Opinion: Windows of opportunity closing

Two events are starting to close the windows of opportunity for this president to govern and for this Congress to contribute to governance.

The first became clear with the release of the minutes from the most recent meeting of the Fed. The days of expansive monetary policy and low interest rates are numbered. 

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It is obvious that, even among some members of the Fed’s board, there is a growing restiveness about the policy of pumping near-limitless amounts of new dollars into the economy in the name of pushing full employment.

Yes, seeking full employment had always been one of the Federal Reserve’s two core responsibilities. But the other one — the imperative to protect the value of the currency — has historically and appropriately taken precedence.

No one can look at the Fed’s actions over the last few years and not conclude that the risk created by the constant and massive printing of money is real. Its potential to destabilize the dollar is significant.  

This reality is beginning to cause the Fed membership, if not its leadership, to question whether staying the course of this extraordinary balance sheet expansion in pursuit of full employment is a good trade-off. It is inevitable that the Fed is going to have to take action to contract this expansion. Interest rates will rise. The adjustment will probably come sooner rather than later.  The implications for the president, the Congress and federal fiscal policy are dramatic.

The Fed has been busily laying down a thick smoke screen that has allowed the president and the Congress to obfuscate the real cost of the incredible deficits and resulting debt that they have been running up over the last four years.  

This cover is going to be pulled away as the Fed adjusts its policies. It will lead to a rather stark awakening.  The unconscionable and profligate fiscal policies will be called to account for their true costs with a massive spike in the cost of federal interest payments.

If interest costs for the federal government simply return to their historic levels, it will add $400-or-500 billion of new expenses to the annual federal balance sheet.  This will overwhelm any tax increase even this president can contemplate and any spending cuts that even the most ardent House Republican could pursue.  It will mean billions and billions of dollars of unanticipated obligations. 

If the federal government had a budget, which due to the Senate Democratic leadership it does not, it would blow a hole the size of Alaska in it.  

All this for interest payments that do virtually nothing to help deliver a better-governed nation or a stronger economy.  It is money thrown out the window. It will compound dramatically the difficulties involved in addressing our deficits and long-term insolvency issue.

There is now a window of opportunity to correct the country’s debt problem amid this artificial environment of exceptionally low interest rates created by the Fed. But the window is closing and it will not reopen. 

The failure to get our fiscal situation in order during this unique period will go down as a major act of misfeasance by the president and the Congress. Neither history nor our children will view their actions kindly.

The second event that is going to limit the ability to govern by those charged with governing is the return to the election cycle. Some would say in observing the president’s performance that he has never stopped electioneering.  

But the fact remains that there is a period — albeit one which is fast moving toward its close — when, in theory at least, the two sides should be able to mute the politics and come together to govern.  By the end of the summer, this window will also close.  The chance will most likely be lost.

Both sides have an obligation to take at least one more serious run at getting something done to right the unsustainable course of our federal fiscal ship. 

If first lady Michelle Obama allows her husband to play golf with Tiger Woods, it should not be too much of a reach to tell her husband to go play golf with the Speaker.  

Tell them to hit the restart button.  Tell them to do something good together for the country and our kids.  Just the two of them in a golf cart for four hours working out America’s, and for that matter the world’s, problems. How refreshing that would be.

Judd Gregg is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations subcommittee on Foreign Operations. He also is an international adviser to Goldman Sachs.