Monday, June 27, 2011

The Way to Prosperity

In President Obama's weekly radio address, he said the U.S. can't simply "cut our way to prosperity."  I must admit that I fully agree with President Obama on this point.   In my 27 years of business experience, I have never found cutting costs the solution to turning around a declining business.
However, President Obama should also include the other ways I've learned that won't turn around a declining business:

  • You can't price your way to prosperity.   Raising prices to improve business results doesn't work.  If the business is declining, raises prices will only accelerate the decline since fewer products will be sold.   The equivalent for government is raising taxes in a declining economy.   So, the U.S. can't simply tax our way to prosperity either.

  • You can't spend you way to prosperity.  In the short term, spending money can help.  More advertising and more coupons will increase sales.  However, this type of spending is unsustainable.  Once it stops, the inevitable business decline continues.  So, the U.S. can't simply "invest" our way to prosperity either.

  • The solution I've found to work the most often is to change the product so that more customers want to pay for the product.   For the U.S. that would mean businesses generate more profits, which then results in more taxes being paid.   So, the U.S. needs to enable all private enterprises to grow and increase profits. 

    Unfortunately, I don't think the government will listen to me :-)    So, I think we can expect more tax and government spending coming as solutions.  
    For more on Strategies and Plans, check back every Monday for a new segment.
    This is not financial or policy advice. Please consult a professional advisor.

    Copyright © 2011 Achievement Catalyst, LLC


    Anonymous said...

    While I typically compare the government to a business, this is one time that really can't be done and here is why. The Government is not selling a product so unlike your business, dropping prices (tax cuts) and reducing product lines (government handouts) would in fact provide for a better climate for business and as it always has int he past, more revenue will be generated for the government (increased tax revenue).

    Our government is the one place we want less customers (government employees, illegals receiving federal aid, foreign aid - er kickbacks) allowing us to put money to better uses. It is time to start making the little cuts that are drops in the bucket until we fill the bucket. It is time we set maximum numbers of federal employees and get what we pay for from those we elect. It is time to stop increasing the federal limo fleet by 70%. It is time to require proof of residency when applying for aid and deporting those who are not able to show they are here legally.

    Most of all it is time to get rid of the ruling elite in Washington from any and all parties and set term limits in Congress, pass a balanced budget amendment, and throw congressional tax cheats in jail.

    Financial Independence said...

    Very interesting reading. Great post. Many thanks.

    I do not believe that the U.S. is declining as such - there is just to much being drained on
    overseas peace keeping missions - if all those money would be invested in economy...

    In the consuming economy as we are in, we need to cut the cost of the government, get rid of
    the non value added social programs - to balance the budget.