Stephen Covey, author of “The Seven Habits of Highly Effective People,” is comparing the science of geology and economics to predict the fallout of the nation’s government failure to get a hold on an effective debt management plan. While geologists can’t predict the when of a disaster with the San Andreas Fault and politicians can’t predict the when of another economic downturn for the United States, both are certain disastrous scenarios that are inevitable.
According to Covey, politicians have taken the US to the edge of a fiscal cliff with prolonging tax cuts and then initiating tax cuts that amount to less than $100 billion a year. Other pundits agree and feel that we’re on the road for another cliffhanger if the US government doesn't approve an increase in the limit of the US national debt. The real issue is that national debt has risen over $5 trillion over the past few years, and politicians are barely discussing ways to get debt management and the debt spiral under control. Debt management is in need of leaders and managers with courage and decisive thinking. Medicare, Bush tax cuts, debt owed by foreign governments, Fannie Mae debts and unfunded obligations like social security all need careful revamping. Even though the government is injecting $85 billion into the US economy, economists are predicting the following problems with the rapid increase of debt:
Even though the stimulus plans has helped less the unemployment rate and the housing market is showing signs of revival, debt management and poor fiscal policies still plague the United States.
Even though a cloud of uncertainty has been lifted with moves by the Greek government to initiate new debt targets, many feel that Greece doesn't need debt reduction but growth to pump up the country’s financial barrel. Charles Dallara, managing director of the Institute of International Finance (IIF) feels that this beleaguered European nation needs to restart its engines for growth to revive its economy. According to Dallara, debt reduction just won’t cut it. The economy in Greece is exceptionally weak, and the economy needs to be turned around and stabilized.
Dallara recently led negotiations with Greece to restructure the country’s debt help by the private sector. After 10 hours of negotiations, Greece’s international lenders finally agreed to reduce Greek debt by $52 billion. Currently, Greece’s sovereign debt is at 170 percent of GDP, making it one of Europe’s most heavily indebted countries. In addition, its economy has shrunk by more than a quarter over the last five years, and unemployment has risen to a record 25 percent.
Over 70 percent of Greece’s debts are now owed to official lenders, such as the International Monetary Fund and the European Central Bank. Although Germany has declined further debt relief for Greece, private-sector bondholders represented by the IFF have agreed to write off some of the debt to assist Greece with debt reduction. Unfortunately, Greece is expected to enter its sixth year of recession in 2013. It appears all the ways that this country’s leaders have implemented for debt reduction hasn't helped the economy in Greece. The rest of the world is wondering just how many times Greece can raise taxes and cut spending to comply with the demands of its international bailout.
When compared to the debt reduction problems in the United States, it seems like Greece is a country in much direr straits.