The Grand Bargain

If, as I hope Democrats and Republicans can come together and strike a 'Grand Bargain' to reduce deficits and hopefully balance the budget, by some combination of tax cuts and revenue raisers, then the victory for the American people would be huge!

However, the road to any victory for the American people means that it will also be a victory for President Obama. As such, there is a lot of skepticism on my part on whether Republicans are willing, (or able) to give this President a victory that would surely mean a second term and his slot in history. In my opinion, the Republicans are so dependent on their base and their base is so rabidly hateful of the President, that any bargain of this size would tear their party apart.

The Republicans, I think made their first move to disrupt "any" bargains, by naming the most political members of the opposition, House Majority Leader Eric Cantor (R-VA) & Senator John Kyl (R-AZ), to the Vice President's deficit negotiation group. Rep Cantor and Senator Kyl have been stringent opponents to any deal that lowers the deficit with the help of tax increases or elimination of tax extenders. Tax Extenders being those deductions which overwhelmingly favor the rich, but also benefit the Middle Class. Deductions such as the Mortgage Interest deduction and Charitable giving deduction.

However, Liberal Democrats have an emotional speed bump that they have to get over with any bargain, that barrier is Social Security. Democrats are going to have to step off their insistence that any fixes to Social Security is the devils work and come to the realization that they need to play a role in shaping how Social Security will be made solvent for the next 75 years, before some financial catastrophe does it for them. They have to admit that the chits that congress has been placing in the so-called Social Security Lock-Box have to be paid.

I think the next several weeks will be interesting. If the President can overcome his base and the Speaker of the House, Rep John Boehner can do the same then we have a chance to get this issue solved. However, if one or both parties decide that they will play to their bases and not compromise then the warning shot Wall Street delivered to the Hill and White House yesterday may come true sooner than we think.