Hope you had a wonderful Easter. Before we jump back into the subject of “Interview With Purpose”, I’d just like to remind you of my blog entry of January 22, 2011 titled “That Giant Sucking Sound”. Wish I’d been wrong about that one.
We’ve covered the first four items on the “Interview With Purpose” checklist:
1. Can the company successfully compete in its market?
2. What is the company “culture”?
3. What are the expected outcomes? How is success measured for this position?
4. Will I have access to the resources required to be successful in this role?
Now on to numbers 5 & 6:
5. Do my skills and experience truly qualify me for this position?
6. Would I hire myself for this position?
These are the most challenging questions one must face when interviewing for a position. Let’s face it, when you interview for a job that you really want, you are in full sales mode. You will tend to “stretch” to match your skills and experience to those required for the position. The primary reason candidates do this is because quite often IT WORKS. Depending on the positions you’ve held in the past, the companies you’ve worked for and what your references have to say about you, it’s not that tough to convince an employer that you are truly qualified for a certain position. And if the employer is anxious to fill the role and doesn’t really ask probing questions, you will likely get the job. And unfortunately, you will likely fail…very soon and very conspicuously.
Be honest with yourself. Do you really have what it takes to be successful in the position? Would you hire yourself for the position? I’m not saying that you have to be the best person for the position, but you better darn sure be well-qualified. However, when someone really wants the position, or perhaps desperately NEEDS the position; the focus is on getting the job, not determining if they can actually do the job.
This is a really tough subject. As a headhunter, I get paid to find people to fill positions with my client companies. As an experienced headhunter and an experienced industry professional, I tend to be overly critical in evaluating candidates, especially when the client has been very clear and specific in what they expect from the position. It’s also very frustrating when I see clients hiring people who are not truly qualified for the position. Increasingly, I’m taking the position that if a candidate is talented and motivated, a good fit for the company (not necessarily the position) and the company has a track record of hiring “off spec”; I should go ahead and submit the candidate. As a result I am more dependent than ever on candidates and clients being open, honest and transparent in the interview process; to interview with purpose. Frankly, I see other headhunters as well as internal recruiters taking the same approach in presenting candidates. So candidates beware. Just because you’re getting an interview, don’t assume that you are really qualified for the position. Take a look in the mirror. Check yourself, before you wreck yourself.
Next week, the final installment of this series.
Saturday, April 30, 2011
Friday, April 22, 2011
THE PURPOSE
I’ll pick up the “Interview With Purpose” theme in the next blog. This week it’s about the THE PURPOSE. He spoke Aramaic and they called him Ea-shoa’ (Life Giver) M’shee-khah (Anointed One). I recommend that you get a Bible and read at least one of the four very brief accounts of his life and ministry (Matthew, Mark, Luke or John). Then read the Book of Acts and the Apostle Paul’s Letter to the Romans. Don’t let anyone “sell” you on Christianity. Read it for yourself. And don’t focus on all of the hypocrites you’ve known, or the dysfunctional churches you’ve attended or heard about; or the whacked-out televangelists you’ve channel surfed across. Just read the inspired words of those who were there and ultimately gave up their lives to follow Ea-shoa’ M’shee-khah, Life Giver, Anointed One, Jesus Christ.
Sunday, April 10, 2011
Square Pegs and Round Holes (Part II)
Now for questions 3 and 4 on the “Interview With Purpose” check list:
_3. What are the expected outcomes? How is success measured for this position?
_4. Will I have access to the resources required to be successful in this role?
Okay, I cheated and put two questions on number three. These are very closely related, but distinctly different. And the difference is critical. Let’s say you’re interviewing for a sales leadership role and the company says “We need to grow our top line revenue”. The obvious questions you must ask is how much and how fast? And if the answers you get are “As much as we can, as fast as we can”, start looking for the exits.
