Tag Archive for 'federal deficit'

America needs a turnaround plan - now!

When a company is in danger of failing, a turnaround specialist is often engaged to create drastic changes to help the business turn itself around before a default happens. After a failure, the same people - now called work-out specialists - try to salvage what they can from the catastrophe.

If your small business were in the same condition the U.S. government is in today, it would definitely be in immediate need of a turn-around pro now, or a workout specialist later.

Perhaps you’ve heard experts say America is bankrupt. However, the classic definition of bankruptcy is when financial obligations exceed the value of assets. By some estimates, the U.S. has over $50 trillion in sovereign assets, which is more than three times the current national debt.

We’re not bankrupt - yet. But the government does have an unsustainable business model. Remember, you will be out of business long before bankruptcy if your business model consistently fails to generate positive cash flow. And in such an operating condition, no creditor will make even an asset-collateralized loan to merely extend the inevitable collapse of a defective business model.

The recent steep rise in our national debt is caused by the government’s deficit spending, which results from a combination of current operating cash requirements, including servicing the debt. If your small businesses were in this condition, it would be said to have unsustainable negative cash flow and, therefore, not creditworthy. Plus, the national debt is now on par with GDP (about $14 TRILLION). The creditworthiness of any business with this debt-to-revenue ratio would diminish rapidly.

Government entitlements are almost 60% of the federal budget and growing because they were committed without actuarial basis to allow for sustained funding. Consequently, more than anything else, America’s business model is unsustainable due to generous 20th century expectations being redeemed in an austere 21st century reality.

Against the laws of economics, the only advantage a government has over a business is that it can print money. But that advantage only provides time, not solutions. We can’t kick this can down the street any longer. America has to have a national gut-check about how we will self-impose a drastic financial turnaround plan before our creditors demand an ugly and likely catastrophic workout.

As in your small business, only leadership can solve our national financial problems.

On my radio program, The Small Business Advocate Show, I talked more about what we need to do to take America back from the political class and work out of this economic slump. Take a few minutes to listen to click on the links below and listen to what I have to say. As always, please let me know your thoughts on the economy and what needs to be done.

America needs a turnaround plan

Americans run America, not politicians

Small businesses must be lean, mean fighting machines

Small business lessons for Washington

There are innumerable issues and circumstances that can create obstacles to small business success. Whether internal or external, most of these factors occur naturally in the course of doing business, and dealing with them just comes with the territory.

But there is one issue that small business owners shouldn’t be threatened with: poor performance of Washington’s political class.

The marketplace is indifferent to, and unforgiving of, the poor performance of any small business. But what is the small business appeal process when government behavior compromises the greater economy?

Job-one for small business owners is to keep their financial affairs in order – cash flow, profitability, etc. Failure to do so negates positive performance of all other activity.
Job-one for members of Congress is to appropriate the funds for the short and long-term financial operation of the government. Since the federal fiscal year begins on October 1, it follows that the budget and associated appropriations should be completed by September 30. At least that’s how things work in a small business – in the real world.

Without any sense of shame, it apparently seems normal to the Washington political class to still be debating the 2011 budget and funding process with less than half of the fiscal year remaining. Without any sense of embarrassment, the political class continues to behave in such a way as to be regularly compared to a Kabuki dance.

Kabuki is a form of Japanese theater in which characters dress, dance and behave on stage in ways that require the audience to suspend any sense of reality to enjoy. Sadly, few metaphors are more apt today.

We wanted to know what my radio, Internet and Newsletter audience thought about the behavior of America’s Kabuki cast of characters, so we asked this question: “Who is to blame for how Washington is handling the 2011 budget process?”

Even though both major political parties were offered up as the first two options, the response to the third is at once dramatic and hopeful. Almost 60% of our sample chose: “A pox on both houses; both are incompetent.”

If this super-majority sentiment is representative and endures to November 2012, all candidates may be required to demonstrate that they will operate the government as a successful small business owner does – in the responsible, real world.

Perhaps it would be enough just to have a sense of shame.

Last week on my radio program, The Small Business Advocate Show, I talked more about the lack of statesmanship and political shenanigans going on these days in Washington, D.C. Take a few minutes to click on the links below and leave us your thoughts on how you think the political haranguing should be resolved.

Washington’s Kabuki Dance: Without any sense of shame

America’s canary in the mineshaft




Warning: fsockopen() [function.fsockopen]: php_network_getaddresses: getaddrinfo failed: Temporary failure in name resolution in /var/www/wordpress/wp-includes/class-snoopy.php on line 1142

Warning: fsockopen() [function.fsockopen]: unable to connect to twitter.com:80 (Unknown error) in /var/www/wordpress/wp-includes/class-snoopy.php on line 1142