Leadership Lessons from the US Debt Deal

The deal is done. Finally!

For many weeks, controversy about the US Debt Ceiling wreaked havoc on business and financial markets, raising blood pressures and inhibiting economic performance.

Savvy citizens and lawmakers know that the Debt Ceiling is not about the future and what we will spend. The spending decision was made months and years ago. Rather, the Debt Ceiling is about the US government’s ability to pay the country’s bills. It caps how much the US may borrow to pay for previously approved programs and services. In effect, we’ve already spent (or promised) the money. This is akin to individuals using credit cards and paying the incurred charges later. (NPR Explains the Debt Ceiling)

Nevertheless, the facts do not deter politicians and pundits from casting the Debt Ceiling as the culprit behind US spending decisions. Unsurprisingly, this seems to be a bipartisan tactic, depending on who authorized the original spending and who is now required to pay for it. (Simply enter “debt ceiling debate” in any search engine.)

Skepticism aside, this year’s Debt Ceiling Deal offers three powerful lessons for leaders.

1) Sometimes, your greatest superpower is not actually yours.

A leader’s job is to set the strategy, grounded in core principles that are clear to everyone on the team. While the leader may be “in charge”, the real work often happens outside public view. Further, the leaders I advise know when and how to get out of their own way. They establish clear parameters, then fully empower the people having the superpower that’s most needed to achieve the objective.

This is precisely what President Biden did. Having spent weeks in a war of words with Speaker McCarthy, Biden delegated negotiating responsibility to two aides, Steve Ricchetti and Shalanda Young. Hailed as “quietly essential”, Ms. Young – not President Biden – held the relevant superpower to get the job done.

2) Look beyond the noise – repeatedly.

The media frenzy surrounding conversation, debate, and worry about the consequences of failing to raise the US Debt Ceiling created constant noise that threatened to swamp a reasonable solution. Effective leaders look beyond the noise and focus on the actions that have the greatest potential for positive impact. They know what matters most to their core stakeholders and let go of everything else – even at their own peril. For the debt deal, Speaker McCarthy saw past the desire of some to see his head on a plate, rolling up his sleeves and doing what’s required of the speakership.

3) Good governance matters.

President Biden truly believes in bipartisanship. He’s known for it, with a decades-long career to prove it. Across the aisle, Speaker McCarthy relishes the role of Speaker of the House, even with all its headaches. He also recognizes a key (though often overlooked in modern times) responsibility of the speakership: building coalitions based on common objectives rather than party affiliation.

Negotiating the debt ceiling, both men understood that making the government work relies on good governance. Without abandoning their own, distinctive core principles, they moved to center and together, crafted a solution that a majority of lawmakers would support.

Clever compromise delivers the win.

At the end of the day, clever compromise yielded the win for the country. Both leaders claimed and celebrated victory. Yet, importantly, neither chose to gloat. Leaders that successfully block out the noise, tap the appropriate superpower, and embrace good governance create tangible value for their organizations.

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?2023 Tara J Rethore.?All rights reserved.?Permission granted to excerpt or reprint with attribution.