USA National Debt Like Household Debt Will Fall Only With Lifestyle Changes
I worked in the aluminum industry for 32 years, about 25 as a senior executive in finance, planning, strategy, and general management. My company’s performance ebbed and flowed with the economy--from boom to bust. As we tried to lower depths of our fall in each recession, it became clear we had to focus on our costs’ structure.
Simply, cutting discretionary spending (programs) ahead of and during recessions was not enough to sustain us. We had to lower our break even costs by reducing fixed costs in each business segment. This led to us exiting many businesses to get enough flexibility to give adequate returns to our shareholders through business cycles.
It took years to decide and do the right thing. We had tough choices affecting many lives, but we had to do it to survive. This is where the USA’s national debt crisis lies today. But sadly, Congress is polarized along party lines and are not facing realities.
Look at the past four years! Since September 2007, the debt ceiling rose six times from $9.8 trillion to today’s level $14.3 trillion. It will increase again, and again, and again, unless, the Government lowers its fixed cost significantly. This means structural changes to entitlement programs. Are the parties ready for this with an election on the horizon? I do not think so. That’s why the ceiling will rise at least one more time in the next twelve months.
Then again, overlooked in these discussions is the other crisis, household debt. The hike in the national debt paralleled that in household debt up to the 2008 recession. With rising unemployment, and less spending power, household debt started to fall. But here is how the Government exasperated its problem: As more people turned to Government for help, unwisely, government embarked on the ill-conceived stimulus program to generate even more debt--”creating jobs” at $278,000 per job!