Debt Deals & Possible Scenarios for the US
We are getting closer and closer to the edge of a potential financial disaster with both sides taking strict partisan stands. Unfortunately this is what US politics has become and I fear will stay as the growth of constant news, elections and funding cycles continues.
Beyond the politics it is interesting to look at the potential scenarios if the US does or doesn't reach a deal to raise the debt ceiling. Goldman Sachs put together an excellent presentation that outlines what could happen, which I have linked to in the source of this post. The scenarios are a long-term debt deal is reached, a short term debt deal is reached and no debt deal is reached. Most of these prove to be disasterous to the US taxpayer, corporations, federal workers and other critical pieces of the government.
The big question for me is how a rational business would react if they were faced with a similar situation? If I were faced with the decision to cut costs, raise additional capital or do nothing it would be based on a solid analysis of the business climate and the future prospects for the business. How would these decisions affect our ability to compete in the market and continue to operate in the best interest of our shareholders.
In the case of the government they should be worried how the cuts help the US compete in the future and what is in the best interest of the shareholders, who are the US taxpayers. The proposed cuts I have seen are based on stakeholder interests that involve corporations, military, unions, essential services and the security of the citizens. Most if not all of the spending cuts are short-term focused and will not help the US compete against other countries who are better aligned around a common cause or strategy.
To make America competitive, safe, clean and sustainable the debt deal should be a catalyst to drive America forward and force the hard choices that otherwise wouldn't be made. Other companies, countries and organizations have reached this same point and come out better, while others have not. I fear the US is acting like a large organization who can't agree on a strategy and are fighting over the limited money that is left.