The sequestration idea, whoever really came up with it, was fiendishly too clever by half. It was designed to create two Hobson’s reciprocal choices at one and the same time (remember the English innkeeper who offered two stalls — one empty, the other with a broken down nag to the rider in a rush to get onwards with his journey?).
In this case both choices were designed to stop the errant journey to a smaller national budget cold in its tracks. The conservatives could not/would not stomach the defense cuts. The liberals would not/could not stomach the social benefit cuts. Therefore it could not/would not ever happen. Only a real Grand Bargain could do that.
Well, now to everyone’s surprise, including mine, lo and behold the sequester is happening! Some people think, obviously, that now bargaining will finally begin in earnest and the sequester cuts will never kick in a big way in the longer run.
The White House has been using scare tactics — especially on the flying public and defense workers. So far most people have not really taken that bait and some public concern now may be drowned out by the Dow Jones average daily making new all time highs, normally signaling full economic speed ahead!
Someone is right and something is wrong with this bizarre scenario.
There is an old Wall Street wisdom that says “markets never lie.” Markets really do reflect in a numerical way what many thousands of people think. People do not knowingly bet against their best interests, if they have their heads on straight. So what is going on?
First, we seem to be turning a corner in terms of job creation and growth. February (a short month at that) saw 236,000 new jobs for the first time in almost eight years. Unemployment fell to 7.7 percent. Hurray!
Second, we really do need, in the long-term, to trim our national budget. The argument about how to do that has so far resulted in stasis. Miraculously now the unthinkable has happened and the budget is being cut in a way that no one really believed could or should happen. And, if the stasis continues the budget really will be cut meaningfully — crudely, yes, but really.
Third, the stock markets may be telling us that it really likes the fact that the budget finally is being cut and also, perhaps by a sheer accident of timing, growth is resuming. The combined overall result may be both the needed leaner national budget at the same time as resumed economic growth to take up the slack being created by budget cuts. Or, finally, an acceptable Grand Bargain!
Fourth, amazingly, therefore overall “clear sailing ahead!”
Boy, that must be Pollyanna’s ultimate dream.
Is that really possible? Could be.
But, the chances really are that what may be happening is that the president is finally getting down from his high horse and talking seriously and personally with a lot of people, who have a crucial vote, including many Republicans. (Boehner, Cantor and Ryan must be going crazy.) All that talk almost surely ends up becoming the long elusive Grand Bargain. And, do not let anyone tell you this was the plan from the beginning; if you do, you might end up owning the Brooklyn Bridge and all its needed repairs!
And, that is what nearly everyone has believed in and hoped for from the beginning of this staggering saga. The difference is that no one, except the invisible Mr. Market perhaps, could foresee this peculiar and devious path to political and economic heaven.
So, to add one final bit of confusion to this drama — while we all may have been wrong about how a solution would unfold, we were right to believe that it would happen, because it simply had to happen.
And, therefore we may not have been wrong after all.
How is that for drawing a target around where the arrow, hopefully, is about to land and restoring our predicting reputations at the same time?
Or, simply doubling down on being right or wrong and being willing to boast about or live with it!