Tuesday, March 5, 2013

A Tough Pill to Swallow


When the so called “Super Committee” failed to solve the budget impasse last year, Congress agreed upon a temporary solution with the political equivalent of a "poison pill" to regulate themselves against a future political stalemate.  In business, a poison pill is a strategy that triggers certain agreements that make it very expensive and difficult for an acquiring entity to pursue a hostile takeover of an organization.  In business, "poison pill" provisions are effective deterrents to organizations that practice common sense.

In Washington, Congress created a strategy that called for cuts across the board. When the Super Committee introduced the idea of automatic cuts during a meek economic recovery, economists and financial analysts warned of the damage to the fragile economy if the Sequestration cuts were enacted.  The politicians (being politicians) assured the public that no such cuts would come to pass; they promised common sense compromise would prevail.  The threatened Sequestration cuts were only a mutually agreed upon "poison pill" to avoid a political stalemate.

Last Friday, President Obama ordered the Sequestration cuts.  However, each side blamed the other side for their failure to come up with a compromise.  The "poison pill" strategy failed.  But, in retrospect, it was always doomed to fail. 

Congress didn't have to swallow the pill - we did.

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