Let’s say the answers are more specific, 10% CAGR over the next 5 years. But, what they don’t say is that they expect the revenue growth will come from business that is more profitable than what they are currently doing and, oh by the way, their existing market has minimal growth potential. In fact, their core business is under competitive attack and their market share is likely to shrink and become less profitable.
How are you liking this job now? Always look closely at the expected outcomes, how are they measured and where is the starting point.
On to question 4, will you “have access to the resources required to be successful in this role?” Let’s stay with the example above. Perhaps you’re still interested and can see the potential for success. But, it will require hiring sales people with experience in other market segments and significant investment in new equipment and/or technology. Now this gets dicey. If you’re interviewing for a position, it is always risky to start asking questions about how much the company is willing to invest so you can be successful. I recommend that you don’t tackle this question head on. It’s better to ask open ended questions about the company’s resources (people, equipment, technology, access to capital, etc). Look for opportunities to connect their responses to a question such as, “So with the right person in this position, you feel that you’ve got all the other pieces in place to get to the next level?” A “yes” answer is a big red flag. While there are situations where there really is only one missing piece, those are few a far between. And the more aggressive the company’s expected outcomes, the more likely it is that they will need more than just you to achieve those outcomes.
Again, it’s all about interviewing with a purpose. If your purpose is just to get the job, then tell them what they want to hear and only lob softball questions that demonstrate you’ve done your homework and really want to work for these bozos. If your purpose is to get the right job, where you can be successful over the long run, then ask the tougher questions. The non-bozos will respect that approach.
Next time, questions 5 and 6.
_3. What are the expected outcomes? How is success measured for this position?
_4. Will I have access to the resources required to be successful in this role?
Okay, I cheated and put two questions on number three. These are very closely related, but distinctly different. And the difference is critical. Let’s say you’re interviewing for a sales leadership role and the company says “We need to grow our top line revenue”. The obvious questions you must ask is how much and how fast? And if the answers you get are “As much as we can, as fast as we can”, start looking for the exits.
Let’s say the answers are more specific, 10% CAGR over the next 5 years. But, what they don’t say is that they expect the revenue growth will come from business that is more profitable than what they are currently doing and, oh by the way, their existing market has minimal growth potential. In fact, their core business is under competitive attack and their market share is likely to shrink and become less profitable.
How are you liking this job now? Always look closely at the expected outcomes, how are they measured and where is the starting point.
On to question 4, will you “have access to the resources required to be successful in this role?” Let’s stay with the example above. Perhaps you’re still interested and can see the potential for success. But, it will require hiring sales people with experience in other market segments and significant investment in new equipment and/or technology. Now this gets dicey. If you’re interviewing for a position, it is always risky to start asking questions about how much the company is willing to invest so you can be successful. I recommend that you don’t tackle this question head on. It’s better to ask open ended questions about the company’s resources (people, equipment, technology, access to capital, etc). Look for opportunities to connect their responses to a question such as, “So with the right person in this position, you feel that you’ve got all the other pieces in place to get to the next level?” A “yes” answer is a big red flag. While there are situations where there really is only one missing piece, those are few a far between. And the more aggressive the company’s expected outcomes, the more likely it is that they will need more than just you to achieve those outcomes.
Again, it’s all about interviewing with a purpose. If your purpose is just to get the job, then tell them what they want to hear and only lob softball questions that demonstrate you’ve done your homework and really want to work for these bozos. If your purpose is to get the right job, where you can be successful over the long run, then ask the tougher questions. The non-bozos will respect that approach.
Next time, questions 5 and 6.
Sunday, April 3, 2011
Square Pegs and Round Holes
Last time we talked about interviewing “With Purpose” and left it with the question of how should a candidate go about determining their value to a potential new employer.
I think there are 7 questions a candidate should focus on when considering a new job opportunity.
_1. Can the company successfully compete in its market?
_2. What is the company “culture”?
_3. What are the expected outcomes? How is success measured for this position?
_4. Will I have access to the resources required to be successful in this role?
