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- JPMorgan CEO Jamie Dimon urged Washington to boost the economy.
- His proposals include investing in American industry, teaching students workplace skills, and expanding the Earned Income Tax Credit.
- CEOs of Apple, Tesla, and other major companies have proposed industrial policy and reducing income inequality.
Corporations have long wanted the US government to just get out of the way. Now, some of the biggest CEOs want it to lead.
In his annual letter to shareholders last week, Jamie Dimon, CEO of JPMorgan, called the US government the "silent partner" of the world's largest bank, joining Warren Buffett, CEO of Berkshire Hathaway, and Elon Musk, CEO of Tesla, who've either affirmed the benevolent role the US government can play in shaping the economy or benefited from its policies.
Forecasting "storm clouds ahead," Dimon wants the government to drive economic growth by subsidizing industry, investing in the workforce, and reducing income inequality.
Following in Buffett's footsteps, Dimon said JPMorgan owes its business success to the "extraordinary conditions our country creates" for economic growth. The language harkens back to the "liberal consensus" that lasted roughly from end of the Second World War to the 1970s in which Democrats and Republicans largely agreed that the federal government should carry on the New Deal tradition of government-led growth and social welfare.
Though the US today has not just come off a world war, the country is battling sluggish growth, high inflation, and persistent labor shortages. To address these contemporary problems, "Policy should precede politics" and be based on facts, analysis, and expertise, Dimon said.
Government can lead industry
To improve "American competitiveness" and re-establish the "American promise" of "equal access to opportunity for all," Dimon proposed the US government develop a deliberate industrial policy that would drive growth and protect national security. He cited Biden's Inflation Reduction Act and CHIPS Act as "indirect" policies which "provide specific incentives" for electric vehicles, semiconductors, rare earths, and alternative energy sources. Dimon argued industrial policy would counter "unfair economic competition" from China whose subsidies and economic dominance could disrupt access to vital products and materials.
This growth strategy has historical precedent. When the US was engaged in the Cold War race for economic, technological, and geopolitical dominance with the Soviet Union, President Dwight Eisenhower created DARPA to streamline research and development of technology in the Department of Defense and NASA to intensify civilian space exploration and research, according to the Eisenhower Memorial Commission. These investments gave us innovations like the internet and GPS without which Big Tech companies would not exist.
Notably, just as Biden's infrastructure law has flushed the economy with cash for roads, bridges, and "good-paying jobs," the Eisenhower administration invested billions into the interstate highway system we use today.
Similarly, renewable energy is a growing domain of geopolitical economic competition. Elon Musk has called for a carbon tax to move the country and world away from fossil fuels to alternative energy sources like solar. His businesses like Tesla and SpaceX have received billions of dollars in government contracts and tax credits, though the CEO has criticized government regulation and subsidies, even those from Biden's infrastructure law that would go to electric vehicle manufacturers.
Akin to Musk, Dimon said he didn't want the government to micromanage industry, believing "Adam Smith's invisible hand still prevails." Rather, the scope of industrial policy should come with "very strict limitations on political interference and related comprehensive policy around factors like permitting requirements" to promote investment and "allow infrastructure to be built."
Reducing inequality through job training and a living wage was and is good for the economy
Beyond using the government to directly embolden American industry, Dimon told investors greater equality of opportunity would boost economic growth.
Fixing "income inequality will reignite the American dream," he told shareholders.
For Dimon, that begins with jobs. Citing that there are 10.8 million job openings and only 5.9 million unemployed Americans, Dimon said policy should help high schools and community colleges work with local businesses "to create specific skills-training programs, internships and apprenticeships that prepare graduating students to be job ready."
For years, CEOs like Musk and Apple's Tim Cook have said colleges fail to teach skills for today's job market and their companies hire for skills, not degrees. Recently, some states have dropped college degree requirements for government jobs, which former President Barack Obama has said "reduces barriers to good paying jobs."
These pushes to ready the workforce mirror the Servicemen's Readjustment Act of 1944, better known as the G.I. Bill, which provided veterans with funds for college education to prevent mass unemployment when the troops returned after the Second World War. Finding higher education to be "no longer a luxury, but a necessity" in a rapidly changing economy, President Lyndon Johnson pushed for the Higher Education Act of 1965 to increase federal research funding and expand access to higher education through financial aid.
Though demographic shifts mean the US now has too few workers rather than too many, Dimon said, "work-skills training has never been needed more."
Last of all, Dimon urged the government to provide "more income to lower-paid workers." He suggested expanding the Earned Income Tax Credit, a tax refund that allows lower-income working individuals and families to keep more of their earned income.
Dimon even proposed converting EITC "into a negative income payroll tax, paid monthly," bringing to life an idea President Richard Nixon, a Republican, conceived and abandoned at the tail end of the liberal consensus. Nonetheless, the high income tax rates of the postwar era financed redistributive programs like Social Security, which Lyndon Johnson expanded to include healthcare with the Medicare and Medicaid Act of 1965 as part of his War on Poverty.
Dimon's proposal of a negative income tax follows the growing popularity of universal basic income guaranteeing a minimum standard of living for every American, which Musk said the country "obviously needed."
Buffett has also touted expanding EITC, coupled with raising income taxes on the wealthiest Americans, to reduce inequality. Dimon didn't mention tax policy in his letter but insisted JPMorgan should and does pay its "fair share" in taxes, noting they've paid $43 billion in US federal, state, and local taxes in the last 10 years.
Dimon insisted that expanding EITC "would do more than anything else to lift up lower-income neighborhoods" and that additional income would go right back into the economy.
These government policies would help business, he said, as "shareholder value can be built only if you maintain a healthy and vibrant company, which means doing a good job of taking care of your customers, employees and communities — in other words, stakeholders.
"We require a 21st century government," Dimon said, but these ideas of his and other CEOs have their roots in a century earlier.