I want to share with you something that's been bothering me for a while now... Jamie Dimon, Chairman and CEO of banking giant JPMorgan Chase, recently released his annual letter to shareholders. Dimon is, as you might imagine, smart as a whip. In fact, Buffett says he considers Dimon's shareholder letters indispensable reading.
Two lines stuck out from Dimon's latest missive:
"The United States of America is truly an exceptional country... But it is clear that something is wrong -- and it's holding us back."
I've got to be honest... this has stuck with me for weeks. It's something I've been thinking long and hard about for the past few years, and I'm willing to bet you've at least felt it on some sort of visceral level yourself.
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Dimon offered little in the way of prescriptions. Rather, I think his main goal was to articulate his view of the problems as he best sees them, and attempt to get the conversation going. This is a good first step.
This, of course, does not have anything directly to do with investing, per se -- but it does impact the way our nation functions and how our economy operates. So in the spirit of getting the conversation going, I want to share a few bullet points with you from his letter today.
-- Our economy has been growing much more slowly in the last decade or two than in the 50 years before then. From 1948 to 2000, real per capita GDP grew 2.3%; from 2000 to 2016, it grew 1%. U.S. productivity growth tells much the same story.
-- This lower growth has been accompanied by -- and may be one of the reasons why-- real median household incomes in 2015 were actually 2.5% lower than they were in 1999. In addition, the percentage of middle class households has actually shrunk over time.
-- Over the last 16 years, we have spent trillions of dollars on wars when we could have been investing that money productively. (I'm not saying that money didn't need to be spent; but every dollar spent on battle is a dollar that can't be put to use elsewhere.)
-- Since 2010, when the government took over student lending, direct government lending to students has gone from approximately $200 billion to more than $900 billion -- creating dramatically increased student defaults and a population that is rightfully angry about how much money they owe, particularly since it reduces their ability to get other credit.
-- It is alarming that approximately 40% (this is an astounding 300,000 students each year) of those who receive advanced degrees in science, technology, engineering and math at American universities are foreign nationals with no legal way of staying here even when many would choose to do so. We are forcing great talent overseas by not allowing these young people to build their dreams here.
-- Felony convictions for even minor offenses have led, in part, to 20 million American citizens having a criminal record -- and this means they often have a hard time getting a job.
-- Labor force participation is too low. Labor force participation in the United States has gone from 66% to 63% between 2008 and today. Some of the reasons for this decline are understandable and aren't too worrisome -- for example, an aging population. But if you examine the data more closely and focus just on labor force participation for one key segment; i.e., men ages 25-54, you'll see that we have a serious problem... the participation rate for that cohort has gone from 96%in 1968 to a little over 88% today. This is way below labor force participation in almost every other developed nation.
-- If the work participation rate for this group went back to just 93% -- the current average for the other developed nations -- approximately 10 million more people would be working in the United States. Some other highly disturbing facts include: Fifty-seven percent of these non-working males are on disability, and fully 71% of today's youth (ages 17–24) are ineligible for the military due to a lack of proper education (basic reading or writing skills) or health issues (often obesity or diabetes).
This is just the tip of the iceberg in terms of the problems Dimon lays out. I'll spare you the details (for that, I've linked to the letter below). But some other "highlights" include:
-- Education is leaving too many behind.
-- Infrastructure needs planning and investment.
-- Our corporate tax system is driving capital and brains overseas.
-- Excessive regulations reduce growth and business formation.
And perhaps most troubling of all, Dimon points out, is that "The lack of economic growth and opportunity has led to deep and understandable frustration among so many Americans."
For the record, I agree with most of the contentions spelled out in Dimon's letter. And I do, in my head and my heart, believe America is an exceptional country. But, yes, something is holding us back.
If you care deeply about this idea, then I encourage you to read the letter and all of its supporting information (the big-picture stuff begins on page 32). Formulate your own opinion. It's time we all start thinking about these issues and talking about them in a civil manner.
If you'll allow me, I'd like to end things by asking you this: What are your thoughts? Do you think Dimon is right? What are some of the other problems we face (and what can be done about it)? Send an email to Editorial@StreetAuthority.com and let us know what you think.
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