_5. Do my skills and experience truly qualify me for this position?
_6. Would I hire myself for this position?
_7. What are my other options?
Let’s take 1 & 2 this week.
The first question, “Can the company successfully compete in its market?” seems like a no-brainer; but I talk to candidates every day who find themselves working for companies that are not competitive. The candidate may be well paid, love their boss and think the company culture is great (hey, they took the job for some reason), but then they find out that the company cannot (or will not) deliver the products or services required to compete in the market place. My observation is that, in most cases, an experienced industry professional should have been able to figure this out before taking the job. Frankly, as a headhunter, if I know that an employer is struggling to compete in its market; I tell the candidate. And I tell the employer as well. If a company is in trouble, they better have a great plan to turn things around or you’re only taking a temporary job. If they have no plan or worse yet, are living in denial….walk away. As we say in Texas…you can’t polish a turd.
Number 2, the “Culture”. One of the most overused, least understood terms in business. I suppose as a candidate, whatever you consider to be important in a company’s culture is all that really matters, but company culture is a very big and complex subject. I like this definition: "The specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization.” [1]
We work in the transportation, logistics and supply chain space. It is a very large, highly fragmented market and I cannot think of a sector with more diverse cultures. This is something every candidate should seriously consider. Moreover, ours is an industry where some very successful, highly profitable companies do not have what most outsiders would describe as a healthy culture. Maybe a high functioning cult, but not a healthy culture. Know who you are, how you deal with people and how you like to be dealt with. Don’t join an organization where your style doesn’t fit. It almost never works.
Next time, we’ll talk about questions 3 and 4. In the mean time, before you take that next job…call me.
1. Charles W. L. Hill, and Gareth R. Jones, (2001) Strategic Management. Houghton Mifflin.
I think there are 7 questions a candidate should focus on when considering a new job opportunity.
_1. Can the company successfully compete in its market?
_2. What is the company “culture”?
_3. What are the expected outcomes? How is success measured for this position?
_4. Will I have access to the resources required to be successful in this role?
_5. Do my skills and experience truly qualify me for this position?
_6. Would I hire myself for this position?
_7. What are my other options?
Let’s take 1 & 2 this week.
The first question, “Can the company successfully compete in its market?” seems like a no-brainer; but I talk to candidates every day who find themselves working for companies that are not competitive. The candidate may be well paid, love their boss and think the company culture is great (hey, they took the job for some reason), but then they find out that the company cannot (or will not) deliver the products or services required to compete in the market place. My observation is that, in most cases, an experienced industry professional should have been able to figure this out before taking the job. Frankly, as a headhunter, if I know that an employer is struggling to compete in its market; I tell the candidate. And I tell the employer as well. If a company is in trouble, they better have a great plan to turn things around or you’re only taking a temporary job. If they have no plan or worse yet, are living in denial….walk away. As we say in Texas…you can’t polish a turd.
Number 2, the “Culture”. One of the most overused, least understood terms in business. I suppose as a candidate, whatever you consider to be important in a company’s culture is all that really matters, but company culture is a very big and complex subject. I like this definition: "The specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization.” [1]
We work in the transportation, logistics and supply chain space. It is a very large, highly fragmented market and I cannot think of a sector with more diverse cultures. This is something every candidate should seriously consider. Moreover, ours is an industry where some very successful, highly profitable companies do not have what most outsiders would describe as a healthy culture. Maybe a high functioning cult, but not a healthy culture. Know who you are, how you deal with people and how you like to be dealt with. Don’t join an organization where your style doesn’t fit. It almost never works.
Next time, we’ll talk about questions 3 and 4. In the mean time, before you take that next job…call me.
