Latest Increase In Debt Ceiling Underscores 6 Ways To Avert A Crisis

Congressional approval on Thursday of legislation to increase the national debt limit averted what President Joe Biden said last night would have been a catastrophic economic crisis. Biden signed the bill into law today.

The last-minute avoidance of a self-inflicted national crisis highlights for business leaders six best practices for preventing a crisis in their companies and organizations.

Don’t Wait

As soon as you see what is or could be a problem, do something about it.

Congress knew for months that the debt ceiling would have to be increased but waited almost until the last minute to raise the limit.

Are there challenges, issues, or problems in your organizations that you know about but have left festering or simmering? If so, why are you waiting to do what’s needed to address it?

Weigh The Consequences

Carefully consider what could or would happen if you continue to delay in addressing the problem.

“Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations—an unprecedented event in American history,” according to the Treasury Department’s website.

A default “would precipitate another financial crisis and threaten the jobs and savings of everyday Americans—putting the United States right back in a deep economic hole, just as the country is recovering from the recent recession,” the department pointed out.

In the corporate world, the failure to act promptly, strategically, and effectively could yield a variety of damaging results, including lawsuits, negative publicity, loss of market share, a decline in share price, and reduced revenue and profit.

Get The Support You Need

Depending on the nature and extent of the problem, you may not be able to address it by yourself and may have to call upon others for their help or support.

In the case of the national debt ceiling, Biden had no choice but to work with House Speaker Kevin McCarthy in order to secure House passage of the legislation.

In the corporate world, executives may have to work with executive committees, boards of directors, and others to solve a looming issue.

Cut Red Tape

Find ways to reduce or eliminate obstacles that could slow down your company’s efforts to prevent a crisis. This could include policies or procedures that may require time-consuming reviews, analysis, and approvals.

Be proactive in overcoming those hurdles, and emphasize to decision-makers the importance of moving quickly—and the possible consequences if they don’t.

Permanently Fix The Problem

It’s not as if this is the first time that the country’s debt limit had to be raised.

“Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend or revise the definition of the debt limit—49 times under Republican presidents and 29 times under Democratic presidents,” according to the Treasury Department’s website.

Business leaders should try to do more than find a temporary solution to what could be a more profound or systemic problem. Otherwise, they could be forced to deal with the same or similar problems repeatedly.

Learn From Your Mistakes

Learn from any mistakes you made to prevent a crisis and take steps to ensure that the errors are not repeated.

Document what you said and did about the situation. Then conduct a careful and objective analysis of what worked—and what did not work. The analysis could yield important insights and perspectives that might help avert another crisis.

Unfortunately, there are no signs Congress plans to do anything to prevent the kind of political drama the nation witnessed these past few days when the latest debt increase law expires in 2025.