My colleagues at Forrester and I have been puzzling over the discrepancy between the wealth of attractive new mobile, cloud, and smart computing technologies in the market, and the relatively weak record of actual growth in tech spending that our tech market forecasting numbers show. Certainly, the recessions in Europe and weak economies in the US, Japan, China, India, Brazil and other emerging markets explain part of the weakness in tech buying. In addition, cloud computing’s impact on the timing of tech spending (reducing initial upfront capital purchases of owned hardware and software while increasing future subscription payments for use of these resources) means that spending that in the past would have occurred in current years has now been pushed into the future. Lastly, as a recent Economist article pointed out, business investment in general has been low compared to GDP and to cash distributed to shareholders this decade, as CEOs with stock option compensation have focused on meeting quarterly earnings-per-share targets instead of investing for the longer term (see Buttonwood, “The Profits Prophet,” The Economist, October 5, 2013). Still, even taking these factors into account, tech investment has been growing more slowly relative to economic activity than in past cycles of tech innovation and growth.
Two weeks after the Federal government shutdown and two days before the Federal government runs out of means to pay all its bills without additional Federal borrowing, the unthinkable development of a Federal debt default needs to be thought about. The responsibility for this situation lies squarely with the House Republicans, who have refused to bring to a vote a resolution to raise the debt ceiling without conditions. Moderate Senate Republicans and Senate Democrats have been working on a resolution that would raise the debt ceiling until January and re-open the Federal government at current, sequestration-reduced spending levels, in return for initiating negotiations between the White House, Democrats, and Republicans on longer-term deficit reduction plan and some minor adjustments to the Affordable Care Act. While this could well form the basis for a way out of this deadlock before midnight on Thursday, October 17, some House Republicans have already labeled it "a surrender" and vowed to oppose it. So, I think the risk of a Federal debt default is at 10% and rising.