1. Charles W. L. Hill, and Gareth R. Jones, (2001) Strategic Management. Houghton Mifflin.
Saturday, March 19, 2011
Interview with Purpose
Almost daily I see articles posted on the internet about interviewing. Most are targeted at candidates. They focus on the toughest interview questions and the best answers. How to dress for an interview. How to sit. How to make eye contact. Gender-related interview tips. Generational considerations…how should a baby boomer candidate respond to a Gen Y interviewer? The only subject other than job interviewing with a wider array of tips and advice is golf. And I would say the outcomes for job seekers is about the same as the outcomes for golfers. You look and act like you know what your doing but your scores don’t get any better.
To be clear, it is important that you dress appropriately, speak clearly and know how to answer the basic interview questions. But the most important consideration for a candidate is not “How do I get this job?” The most important one is “Can I bring value to this organization?” That should be the primary purpose of your interviewing process. And nowadays it is definitely a process. Certainly for management and executive level talent, the process may go on for weeks and months. A candidate will go through multiple interviews with various people. It is tedious, stressful, necessary and, if done well, revealing.
Sadly, the truth is that most organizations do not do a very good job of interviewing. Even those who believe they have a very thorough interview and evaluation process, tend to select candidates based on factors other than “value to the organization”. Value is important and it is a factor, but it usually trails way behind appearance, personality, work history and how well does the hiring authority like the candidate. And herein lies the greatest risk for both the candidate and the employer. If, on a scale of 1-10, you are a 10 on the “personal” factors and resume, but only a 3 on value; you may get the job, but you aren’t likely to keep it very long.
“Value to the organization” is a big subject on its own and depends on multiple factors. That is a major reason why it is so difficult to determine a candidate’s value to the organization during the interview process. In most cases, it is actually the candidate who is best suited to make that determination. The problem is that most candidates want the job too much and are unwilling to make an honest assessment of their “value fit” for the position and/or the company.
Next time we’ll talk about what a candidate should consider in determining their value to a potential new employer.
To be clear, it is important that you dress appropriately, speak clearly and know how to answer the basic interview questions. But the most important consideration for a candidate is not “How do I get this job?” The most important one is “Can I bring value to this organization?” That should be the primary purpose of your interviewing process. And nowadays it is definitely a process. Certainly for management and executive level talent, the process may go on for weeks and months. A candidate will go through multiple interviews with various people. It is tedious, stressful, necessary and, if done well, revealing.
Sadly, the truth is that most organizations do not do a very good job of interviewing. Even those who believe they have a very thorough interview and evaluation process, tend to select candidates based on factors other than “value to the organization”. Value is important and it is a factor, but it usually trails way behind appearance, personality, work history and how well does the hiring authority like the candidate. And herein lies the greatest risk for both the candidate and the employer. If, on a scale of 1-10, you are a 10 on the “personal” factors and resume, but only a 3 on value; you may get the job, but you aren’t likely to keep it very long.
“Value to the organization” is a big subject on its own and depends on multiple factors. That is a major reason why it is so difficult to determine a candidate’s value to the organization during the interview process. In most cases, it is actually the candidate who is best suited to make that determination. The problem is that most candidates want the job too much and are unwilling to make an honest assessment of their “value fit” for the position and/or the company.
Next time we’ll talk about what a candidate should consider in determining their value to a potential new employer.
Thursday, March 3, 2011
2-4-6-8... How Do We Negotiate?
Why drink the water from my hand?
Contagious as you think I am
Just tilt my sun towards your domain.
Your cup runneth over again
- from the song December, by Collective Soul.
So why did the bottom drop out of American public education just as per-pupil spending soared? Basic economics provides a compelling answer, though countless blue-ribbon commissions, and indeed much of the present national dialogue about school reform, have failed to acknowledge it: the $250 billion public education industry behaves precisely like any other publicly protected monopoly. Union negotiators in the private sector know that if they insist on protecting incompetent workers and cling to outdated work rules, especially in the global economy, the company will begin losing market share, and union members will lose their jobs. In public education, by contrast, collective bargaining takes place without the constraining discipline of the market. When school board representatives sit down with union officials to negotiate a labor contract, neither party is under pressure to pay attention to worker productivity or the system's overall competitiveness: if the contract allows some teachers to be paid for hardly working at all, and others to perform incompetently without penalty, there is no real economic danger for either side. After all, most of the monopoly's customers, the schoolchildren, have nowhere else to go. Historically, tax revenues have continued to flow into the schools no matter how poorly they perform.
