Government Debt and Global Competitiveness - Essay Example

Government Debt and Global Competitiveness Texas A&M Commerce In partial fulfillment of the requirements for MKT 521 Lloyd M. Basham May 11, 2012 Table of Contents Abstract……………………………………………………………………………………….3 US Government Debt……………..……………………………………………………………4 Default on the US Government Debt.………………………………………………………….5 What Am I to Do?

………………………………………..…………………………………..5 Leadership Practices…………………………………………………………………………..6 References…………………………………………………………………………………….8 Abstract Due to the recession in 2008, the country has incurred a lot of government debt. Today, policy makers are taking into consideration having a debt limit for the country. The debt limit would mean that the taxpayers need to shoulder additional expenses and taxes plus slow economic growth.

However, this would be a big help to the government in lowering its debt and attracting foreign and local investors. The second option aside from having a debt limit is a default on the debt, meaning a no-pay for the government. This would of course make the deficit lesser but the image of the US will be tarnished forever and would be a major catastrophe. To help nullify the default, awareness and support in my side is needed. These little efforts may mean a lot especially if many would follow me.

Also, aside from the efforts, leadership practices for global competitiveness will be done by me. These would include having dedication, following the company’s commitment, being honest, constantly training to be better and having the focus to achieve desired goal. Keywords: US Government Debt, Global Competitiveness, leadership practices Government Debt and Global Competitiveness US Government Debt Government debt is the stock of outstanding IOUs issued by the government at any time in the past and not yet repaid (Seater, 2008).

To avoid incurring huge government debt, a limit should be followed. Debt subject to limits has two components, debt held by the public and intragovernmental debt (Concord Coalition, 2011). Debt held by the public is debt by any individual or entity besides the federal government such as mutual fund, individual investor or foreign government. Meanwhile, intragovernment debt is the debt government owes to itself such as Trust Funds from Medicare Hospital and Social Security. According to the Congressional Research Service, as cited by the Concord Coalition (2011) Congress has always placed restrictions on federal debt.

 Prior to World War I, borrowing was often authorized for separate purposes such as military activities and the construction of the Panama Canal. The current statutory debt limit, $14.294 trillion, was established on February 12, 2010 (Concord Coalition, 2011).   When revenues received by the Treasury are not sufficient to meet the expenses of the federal government, the Treasury borrows to obtain the cash necessary to meet its obligations. The financial crisis in 2008 was one of the main reasons of the recent debt buildup.

Due to much debt incurred in housing loans which triggered the recession, the national debt ballooned. According to the Concord Coalition (2011), in July 2008, the Housing and Economic Recovery Act increased the debt limit by $800 billion to $10.615 trillion. In October, another addition was needed and a $700 billion increase was attached to the Emergency Economic Stabilization Act of 2008.  Then, in February 2009, the American Recovery and Reinvestment Act of 2009 raised the statutory limit to $12.

104 trillion.  In February 2010, the limit was raised to the current level of $14.294 trillion, an increase of $1.9 trillion. Default on the US Government Debt In a deep recession, debtors may become unable to repay their debts and choose to default on them. That, in turn, can make financial institutions insolvent, leading to a collapse of the financial system and a cessation of the intermediary functions that they perform (Seater, 2008). Raising the debt limit is a decision to pay the bills.

On the other hand, refusing to raise the debt limit is essentially a decision to default on government past obligations which simply means refusing to pay the bills. Treasury Secretary Tim Geithner as cited by Sahadi (2011) said missing any payments would amount to default, a step the United States has never taken and which could have "catastrophic economic impact that would be felt by every Americans." If the debt ceiling isn't raised, lawmakers will have two choices: Either cut spending or raise taxes by that amount, or let the country miss payments on many of its legal obligations.

Of course the option of a default is always a no-no. The trust of investors and private institutions on the US government will be tarnished and it will be hard to entice them again. When the government borrows, it makes a promise to pay the lender and whatever it might take; the promise should not be broken. What am I to Do? First, I have to make sure that I am aware of the things concerning the government debt every now and then. I must know what the government is doing to limit the debt or to reduce it.

Second, lawmakers will have my support on raising the debt limit. It may mean having higher taxes imposed upon me and other citizens but this may be a big help in lessening the government debt. Secretary Geithner stated that if the debt limit is raised, a broad range of government payments would have to be stopped, limited or delayed. In addition, interest rates and borrowing costs would rise and Americans' home values and retirement savings would get hit (Sahadi, 2011). This crucial step would be a burden to the people but with everyone helping and participating, the burden may be lessened.

Third, I would support policy makers who are making efforts towards making a decrease in debt and adding revenue generating activities of the government. Awareness and my support is what I can offer to help alleviate the problem. Aside from these, there are also little things which I can do which can contribute also to developing my global competitiveness. Leadership Practices As a sales representative of St Jude Medical, I can practice some behaviors and manners which would be worth emulated by my colleagues and my subordinates.

Though I’m not on the topmost part of the company to make big changes on helping the government and upholding competitiveness, as sales representative, it’s the small things that matters. It all begins with a few single steps. Producing quality products and constantly innovating are the things essential for global competitiveness. The company’s commitment is dedicated to developing medical technology and services that put more control in the hands of physicians, and that advances the practice of medicine and contributes to successful outcomes for every patient.

We strive for continuous improvement in everything we do, every day. We are committed to consistently meeting the highest quality standards and operating in a highly disciplined environment, backed by rigorous business ethics (St Jude Medical, 2012). Following this commitment by mind and heart is for me to do as part of the leadership practices. According to HR Focus (2006), this commitment serves as the vision and strategy of the company, outlining why it’s necessary to strive, be competitive, and create a picture of the future.

Also, I must always have focus and that focus must be spread around to my co workers giving us something to work towards. Also, being open-minded and honest all the time would contribute to my leadership development and supporting the government. Lastly, constant training for me and my colleagues will certainly make us better and achieving better support to the institution. References Concord Coalition. (2011). Understanding the Federal Debt Limit. Retrieved May 9, 2012 from http://www.concordcoalition.

org/issue-briefs/2011/0708/understanding-federal-debt-limit HR Focus. (2008). Tips for Making Successful Change Happen. Retrieved May 9, 2012 from http://www.flexexecs.com/fe_images/ai_hrf_mar06.pdf Sahadi, J. (2011). Treasury Extends Debt Ceiling Window to Aug 2. CNN Money. Retrieved May 9, 2012 from http://money.cnn.com/2011/05/02/news/economy/debt_ceiling_ borrowing_needs/index.htm Seater, J. (2008). Government Debts and Deficits. Library of Economics and Liberty. Retrieved May 10, 2012 from http://www.econlib.org/library/Enc/GovernmentDebtandDeficits.

html St Jude Medical. (2012). Our Company. Retrieved May 10, 2012 from http://sjm.com/corporate/about-us/commitments.aspx