How do you pronounce ‘Moderate?’
Well, that depends. Is it a noun, or a verb?
Over the past week I’ve had the privilege of several discussions with members/staffers of the US Senate around the topic of the pending vote on the debt ceiling. It’s an issue I’m attracted to academically, particularly due to my past political and investment-focused career phases, plus my continued wonkish interest with all things ForEx and Fed.
My discussions earlier this week were with Democrats, though I have recently spent time with the Republican side toward assessing this issue. And driving one key point. This issue’s too big for little political agendas.
This issue needs to be ‘moderated’ to solution. Verb.
This statement, in the planet known as the US Senate, is amusing to the ear. The Majority and Minority Leaders in the Chamber being less ideologues than ruthless hardcore political players seeking a win, the oftsaid line “everything is political, except for politics, which is personal,” couldn’t be more true.
It’s a credo borne out in just about every primal legislative breath. The mere idea that something could go beyond the whim or wile of politics seems utopian.
But this is the debt ceiling. It’s different. It’s what arches over all the other things you think the government should or shouldn’t be doing.
And therein rests an opportunity.
The debt ceiling being near to attainment, we have three choices.
1) Raise it without conditions “clean bill.” Risk interest payments and negative perceptions rising. And possible default.
2) Freeze it. Risk, perhaps in just a few months, default.
3) Raise it with conditions. Least chance of default.
Along the right-left continuum, among which no reasonable person claims to like the idea of default:
1) is considered the far left position,
2) the far right position, and
3) the compromise or center position.
As I write this, voices leaning left, led by those such as US Treasury Secretary Geithner, threaten apocalyptic default and related catastrophe if his own chosen path (which we assume reflects that of his boss, President Obama) does not occur.
Voices leaning right, among them Republicans such as Senator Pat Toomey of Pennsylvania, a freshman who boldly challenged the will of the Treasury Secretary on this matter earlier this year, after having been in office just a few weeks, say that the irresponsible procrastination of a clean raise is precisely *not* the message we want to send to the markets. Considering the S&P’s ‘negative’ warning issued April 18th, this point should be taken with acute seriousness.
Whichever one you agree with, those are some fighting words for a fighting sort of time. And, as a moderate Democrat Senator shared with me the other day, if we have a straight partyline vote on this? “The markets may not like that part either. Regardless of what we do.”
A group in the Senate called the Gang of Six, realizing this, is driving a potential bipartisan solution to avoid this potentially uncomfortable scenario.
So what happens in the middle? Well that depends upon how you define, pronounce, and categorize the noun or verb, “moderate.” And how you view the classic “Prisoner’s Dilemma.”
A Prisoner’s Dilemma, basically described, has two ‘participants with a dual ‘blind’ choice set.
Each can
1) Cooperate >gain a shared optimal outcome,
2) Attack > turn on the other and gain a halfish sort of outcome, or
3) Cede > turn on oneself, and cede the battle.
Well, if the other guy isn’t known for his cooperation, what would you rationally choose? Option 2.
The unique equilibrium for this game is a Pareto-suboptimal solution, that is, rational choice leads the two players to both play defect, even though each player's individual reward would be greater if they both played cooperatively. (a)
That’s the center outcome, the moderate outcome, ‘moderate’ pronounced as a noun.
Why do moderates look fishy to a lot of people? They aren’t standing up for things. They’re making deals. They are playing it safe for themselves. Perhaps only to get re-elected.
Now you can’t exactly blame them. But alas, you do. Because you are left unsatisfied. How do we get to the optimal outcome, you ask?
Well we’d have to communicate. And that is where the verb, ‘moderate,’ comes in. With its action step and its ‘long A.’
A person at the middle. Who creates a civil realm for the two to understand and agree.
Have we tried it? Have we tried to stop dismissing a real moderating methodology, as if it were a dream?
This isn’t about meeting in the exact middle. Which is not always the best thing to do. It’s about deciding how to get to that optimal Option1.
I’m as skeptical as anybody. But if being a noun, a ‘moderate’ is wimping out and failing, might being a verb, ‘moderating’ be the brave guy’s path to try?
We need an optimal outcome on this one. This is our debt ceiling, and we’ll hit it in a few weeks. Do we have a choice?
(a) http://en.wikipedia.org/wiki/Prisoner%27s_dilemma