The words written above are not mine. They were written in 1997 by Sol Stern (City Journal). The article “How Teachers’ Unions Handcuff Schools” is a good read and very timely even though it was written 14 years ago. It really gets down to the core of the public employee collective bargaining controversy. Economists would characterize public employee collective bargaining as a Monopoly Union Model. This model states that the monopoly union has the power to maximize the wage rate (and benefits, work rules, job security, etc etc.); and the employer then has the right to choose how many people it can afford to hire. The problem comes when the affordable level of employment cannot satisfy customer demand. The customer (parents/students) can either pay more, settle for poor service (higher student-teacher ratios, limited curriculum), relocate or go to private school (aka pay more).
Unions started back in the day because certain industries had monopoly or near monopoly power over workers. All of us from working class backgrounds owe a debt of gratitude to the union movement. Even today, the threat of unionization is a key factor in motivating many employers to pay more and treat their employees better than they might otherwise be inclined to do. So I am not anti-union, at least in theory. But having managed Teamsters once upon a time, I must admit that unions are pain in the ass. And in a deregulated, competitive trucking industry, guess what? The Teamsters overplayed their hand and lost their position as power players in that industry.
If public employees (or any group of employees) have what is essentially monopoly power, including the political leverage to handpick those with whom they will be negotiating pay, benefits and working conditions; we have a serious problem. In the public employee market where “collective bargaining takes place without the constraining discipline of the market”; it would appear that the only constraint is the taxpayers’ willingness to spend more money. And clearly the taxpayers are fed up. If the public employee unions are to survive they must face the same realities that all employers, government or private, face everyday when they turn on the lights. Stated simply, those are economic reality and the reality of providing value to the customer.
Employers and employees who ignore these realties eventually cease to exist.
“Come now, let us reason together…” Isaiah 1:18
Contagious as you think I am
Just tilt my sun towards your domain.
Your cup runneth over again
- from the song December, by Collective Soul.
So why did the bottom drop out of American public education just as per-pupil spending soared? Basic economics provides a compelling answer, though countless blue-ribbon commissions, and indeed much of the present national dialogue about school reform, have failed to acknowledge it: the $250 billion public education industry behaves precisely like any other publicly protected monopoly. Union negotiators in the private sector know that if they insist on protecting incompetent workers and cling to outdated work rules, especially in the global economy, the company will begin losing market share, and union members will lose their jobs. In public education, by contrast, collective bargaining takes place without the constraining discipline of the market. When school board representatives sit down with union officials to negotiate a labor contract, neither party is under pressure to pay attention to worker productivity or the system's overall competitiveness: if the contract allows some teachers to be paid for hardly working at all, and others to perform incompetently without penalty, there is no real economic danger for either side. After all, most of the monopoly's customers, the schoolchildren, have nowhere else to go. Historically, tax revenues have continued to flow into the schools no matter how poorly they perform.
The words written above are not mine. They were written in 1997 by Sol Stern (City Journal). The article “How Teachers’ Unions Handcuff Schools” is a good read and very timely even though it was written 14 years ago. It really gets down to the core of the public employee collective bargaining controversy. Economists would characterize public employee collective bargaining as a Monopoly Union Model. This model states that the monopoly union has the power to maximize the wage rate (and benefits, work rules, job security, etc etc.); and the employer then has the right to choose how many people it can afford to hire. The problem comes when the affordable level of employment cannot satisfy customer demand. The customer (parents/students) can either pay more, settle for poor service (higher student-teacher ratios, limited curriculum), relocate or go to private school (aka pay more).
