Why so much discussion about the debt ceiling?

So much has been written about the debate in Washington and what is needed to repair our struggling economy. If someone wanted to get into a macroeconomic discussion, I would recommend reviewing the Global Competitiveness Reports provided by the World Economic Forum.

Global Competitiveness Reports are published each year based upon twelve pillars of Competitiveness. These include institutions (more of a measure about how much we trust the government, congress, etc.), infrastructure, macroeconomic environment (interest payments, debt, fiscal deficits), health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and technological innovation.  I would recommend anyone interested to get a copy of the 2010-2011 Global competitiveness Report to better understand the terms and how they are used.

A recession is defined by two consecutive quarters where the Gross Domestic Product (GDP) growth rate is negative. Using this definition the recession started in the fourth quarter of 2007 and ended in the third quarter of 2009. Although by this definition we are not technically in a recession, the impacts of the recession are still very evident. Using the Global Competitiveness Report criteria as a guideline and comparing the 2007-2008 report with the 2010-2011 report provides some insight as to what has changed and what needs to be addressed to get us back. The reports rate each country by their rank in the world. Below is the change of the United States world ranking overall and in the twelve pillars between the 2007 and 2010 reports.

Changes between 2007 and 2010:

Overall Competitiveness dropped from 1^st to 4^th.

1. Trust in institutions dropped from 25^th to 40^th

2. Infrastructure dropped from 7^th to 15^th

3. Macroeconomics dropped from 66^th to 87^th

4. Health and Primary Education dropped from 34^th to 42^nd

5. Higher Education and Training dropped from 5^th to 9^th.

6. Goods Market Efficiency dropped from 8^th to 26^th

7. Labor Market efficiency dropped from 1^st to 4^th

8. Financial Market Development dropped from 9^th to 31^st

9. Technological Readiness dropped from 11^th to 17^th

10. Market Size remained 1^st

11. Business Sophistication dropped from 4^th to 8^th

12. Technical Innovation remained 1^st

It is troubling that in only three years our trust in politicians has plummeted 15 positions, but it is unlikely that will be corrected anytime soon. Infrastructure and health and primary education are very concerning, but the recent reduction in investment in these sectors has caused the decline. The leading indicators seem to be the Macroeconomics and the Financial Market Development. The other factors not specifically mentioned are most likely lagging indicators and are more of a result of the poor economy.

At the federal level, we need to reduce the national debt. There should be careful thought before getting our country further in debt, but reductions must be balanced with investment in other areas such as infrastructure, schools, and healthcare. The United States is still the greatest marketplace in the world and continues to dominate the world in technical innovation. Although our Country is facing some tough times, there are still some very positive indicators if the macroeconomics and financial markets can be corrected.