With the U.S. deficit at $1.4 trillion and rising, the impact for businesses is far-reaching. The dollar is weakening, causing prices as well as fears of inflation to rise and shaking everyone’s confidence. While U.S. politicians continue to debate the debt ceiling and budget cuts, we’re contemplating the effect on U.S. businesses competing in the global marketplace.
First, recognize that usual market forces will not have a big impact in the turnaround of the deficit. Seven years ago, then Fed Chairman Alan Greenspan shared his deep concern about the growing U.S. deficit—which was expected to reach $500 billion that year. More than the trade deficit or high household debt, the budget deficit was a “significant obstacle to long-term stability” because it is not readily subject to correction by market forces, Greenspan told a banking conference.
After realizing that normal market forces won’t have a significant effect on the deficit, uncertainty can permeate business executives’ thoughts. Recognize that uncertainty does exist but don’t let it paralyze you or your business. Here are some things you can do:
- Understand this is an unprecedented situation so consumers are spending more frugally because they are unsure what their future holds in regards to employment, taxes, or government benefits. Watch for patterns in your customers’ (and prospects’) buying habits and don’t forget to monitor their buying habits elsewhere, because those can be indicators of how “uncertain” the buying public still is.
- Monitor the debate at the local, state, and federal levels to know what’s going on and how proposed ways to address the deficit will affect you, your business, and your customers. For example, the military budget may get cut by $513 billion under the president’s proposal—defense contractors will take a big hit and need to plan accordingly.
- Assess your current operations to look for ways to improve efficiencies. You likely did this during the recession for “survival” reasons. Now, look for improvements based on growth with lean operations. For example, how well are you staffed for growth if an opportunity does materialize? Is there a plan to increase hours and pay overtime for existing employees or do you plan to use temporary staffing services? If it’s the latter, do you already have a relationship with a staffing firm that you can call on short notice? Make a plan for lean growth and make advance preparations.
- Analyze opportunities and impediments to growth. With a growing deficit that’s already in the trillions, the U.S. dollar isn’t strong. Challenges exist, but how will your company address them? Do you ramp up marketing to your U.S. clients? Do you consider setting up operations outside the U.S. or partnering with a company overseas? Identify the factors that are most likely to affect your business and think about all the possible solutions.
Perhaps the most crucial response to the trillion-dollar U.S. deficit is to react. Don’t become paralyzed by fear or frustration because you can’t control the debt and uncertainty permeates the country. Use this post-recession time to plan, prepare, and ultimately act to take your company to the next level.