Unions started back in the day because certain industries had monopoly or near monopoly power over workers. All of us from working class backgrounds owe a debt of gratitude to the union movement. Even today, the threat of unionization is a key factor in motivating many employers to pay more and treat their employees better than they might otherwise be inclined to do. So I am not anti-union, at least in theory. But having managed Teamsters once upon a time, I must admit that unions are pain in the ass. And in a deregulated, competitive trucking industry, guess what? The Teamsters overplayed their hand and lost their position as power players in that industry.
If public employees (or any group of employees) have what is essentially monopoly power, including the political leverage to handpick those with whom they will be negotiating pay, benefits and working conditions; we have a serious problem. In the public employee market where “collective bargaining takes place without the constraining discipline of the market”; it would appear that the only constraint is the taxpayers’ willingness to spend more money. And clearly the taxpayers are fed up. If the public employee unions are to survive they must face the same realities that all employers, government or private, face everyday when they turn on the lights. Stated simply, those are economic reality and the reality of providing value to the customer.
Employers and employees who ignore these realties eventually cease to exist.
“Come now, let us reason together…” Isaiah 1:18
Saturday, February 19, 2011
Just Keep Talking
"The less you intend to do about something, the more you have to keep talking about it."
Otherwise known as the Law of Inverse Relevance (LIR). We must credit the LIR to a fictional character, Sir Arnold Robinson, who spoke those lines back in the 80’s during the first episode of Yes Minister, a BBC comedy series. I suppose the real credit goes to the writers Antony Jay and Jonathan Lynn. They also get credit for this jewel:
“Politicians like to panic. They need activity - it is their substitute for achievement.”
And so we watch our government, at all levels, flailing around and trying to figure out how to satisfy “we the people” without taking goodies away from some of “we the people”. What’s going on in Wisconsin today is a classic example. It’s not a matter of IF someone will have to give up something, it’s just a matter of who. And guess what, those who are being asked to give up something are having a fit. At the national level it’s why we resist making meaningful spending cuts or increasing taxes.
Yes, I’m ok with increasing taxes in order to bring down the national debt even though increasing taxes would only amount to a drop in the bucket compared to spending cuts. Our tax revenues account for well under 20% of GDP. Let’s assume that “we the people” would support a 10% increase in taxes across the board. Best case scenario in 2011, we increase revenues $300B on a $3.8 Trillion budget with a projected $1.3 Trillion deficit.
Another way to look at it is that for the past 50 years, tax revenues as a % of GDP have been in the 15-20% range, regardless of tax policy. Pre-Bush tax cuts we were closer to the 20% number, so we’ll use that. And let’s use the optimistic 2011 GDP forecast of $15.2 Trillion. Even with the higher tax rates our revenues would be just over $3 Trillion, well short of the proposed $3.8 Trillion spending budget. We would need a GDP of $19 Trillion and the higher tax rate to support a $3.8 Trillion budget. So when the politicians are struggling to cut $100 billion (that would be 0.1 trillion), I think we are in big trouble. We have to cut spending, seriously cut spending.
And I’m not one of those who insists that we must pay off our national debt. That’s crazy. Some level of debt is acceptable. Since WWII, our debt as has ranged from 1/3 to 2/3 of GDP. But we are now close to a debt level that equals GDP and will soon exceed it. Since 1984 our GDP has grown by over 350%. Our national debt has grown by over 850% !!! Clearly an unsustainable pace.
Another way to look at it is that IF we maintain our current debt level at around $14 trillion, our GDP would need to reach $21 trillion for us to get back to a what would still be considered a relatively high 66% debt-to-GDP ratio. That also means our GDP needs to increase by almost 50%. The good news is that is very doable over a decade or perhaps less.
STEP 1 IN RETURNING TO FISCAL RESPONSIBILITY IS DO NOT ADD TO THE CURRENT DEFICIT…PERIOD, END OF DISCUSSION. Cut spending, raise taxes, whatever; but do not add one more penny to the national debt.
