Leadership Downgrade: Sacrificing the Public Trust in America

Unintended consequences will result from S&P’s downgrade of the United States’ credit rating.  One that we should encourage is developing a frank and constructive discussion of the root causes for the failure of leadership by our elected officials. Is the fabric of our political institutions now sufficiently frayed to catalyze long-term thinking and coherent policy planning that will actually outlive any single election cycle?  Sadly, as long as strident partisanship, personal disrespect, and polarization continue to define the U.S. political process, we are unlikely to do better than continue to lurch from one crisis to the next.

America’s debt downgrade is only the latest manifestation of our country’s slipping global competitiveness.  In my view, two important words should be at the forefront of any constructive discussions about America’s way forward: “posterity” and “stewardship.”

While there is little debate over the fact that the lack of U.S. economic growth must be resolved by creating new jobs, there is little agreement over how to remove the structural obstacles preventing a return to robust growth.  While it may be an oversimplification, in my view the U.S. economic engine can only be re-energized if risk takers are encouraged to take economic risk through the formation of new enterprises.  The Congress and the Administration should view prospective changes to the tax code, government spending, and the U.S. capital markets with two primary objectives: First, to empower and re-invigorate the American entrepreneur; and, second, to attract the foreign entrepreneur to the U.S.  By now it should be apparent that we will be unable to tax or cut our way to prosperity without promoting the long-term growth of new enterprises that create new jobs in America.

American political institutions, the machinery of democracy, have increasingly become ossified because it is not in the interests of our elected leaders to lead.  Many of our elected officials confuse leadership with dogmatic obstinacy while others equate achieving compromise with success, regardless of the quality of the result.  Lost in the shuffle is the concept of acting in the broader public interest, a noble idea that has been trampled by partisans who are uncompromising about their narrowly interpreted constituencies’ immediate needs.  All but short-term thinking is absent from the behavior of the vast majority of our leaders.

Can we expect more from the legislative body of the House of Representatives when each member serves a two-year term?  Can we expect long-term thinking from our leaders in a society that is all about instant gratification?  Can we expect gradualist behavior in our capital markets when over 70% of daily trading volume comes from high velocity pools of capital that are engineered to profit from the short-term?

We can and we must.

Our leaders need to be re-educated about the obligations of leadership, of what it means to serve as representatives of the people who elect them.  Leadership in government entails carrying a sacred public trust, and it requires making decisions that may not be in your own immediate self interest but are in the long-term best interests of your society.  Being a fiduciary requires you to make the best decisions for all of your constituents, not just for yourself or for those that you represent in the narrowest of terms.  At times it requires self-sacrifice, and at times it will make you unpopular. Stewards are ready to take on the responsibilities of taking care of something that belongs to someone else.  America needs leaders who understand that they are the stewards of our society, not just for this election cycle or the next one, but for future generations of Americans.

As a signal to the world, the downgrade of our sovereign debt risk implies that the full faith and credit of the United States Government isn’t worth what it used to be.  That should not be the legacy that our generation leaves to posterity.