Guest Post: A Leadership Deficit

July 29, 2011 Economics

The debt ceiling debate is front and center in the media right now. I wanted the take of an expert, so I turned to Dr. Mark Jamison from the University of Florida. Dr. Jamison and his associate, Araceli Castaneda recently wrote an op-ed on the topic and gave me permission to reprint it here.

This moment in history is a good opportunity to learn about leadership. We see the U.S. debt ceiling deadline looming large and our federal government losing its AAA credit rating, even if a debt deal is reached. We also see the people who are in a position to do something faltering: Three perspectives seem to prevail.

First, there are the political actors who see today’s predicament as a phase in a long-running competition for public approval and political power. They play to the media and the voting public, demonize rivals, and exalt themselves, seeking advantage for the next election.

Second, there are those who view this moment as resulting from recent elections that authorized them to reign in government spending; they feel a need to meet their supporters’ expectations and stand firm against the bad guys.

Finally, there are those who perceive the situation as a train wreck; they attempt to distance themselves from the fray, from the adolescents, and frame the state of affairs as someone else’s fault.

These three views shape much of the activity in Washington, D.C., at least as it is portrayed in the media. This media view is to be expected. After all, powerful drama with good guys, bad guys, and looming disasters stimulates newspapers sales, newscast viewership, and Internet page views.

However, these perspectives seem to miss the uncomfortable feeling that is settling in for this country: Most of us in the U.S. have never lived in a country that was not the world’s leading economy, not the world’s leading financial center, and not a world leader in good government.

Now we do.

Public debt as a percent of our income (GNP) now stands at 73%. That is double what it was at the start of the current recession. Thumbing its nose at historical patterns, our sputtering economy is now into its fourth year of the doldrums, despite multiple attempts at fiscal and monetary stimulus.

Wall Street is now a four-letter word in much of the public discourse, not the respected center of international finance that it became after the Great Depression.

U.S. government officials are being lectured about financial responsibility by officials from countries that we considered developing economies just a few years ago. Now the media mentions the U.S. in the same breath as it does Europe’s most anemic economies.

Our natural response to this predicament is to view it as someone else’s fault: We blame Democrats, Republicans, greedy businesses, bureaucrats, Bush, etc. We don’t see ourselves in the problem.

But we are there.

We are there in part because we are looking for solutions in the wrong places: We are looking for a traditional type of leader, one who would provide direction, solve problems, and fix the bad guys. But this approach does not work because this is new territory, and there are no easy answers.

Making matters worse, we are divided in what we want. Some voters want to live in the world’s strongest economy, financial center, etc. again. Others are more comfortable with a United States that does not stand out on the world stage.

Some voters don’t bother themselves with such concerns, preferring to focus on culture wars, nanny state, wealth envy, or social and environmental justice. As a result, many of us become upset if someone tries to lead us on a particular course, as President Obama has discovered.

Maybe the leadership deficit is in us.

We are also in the midst of this dilemma because we do not like what someone practicing leadership has to offer. Leadership in moments like this should stir, steer, inspire, and disappoint. Stirring keeps our problems, conflicts, and contradictions before us so that we see them clearly and debate them with our friends and colleagues.

Steering moves us away from past loyalties and supposed truths that in fact hold us back, and moves us onto new paths of our own making. Inspiration is needed to keep us in the game: It gives us hope that we can overcome the current situation. It also carries us through the disappointment of coming to the realization that some of our “truths” may be false, and some of our aspirations may be fantasies.

Mark Jamison and Araceli Castaneda are director and assistant director of the Public Utility Research Center at the University of Florida. They teach leadership courses in the U.S. and internationally. The Center has trained more than 2500 government and industry officials from 148 nations on issues of energy, telecommunications, and water, including how to make difficult changes in a highly politicized environment.



  • Anonymous

    United States had borrowed money from Europe and at home during the American Revolution. The Continental Army had not been paid what was due to them, and many of the independently-wealthy officers of the army had spent their entire fortunes on equipment and supplies for their particular combat unit. The various states had likewise borrowed money to finance the war effort; some states owed private citizens for the purchase of supplies, exchanged for a promissory note due sometime in the future. Hamilton sought to inspire the confidence of domestic and foreign investors in the public credit of the new nation. The US national debt in 1790 was US$54 million,[1] which would be comparable to a US national debt of US$4.1 trillion in 2009 by relative share of GDP.[2] The Congress endorsed his plan to pay off the US$11 million owed to foreign creditors, but balked at funding the domestic debt of US$27 million and assuming the state debts of US$25 million.[3] This monetary policy may have contributed to an economic downturn at the turn of the decade.
    Hamilton proposed a remarkable set of policies for handling the debt problem. All debts were to be paid at face value. The Federal government would assume all of the debts owed by the states, and it would be financed with new U.S. government bonds paying about 4% interest. The government would not pay back the principal on the bonds, merely the interest, which would be paid by a new tariff and a stiff excise tax on liquor.

    Hamilton’s economic plan had multiple goals. First, the debts and honor of the nation would be secured. Hamilton felt that the Federal government would not be able to borrow money from anyone in the future if these debts were not paid. By selling bonds to pay the debt, bondholders would have a direct financial interest to help the new United States government survive and thrive. Creditors who purchased the bonds could use them as collateral for loans, stimulating the economy even more.[4]

    The plan would also create a bureaucracy of agents across the country who would be tied to the Federal government instead of the individual states. Assuming the debts of the states would likewise couple financial elites in those states to the national government and less so to state governments, thereby reducing the risk of secession. Hamilton’s scheme was called “debt assumption plan,” and it was a radical idea in 1790.

  • Anonymous

    George Washington’s Farewell Address

    The Importance of Credit, and the Sparing Use of Government BorrowingWashington provides strong support for a balanced federal budget, arguing that the nation’s credit is an important source of strength and security. He urges the American people to preserve the national credit by avoiding war, avoiding unnecessary borrowing, and paying off any national debt accumulated in times of war as quickly as possible in times of peace so that future generations do not have to take on the financial burdens that others have taken on themselves. Despite his warnings to avoid taking on debt, Washington does state his belief that sometimes it is necessary to spend money to prevent dangers or wars that will in the end cost more if not properly prepared for. At these times, argues Washington, it is necessary, although unpleasant, for the people to cooperate by paying taxes created to cover these precautionary expenses.

    Washington makes an extended allusion, possibly in reference to the Whiskey Rebellion in Pennsylvania which he led a national army to put down, on how important it is for the government to be careful in choosing the items that will be taxed, but he also reminds the American people that no matter how hard the government tries there will never be a tax which is not inconvenient, unpleasant, or seemingly an insult to those who must pay it._http://www.nysedregents.org/USHistoryGov/20100817-us-examw.pdf_