That means putting everything on the table including Social Security, Medicare and Medicaid. Given our demographics and the rising costs of healthcare, we cannot resolve the debt problems without addressing these three areas. These three and the defense budget are the big buck items. We have to cut, cap and/or figure out a way to pay for them.
In talking about the government, Will Rogers once said: “If stupidity got us into this mess, then why can’t it get us out?” Will Rogers was making a joke. I’m not sure that it was just stupidity that got us into the current mess, but I am sure that stupidity will not get us out of it. Neither will talk. The time for talk is over. It’s time to fix the problem.
Otherwise known as the Law of Inverse Relevance (LIR). We must credit the LIR to a fictional character, Sir Arnold Robinson, who spoke those lines back in the 80’s during the first episode of Yes Minister, a BBC comedy series. I suppose the real credit goes to the writers Antony Jay and Jonathan Lynn. They also get credit for this jewel:
“Politicians like to panic. They need activity - it is their substitute for achievement.”
And so we watch our government, at all levels, flailing around and trying to figure out how to satisfy “we the people” without taking goodies away from some of “we the people”. What’s going on in Wisconsin today is a classic example. It’s not a matter of IF someone will have to give up something, it’s just a matter of who. And guess what, those who are being asked to give up something are having a fit. At the national level it’s why we resist making meaningful spending cuts or increasing taxes.
Yes, I’m ok with increasing taxes in order to bring down the national debt even though increasing taxes would only amount to a drop in the bucket compared to spending cuts. Our tax revenues account for well under 20% of GDP. Let’s assume that “we the people” would support a 10% increase in taxes across the board. Best case scenario in 2011, we increase revenues $300B on a $3.8 Trillion budget with a projected $1.3 Trillion deficit.
Another way to look at it is that for the past 50 years, tax revenues as a % of GDP have been in the 15-20% range, regardless of tax policy. Pre-Bush tax cuts we were closer to the 20% number, so we’ll use that. And let’s use the optimistic 2011 GDP forecast of $15.2 Trillion. Even with the higher tax rates our revenues would be just over $3 Trillion, well short of the proposed $3.8 Trillion spending budget. We would need a GDP of $19 Trillion and the higher tax rate to support a $3.8 Trillion budget. So when the politicians are struggling to cut $100 billion (that would be 0.1 trillion), I think we are in big trouble. We have to cut spending, seriously cut spending.
And I’m not one of those who insists that we must pay off our national debt. That’s crazy. Some level of debt is acceptable. Since WWII, our debt as has ranged from 1/3 to 2/3 of GDP. But we are now close to a debt level that equals GDP and will soon exceed it. Since 1984 our GDP has grown by over 350%. Our national debt has grown by over 850% !!! Clearly an unsustainable pace.
Another way to look at it is that IF we maintain our current debt level at around $14 trillion, our GDP would need to reach $21 trillion for us to get back to a what would still be considered a relatively high 66% debt-to-GDP ratio. That also means our GDP needs to increase by almost 50%. The good news is that is very doable over a decade or perhaps less.
STEP 1 IN RETURNING TO FISCAL RESPONSIBILITY IS DO NOT ADD TO THE CURRENT DEFICIT…PERIOD, END OF DISCUSSION. Cut spending, raise taxes, whatever; but do not add one more penny to the national debt.
That means putting everything on the table including Social Security, Medicare and Medicaid. Given our demographics and the rising costs of healthcare, we cannot resolve the debt problems without addressing these three areas. These three and the defense budget are the big buck items. We have to cut, cap and/or figure out a way to pay for them.
In talking about the government, Will Rogers once said: “If stupidity got us into this mess, then why can’t it get us out?” Will Rogers was making a joke. I’m not sure that it was just stupidity that got us into the current mess, but I am sure that stupidity will not get us out of it. Neither will talk. The time for talk is over. It’s time to fix the problem.
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