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Bottom Line, as Data in This Presentation Indicate...

USA Inc.’s expenses far exceed revenue – and government
projections imply this trend will get worse, not better.

In addition - while not addressed in depth in this presentation - USA Inc.
(while still a global powerhouse), at the margin, is losing competitive
advantage to many other countries.

Instead of ignoring the problems, we simply ask the question...
How would a financial / turnaround expert look at USA Inc.’s financials,
business model, strategic plans, efficiency and aim to drive the
‘business’ to break-even (or a modest profit) over the next
5-10 years?

KP
CB www.kpcb.com
USA Inc. | What Might a Turnaround Expert Consider? 233

Matching Expenses & Revenue:
Imperatives & Constraints

There are many reasons to make changes

– USA Inc. is losing money, and forecasts imply it will continue to lose money.

– Net debt levels (62% in F2010) are expected to surpass 90% threshold* – above
which real GDP growth could slow by more than one percentage point – by 2021E.

– Spending (primarily related to entitlement programs) is at unsustainable levels
based on USA Inc.’s ability to fund the spending (without increasing debt levels).

– Americans rank ‘reducing America’s debt’ as one of country’s top priorities,
according to a national survey by Peter G. Peterson Foundation in 11/09.

– We are now in the midst of a major generational baton-passing (from the Baby
Boomers to Generation X) which requires preparation for policy change.

– Foreigners own 46% (and rising) of USA Inc.’s debt, per Treasury Department –
Are they going to keep funding USA Inc.’s spending?

Note: *Carmen Reinhart and Kenneth Rogoff observed from 3,700 historical annual data points from 44 countries that the relationship between government debt
and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average
growth falls considerably more. We note that while Reinhart and Rogoff’s observations are based on ‘gross debt’ data, in the U.S., debt held by the public is closer
to the European countries’ definition of government gross debt. For more information, see Reinhart and Rogoff, “Growth in a Time of Debt,” 1/10.
KP
CB www.kpcb.com
USA Inc. | What Might a Turnaround Expert Consider? 234

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