The Debt Ceiling and Unnecessary Complexity
There are several high priority items that need our attention, but a conversation regarding artificial intelligence and lifelong learning will have to wait until next week. Instead, let’s spend a few minutes this Saturday discussing the US debt ceiling, the concept of unnecessary complexity, and what it all means for you and your business. But first, a little background.
According to Gallup, as of March, 2023, the job approval rating of the United States Congress is an abysmal 20 percent. I’m included in the 78 percent of citizens who disapprove of the way Congress is handling its job. Yes, amazingly, 2 percent of survey respondents had “no opinion!” There are many reasons for my personal vote—hyper partisanship, gridlock, and a blame mindset top the list for me. If we home in on the issue of gridlock, one root cause that doesn’t get nearly enough airplay is the sheer volume of unnecessary complexity that impedes progress on issues that legislators might otherwise agree on.
Case in point is the debt ceiling. For those who need a primer, one of Congress’s primary functions is to negotiate and approve the national budget. Both the executive and legislative branches have responsibility for directing fiscal policy, but it is Congress that controls the vast majority of what actually gets approved and spent. In 1939, Congress established the country’s first cap on borrowing, and we’ve been living in a world where budgets and the amount the country can borrow must be approved in separate measures. The United States and Denmark are the only two countries in the world that have a fixed cap on the amount the government can borrow. Caps on borrowing as a percent of gross domestic product (GDP) are more common.
In the last few decades, this need to vote on how much the country can borrow after spending has already been approved has turned into a blunt instrument that is wielded by one political party to extract concessions from the other. As I look back on the debt ceiling brinksmanship that has played out within Congress and between Congress and the executive branch, I see no value that has been added as a result of those crises. Instead, economic and societal value has been destroyed in the form of increased uncertainty and government shutdowns. Maybe some political fortunes have risen as a result of debt ceiling brinksmanship, but I think we can or should all agree that there are more productive uses of an elected official’s time. From my vantage point, all I see is unnecessary waste.
Why is this discussion of the debt ceiling important for you and your business? Two things stand out:
First, most businesses function better when the economy is stable, and fiscal policy has a major impact on economic stability. Yes, there are businesses that thrive on chaos, but those are the exception and not the norm. The vast majority of us value reliability, predicability, and high-functioning governmental entities and policies that support business growth and consumer well-being. Fights about the debt ceiling do neither of these things. When an individual or business decides that it cannot pay its bills after spending has occurred, we call that bankruptcy. When an individual or business decides that it won’t pay its bills after they’ve been incurred, that’s malfeasance and fraud. Refusing to increase the debt ceiling fits in the latter category. Do we as a society really want to be known as the country that willingly defaulted on its obligations? I don’t think so.
Second, it’s instructive to hold up examples of unnecessary complexity, because I can virtually guarantee that unnecessary complexity exists in your business or institution. Once you become aware of the concept, it becomes easier to identify and mitigate. The tool I like to use is the “five whys.” As a quick reminder, the five whys is a line of inquiry aimed at the discovery of the root cause of a challenge or business failure. While there are times when you can literally ask why over and over again to determine root cause, the more likely scenario is deeper and deeper exploration of a challenge through well-crafted questions that probe an issue from multiple perspectives to “peel back the layers of the onion.” It’s amazing how much non-value-adding work and unnecessary complexity can be identified once your colleagues are empowered to ask “why” and to do something about minimizing the waste they see around them.
Before we finish today’s Muse, it’s important that you know I am in support of efficiency and controlling spending at all levels of government. I’m concerned about the mountain of debt that we’re passing on to future generations. While some debt is good, we should all be alarmed about the nation’s debt-to-GDP ratio. Businesses, institutions, and individuals make budgetary and borrowing decisions that are congruent with one another. Is it too much to ask our elected officials to do the same? All they have to do is pause and ask: “Why do we keep going around and around with the current system? Why does the debt ceiling exist?” If the answer is that it serves the function of a political bargaining chip and adds no value to society, then let’s ditch “the way we’ve always done it” for new models that are indeed value-adding to constituents. Let’s ditch the debt ceiling.
