Although debt is often abused at both the corporate and public level as evidenced by recent banking scandals, it remains a primary tool of governments, companies and individuals in order to conduct their daily affairs.
Unfortunately politics gets in the way of governments using debt tools properly. Fortunately for the CEO’s of the many companies that fuel our economy they do not have the same difficulty in aligning their growth with the proper use of debt. When CEO’s don’t get it right and don’t manage costs they way they should the result is generally receivership or protection from creditors that allows them to restructure their finances, trim operating costs and get their expenses more in line with their revenues. In most cases this costs the CEO his or her job. It continues to amaze this author that our government has to bicker to the extent they do in order to raise the debt ceiling to drive economic growth and assign accountability to not properly managing the budget.
Companies use a variety of spend management tools in the procure to pay process in order to indentify costs that need to be driven out of their businesses that are a result of poor visibility, mismanagement, maverick spending and other supply chain issues. Our government could do the same thing. Unfortunately as we have all just witnessed politics get in the way. At companies the executives are accountable to the board of directors and share holders. Who is the government accountable to? Oh, that’s right US!
Remember that at the next election.