Sunday, July 24, 2011

Leadership is Needed to Solve the Debt Crisis

The national debt is a big problem, a very big problem, perhaps the greatest threat to our national well-being in many generations. The problem extends beyond the debt ceiling deadline of August 2. The S&P credit rating organization has repeatedly warned that it may downgrade U.S. debt if any deficit-reduction deal is not robust enough to change the trajectory of the country's future debt growth. A downgrade may come even if officials agree to raise the debt ceiling. Any downgrade would drive interest rates through the roof. Ask the Greeks who now must pay 26.6% interest on 2-year government bonds (the interest on 2-year U.S. bonds is 0.46%).

We, as a country, collectively need to bring into balance our government expenditures and tax revenues. The U.S. now borrows 42 cents of every dollar it spends. This is not sustainable and has created a mountain of debt. Most of us cannot grasp the magnitude of our national debt at $14T. By coincidence, $14T is roughly equal to the total debt outstanding of all home mortgages in the U.S. Think about the debt you owe on your home and how long it is going to take to pay it off. Now double that amount, because you are also going to have to pay your share of the debt owed by the federal government. The data is startling. The good news is that everyone seems to agree that our debt and deficits must be addressed now. A divided government, which shares the responsibility, presents a great opportunity for compromise on the difficult decisions that need to be made.

The bad news is that our divided government seems to be stuck at an impasse. As we get closer to this first challenge presented by the debt ceiling deadline, both sides are becoming more entrenched and more vitriolic in their rhetoric. I have been seen politicians, the media and even some friends become more negative and accusatory on this issue. I have experienced this same downward spiral before in business. When things go bad, the morale, teamwork and ability to make difficult decisions can easily be lost. Self interest can become more imperative than the common good. The underlying cause of such pessimism is always a lack of leadership.

Now is a pivotal moment where true leadership must emerge to lead us all in a new direction. This leadership does not necessarily need to come from the top, but leadership is necessary to bring us all together. I know that our country has faced and conquered greater challenges than this one, and that our citizens have and will step up to do whatever is necessary. We are willing to share the burden as long as we know it is a shared sacrifice and that it will solve the underlying issues.

What are the leadership steps necessary to confront great challenges?
  • clearly communicate the challenges and a vision of what is necessary to overcome them.
  • find common ground based upon shared values.
  • open a dialog that shows respect and understanding for all viewpoints.
  • build consensus among all stakeholders with transparency and open dialog.
  • collectively define a path forward based upon the shared values.
  • describe what is necessary and ask everyone to participate in the solution. 
I have found that people will do extraordinary things when asked. In return, they expect to be included in the reasons and solutions. They want to know that everyone is in it together and that there is a plan for success.

In this situation, the American people are being left out of the debate. We hear criticism from both sides on how bad the opposing approach is. This keeps us from reaching a compromise that addresses the underlying goals of both sides. The debt crisis is a collective problem that needs a collective solution that involves everyone. There is much common ground. We are all Americans and want to ensure a prosperous future for our great country. Here are some shared values that our leaders can build upon:
  • We believe that a free society with opportunity for all creates tremendous prosperity.
  • We believe that initiative and hard work should be rewarded.
  • We are charitable and believe in helping those is need.
A great leader can explain to the American people why we need to make shared sacrifices to overcome the serious problem that confronts us. A great leader would explain what needs to be done and how it will return us onto the path that will ensure prosperity long into the future. We need a leader to show us the way.


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