Ballmer: Business Has 'Borrowed Too Much'
The private sector has "borrowed too much money, businesses and consumers alike, fueled by a lot of different things," Microsoft CEO Steve Ballmer told the House Democratic Caucus Retreat in Williamsburg, Va., Friday. The high-tech executive said there is a natural tendency to want to blame somebody for the economic crisis but in reality, "we've all contributed to a culture of spending and private debt." He added that the current situation is a once-in-a-lifetime economic event but it is not unique in U.S. history. In 1929, just before the stock market crash, the private debt-to-GDP ratio was 160 percent and has been steadily increasing since almost the end of World War II, Ballmer said, according to a transcript.
"What we now have will be a fundamental economic reset. The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate," he said. "This may not be the thing that people really want to hear, but it's certainly what we're planning on, and it's the truth on which we're basing sort of our model, if you will, at Microsoft." As part of its reset, the company announced last month that it was cutting 5,000 jobs and said it would create several thousand new jobs in areas that require investment.
To reach the reset point, Ballmer said three things need to happen:
▪ "The economy must be deleveraged. Private debt as a percentage of GDP has to be reduced. Restoring health to the nation's financial system is a fundamental part of this."
▪ "Confidence must be restored. The stimulus package, in my opinion, is vital. It will provide a cushion as we reach the reset point and it will help restart our economic engine."
▪ "America really has to return to growth that's built on innovation and productivity, rather than leverage and private debt. That must happen."
Ballmer went on to talk about advances in technology and the importance of investing in math and science education, which is part of the stimulus package. "Science and technology is the backbone for productivity and innovation," he said, noting that U.S. government investment in science and engineering as a percentage of GDP is half of what it was in 1970. "This country has what it takes to succeed. We have talent, we have technology, we've got the track record," Ballmer added. "We certainly have to roll up our sleeves and put ourselves back on the path of the kind of innovation that will drive the kind of economic success that I know we all want."
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