Time is of the Essence, Any US Budget Deal Will Do

As the debt negotiators square off in Congress, much attention will focus on the size of the 10-year budget deal they come up with. As almost everyone agrees, there is much more risk of doing too little than too much given the scale of America’s fiscal challenge. The truth is that the expected impact of the deal over a 10-year period will not be its most important aspect except in the context of the current media cycle. Very little hinges on whether the deal picks up the low-hanging fruit with respect to entitlements and revenues – or even breaks some new ground – this year or in the next couple of years. Agreements reached now are subject to revision, potentially radical revision following next year’s election. Businesses are basing their investment decisions on the size of their current order books, not their guesses of fiscal policy in 2015. Consumers are deciding whether or not to spend based on how confident they are that they can hold on to their jobs.