Now that ten characteristics of a successful business were covered in previous articles, how do you see them benefiting our nation’s bureaucracy? According to Neil Ducoff, Ten characteristics of a successful business (Strategies, March 24, 2014), these ten included Leadership, Business Culture, Financial Literacy, Structure & Systems, Skill Development, Everyone sells, Work Environment, Compensation, Brand Identity, and Community Service.
Whether we are referring to a business or our government bureaucracy, the core of success in either arena rests in the relationships you build in leadership and financial literacy. All the others function well as long as you have people in charge who know how to lead and inspire others at their best and have the financial savvy to keep it afloat, even thriving.
Although we tend to not see our government being run to achieve a profit, can we extend the definition of “profitability” as actually recording and reaching a balanced budget? If so, that brings us to our nation’s $20 trillion debt and where it is taking us. Just as every family needs to stay within a budget and keep debt as low as possible, how can we then ignore the almost $20 trillion public debt—of which $14.4 trillion is held by us, the public, and $5.5 trillion held by government accounts?
According to the Congressional Budget Office report, Federal Debt and the Statutory Limit, March 2017, these debt numbers are projected to climb even further. You may ask, “Why Are Projected Deficits Rising?” Deficits are projected to “. . . rise over the next three decades—from 2.9 percent of GDP in 2017 to 9.8 percent in 2047—because spending growth is projected to outpace growth in revenues . . . In particular, spending as a share of GDP increases for Social Security, the major health care programs (primarily Medicare), and interest on the government’s debt.”
Keep in mind our government has a debt limit increase option or borrowing limit that has been used for many, many years to bring us to this $20 trillion debt just for obligations currently on the books. So, how can anyone consider new programs in any area let alone pay down more than just the interest on the debt? According to the same CBO report, if Congress doesn’t legislate a debt limit increase and add immediate extraordinary measures to reduce debt from March 16 to the Fall 2017, the Treasury will run out of money to pay existing obligations. “. . . . At such time, the government would be unable to fully pay its obligations, a development that would lead to delays of payments for government activities, a default on the government’s debt obligations, or both.”
Those obligations include stopping, limiting, or delaying payments in Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and many other commitments. To avoid a default with the now-past March 16 cut-off, the Treasury will use some bookkeeping maneuvers to continue to finance government operations through the summer 2017 that includes making interest payments on the national debt. Those maneuvers will be exhausted by sometime in the fall. So, if our debt limit isn’t increased, our nation will default for the first time ever.
Defaulting on those legal obligations would cause severe hardship for American families. Additionally, it would call into question the full faith and credit of the United States government – a pillar of the global financial system. The ensuing financial crisis from a default would have catastrophic economic consequences, potentially including the loss of millions of American jobs. And it would lead to higher borrowing costs, reduced retirement savings, and lower home values for families across the nation. You can follow along on what our government is doing about our debt limit page at U.S. Department of Treasury.
We will all need to watch and see if the Congress again raises the debt limit ceiling as they have 78 times since 1960 by both Democrat and Republican Congresses. According to CBO’s report, The 2017 Long-Term Budget Outlook (March 30, 2017), “At 77 percent of gross domestic product (GDP), federal debt held by the public is now at its highest level since shortly after World War II. If current laws generally remained unchanged, the Congressional Budget Office projects, growing budget deficits would boost that debt sharply over the next 30 years; it would reach 150 percent of GDP in 2047. The prospect of such large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges.”
The next question is “As the interest on the debt mounts, how does President Trump’s 2018 budget handle reducing this enormous debt burden?”