we’ve been cruising around 60 mph for four decades and have now dropped it down to 39 mph. Any driver knows that can feel like a crawl.
The real number behind this slow down is $2.6 trillion – the amount the economy has lost since 2009. Something broke during the recession of 2007 – 2009, and it’s led to slower growth ever since. Back to our automobile analogy, while the drop from 60 mph to barely capping 39 mph certainly feels like a drastic downshift comparatively, it isn’t as drastic when you consider the whole picture.
Back to Dimon, his other comments have called the U.S. “one of the most bureaucratic, confusing, litigious societies on the planet” and “almost an embarrassment.”
And he wasn’t aiming to speak on behalf of all corporations but on behalf of all Americans. Dimon went on to posit that “if this administration could make breakthroughs in tax reform and infrastructure and regulatory reform” on a corporate level, it is exactly what will translate for growth in small businesses, jobs, and wages. And hence, fill the gap of the $2.6 trillion growth we’ve been missing since the Great Recession.
We know political instability can create economic instability, but we need remember that the inverse is also true. Our current economic lag seems to be feeding more and more political discord, and giving rise to comments like the ones from JPMorgan Chase’s CEO.
Politics and the economy are so intertwined that there is an actual political discourse index that puts statistical numbers on conflict in Washington. Called the Partisan Conflict Index, it was invented by economist Marina Azzimonti and is maintained by the Federal Reserve Bank of Philadelphia. How does it work? Simply put, it measures the number of times certain words – words like “gridlock,” “veto,” and “filibuster” – are used in major publications like the Wall Street Journal, LA Times, and Chicago Tribune.
In 2008, this index stood at about 80. As of this past June, it soared to over 200. And it’s 24% higher than it was two years ago. The peak was in October of 2013, due to the brief shutdown of the federal government. Research from creator Azzimonti has demonstrated that elevations in this type of discourse slow down corporate investments, and in turn slow down the pace of economic recovery.
Is Dimon’s rant a fair assessment of the current issues facing the U.S. economy?
My vote is yes. However, I also believe that at the root of frustrations that the economy isn’t pacing at a “bigger-better-faster-more” rate is a failure to appreciate that, despite political discord, we continue to experience healthy growth.
Where does this leave us? While the economy may not be clipping along just yet at the rate it’s enjoyed for 40 years, it will undoubtedly get back up to speed. Never underestimate American ingenuity and resilience. In the famous words of Warren Buffett, “For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”