Saturday, July 23, 2011

Incompleted Transaction

A number of years ago – during my retail career – I was in the process of selling a flat panel TV to a couple on a tight budget. The couple expressed a “willingness” to see a few better, more costly models, but knew full well that they would have to stretch their budget to accommodate their wish list. After about forty-five minutes, we arrived at a fair price for the set they had decided on, along with the appropriate cables and surge protection.

Then, at the register, I suggested one additional add-on: an extended warranty. Indignant that they would have to pay any additional monies, they bolted for the door and sped off in their car. I was aghast. I had encountered resistance before to extended warranties – many people believe that they are a waste of money – but never did I have a customer literally walk out of the showroom. Usually, the customer either rejects the warranty outright, or tries to negotiate part or all of it into the price.

Afterwards, my manager tried to console me. “They couldn’t afford the set and they knew it,” he said. “They just needed an excuse for leaving.” To coin a phrase, their eyes were bigger than their stomachs, or their wallets, for that matter. They couldn’t bring themselves to say they didn’t have the money, so they used the excuse of an optional warranty to get out of the commitment.

John Boehner is that customer. He wanted a deal with the President, he really did. Unlike so many in his Party who seem to think the August 2nd deadline is no big deal, Boehner knows full well what will happen if the debt ceiling is not raised. But the Speaker of the House had this little problem: he didn’t have the votes to pass a deal with revenues in it, and he knew it. So when the salesman – President Obama – mentioned he wanted an additional $400 billion in revenues over ten years (that’s $40 billion a year boys and girls) he had his excuse. He bolted out of the negotiations like a bat out of hell. It mattered not that Obama said that if it was a problem they could work something out, all Boehner knew was that now he could go back to his caucus and say that the President had “moved the goal posts.” He was spared from having to plead with the inmates of the insane asylum to be reasonable.

And, on the other side of the register, Obama, embracing the Gang of Six proposal in the Senate, could now go back to his Party and say he wanted more revenues before he would sign off on such drastic spending cuts. He was also able to say to the millions of independents – and effectively I might add – that, once more, he was the reasonable adult in the room, willing to do the tough work needed to deal with the nation’s mounting debt.

In the short run, politically speaking, Obama is winning on points, but, in the end, the transaction that was on the register was never completed. Translation? No sale! And with just over a week to go, even the most ardent of optimists are becoming skeptical that a deal can be reached before the deadline.

With HR 2560, the “Cut, Cap and Balance” bill all but dead on arrival in the Senate, the Senate Gang of Six Plan still in the preliminary stages and weeks from being scored, much less passed through committee, and the Obama - Boehner deal / no deal plan all but kaput, some are saying that the McConnell - Reid Plan B option might be the only way of avoiding a catastrophe. It would reduce spending by roughly $1.5 trillion  with no additional revenues and grant the President the authority to raise the debt ceiling, while simultaneously being condemned by Republicans for his “recklessness.” Even Dark Lord Grover Norquist himself has said he prefers this plan to a default, a sure sign that not everybody in the Good Ship Lollipop is insane.

There’s of course one big problem with the Plan B scenario. The cuts – factored in over a decade – may not be enough for Moody’s, Standard & Poor’s and Fitch, who have expressed deep concern of late over the mounting American debt. Moody’s has all but said that the U.S. has 90 days to present a credible plan to deal with its debt or it will downgrade the nation’s credit rating, which at the moment stands at triple A. If that happens, interest rates will climb and the debt will grow even higher. All three credit agencies are looking for substantial reductions in the debt in the neighborhood of $4 trillion. This is no longer about mere ideology or how bad the President’s messaging was over the last two years. That ship has sailed. Forces have been unleashed that, if not dealt with, will bring profound consequences for millions of people.

What we now have is a choice of two paths: the first is a center-right path that, while severe in some of its measures, at least preserves the social safety nets and entitlement programs vital to the working poor and elderly, while gaining some small measure of additional revenues to be determined no doubt at a later date; the second is a path of complete austerity which rips apart the very fabric of these social programs and entitlements and raises not one dime of additional revenue. Further, it promises future draconian slashing that will eventually lead to an end of entitlements altogether. While it may pain many progressives to hear this, the choice comes down to a lesser of the two evils. Doing nothing, by the way, is NOT an option.

The President has drawn his line in the sand, as has the Speaker of the House. It is time for the two of them to get back into the room and hash this deal out. If the best Obama can get is $800 billion in revenues than so be it, so long as Boehner is willing to stipulate that if the revenues cannot be met by mere tax reform, they must be made up by additional taxes that equal the amount agreed to. Reid, Pelosi and McConnell can then deal with how and where the cuts come from. There will be more than just a few casualties in anything substantive that results, but the catastrophe that gets averted will, in the end, be worth it. One thing is for certain: When all this is over, conservatives and progressives will have one thing in common: they will both hate it.

Next to doing the right thing for the country, that may be the best news of all.

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