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Timing Is Everything

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One of the largest looming problems in America today is the debt ceiling and the associated long- and short-term budget deals. Now that the bin Laden bogey man is at long last laid to rest, the relentless press is chomping away at President Obama's failure to make the deals on deficits. They make it sound like Obama has failed to use a president's assumed unilateral power to wave the presidential magic wand and -- presto -- produce a budget formula and make Congress -- presto -- swallow it whole. If only it were as simple as it appears to have been in FDR's time.

How easily we forget that timing is everything. And, timing is simply an art, not a science. Remember too that politics is the art of the possible.

Q: When does the coach in football call for the hidden ball trick?
A: When he believes the other coach is thinking about a fourth down punt?

Q: When does the suitor pop the big question?
A: Too soon and he is rejected. Too late and he is outbid.

Q: How do you time your investments?
A: Is it better to be too early and wait, or too late and have to wait longer?

Q: When is the right moment to air the negative political ad?
A: A day late could be lost in the music. A day too early could be endless embarrassment.

Q: When do you raise your own bid for a house you want badly?
A: Too soon, and you get stuck in a bidding contest. Too late, and the other guy has it.

Q: When does one quit making love with a gorilla?
A: When it wants to.

Get it?

Now the President, Congress and the political parties are spinning around a pole of confusion about when and how to raise the debt limit at the same time as they are jockeying about how to, short- and long-term, reduce the budget deficits by some combination of cutting (which?) expenses and/or raising more revenue. Boy, are there opportunities to get ground up by the moving parts in that game, by moving too soon, or too late on any one of the dozens of possible combinations.

While there may be no right answer in how to pull off that caper, there absolutely is a right goal, which the few sane players in that game all know very well. Do it sooner than later and set a framework for a decade and more of real deficit reduction.

So the game we are watching fearfully and hopefully is a waiting and timing game. The smart players have to gauge when the other players are tiring or losing popularity. The dumb players, some of whom only want more exposure for unrelated reasons, look to launch a snow slide just as a new storm approaches.

The President has been clear from the beginning that:

  1. The ceiling must be raised well in advance of any possible default, without conditions tied to unrelated issues, because if we seriously approach, much less cross, that line, we may never fully recover the confidence we have enjoyed from the world's creditors (investors in our Treasury bonds) for the last 200 years.
  2. The deficit issues cannot be resolved solely on the back of the portion of the national budget (less than 20 percent) dedicated to discretionary spending.
  3. The deficit reductions must come from a combination of cuts throughout the whole spectrum of spending, as well as new savings processes in how some spending arises, plus increases in government revenues by reducing tax avoidance benefits and raising new revenues in the form of taxes and fees, particularly from the richest segments in the population.
  4. All of that should be hardly controversial. But it is. What to do?

The playing field is covered with people who are advancing some personal agenda, whether political or of some substance. They are running in all directions at once, whether liberal, conservative, Republican or Democrat -- even the Senate's Gang of Six. There is little theme to most of the noise, except that they are all seeking to seize the moment primarily to be heard. How and why they do not seem able to see through the haze, and recognize that this is not a moment to ignore the overall national public need and good, is almost impossible to discern.

So what is going to happen? We will move inexorably from this moment towards the drop dead date for the debt limit to be raised, which the Treasury now says will be about August 2nd. Around July 15, If not before, we must see some movement towards a conclusion. While a failure to actually make a payment on a Treasury obligation might not occur for quite a while, the ceiling's not being raised by that date would cause serious dislocations in the world's markets for our bonds, which will certainly raise all our borrowing costs for a very long time.

These circumstances, while different in many ways, quite closely resemble last fall's tax showdown, when a long standing deadline on basic tax changes had to be met. The President then had been monitoring a similarly confused and disjointed debate, and as the deadline approached he struck hard and fast and worked out a compromise solution that seemed to make everybody and nobody happy. I believe and hope that will happen again. And a key ingredient in his solution is likely to be a formula that locks in reductions of deficits over a very long time by both reducing expenditures as a percentage of GDP, as well as automatically increasing revenues in a measured way from several types of sources. This President, in his quest for a post partisan type of governing, seems to be mastering the art of extracting compromise from the jaws of deadlines.

That art is based on making sure the outlines of some deal are out there in advance of the crisis and then striking with a great sense of timing in just the right way to pull an imperfect, but acceptable, result out of the fires of confusion -- just in the nick of time!