On Monday, the S&P lowered its outlook on the debt of the United States government from ‘stable’ to negative. While the ratings stayed at AAA, the outlook is cause for concern. In 2010, gross debt and the budget deficit in the United States were 91.6% and 10.6% of GDP respectively. The numbers imply that the average person in the U.S. is carrying a debt load of $43,152.80. To put things in context, the average per capita income in the U.S. is $33,070 and the median is $46,000.
The recent downgrade in outlook speaks to the fact that the magnitude of our debt relative to income is more akin to the distressed nations in Europe (gross debt to GDP is 83.3% in Portugal for the same period). More concerning and the reason for the recent downgrade is that the dialogue in Washington does not bode well for the future. There does not seem to be a roadmap that we can use to navigate ourselves out of this situation. Congress it seems, does not have its act together and our elected officials are unable to speak the same language.
Business Communications 101 tells us that when firms face a crisis the first thing to do is recognize the situation and communicate a strategy and action plan to resolve the situation. Katrina and Deepwater will remain in the public mind for the scale of destruction caused but also for the poor handling of the situations by leaders in charge. The problems were equally about not communicating the solutions being planned as much as they were about not having the right solutions. On the contrary, the events of 9/11 show us that during a crisis, effective leadership demands:
- An understanding of the magnitude of the problem
- On the ground presence
- Willingness to listen
- Willingness to work together
- Communicating the plan of action to all stakeholders clearly and often
Your thoughts about how we can use these lessons to get a handle on our national debt ?