How The Debt/Budget Crisis Will End

When the Republicans took the House back by storm, I predicted that it would increase Barack Obama's chances of being re-elected.  My logic went went this way--Obama would have to tack toward (not to, but toward) the center to get anything done with the new Congress, and in the process, he would appear more reasonable to what had become an increasingly dissatisfied "muddled middle"--those who had voted for him in 2008, but who abandoned him in the mid-term Congressional election.

Fast forward to today, as we move slowly toward national default.  Republicans have quite rightly seized the opportunity to use the crisis (hear that, Rahm?) to drive serious spending cuts into the mix. The Democrats have taken to their sedan chairs with a collective case of the vapors, telling all who will listen that the Republicans are going to starve the hungry, take money from the poor, and hasten the demise of the elderly.  Some time in August, we will default on our national debt, and while I have little technical knowledge of what that would entail, I believe it will be--in the words of our hyper-eloquent Vice President--a "big f---ing deal".

So--how will it all end?

1.  In the end, the President will be in a strengthened position for re-election.  Democrats in Congress will be fuming, and Republicans in Congress will wonder if they've achieved a Pyrrhic victory.

2.  The Tea Party will loudly trumpet both the success they've achieved in dramatic debt reduction AND complain about the lack of backbone of Republicans in Congress.  They will be correct on both counts, and they will vote largely Republican in 2012.

3.  There will be dramatic debt reduction ($3T or more), and there will be increases in total revenue (tax increases, loop-hole closures, etc).  No one will be entirely happy with the outcome, but Congressional Democrats will be least happy of all.

Here's my logic.  Barack Obama wants to be re-elected, and he wants it badly.  He knows that his signature legislative achievement (Obamacare)  is despised by large portions of the voting public, he realizes that his record on the economy is dismal, and he is certain that sticking close to Nancy Pelosi is what got him there (in addition to his own ideological bent).  He must present himself as the great uniter, the man who brought everyone together to save the country from default.  The only way to do that is to come down closer to what Republicans want than what Democrats want.  Let's face it--the discussion right now isn't whether to cut spending, it is "by how much".  To some extent, Republicans have already won.

Congressional Republicans?  Well, they are in the driver's seat, but they must be careful not to overplay it.  They can and will walk away from this debate with major spending cuts--if they are willing to treat those (laregly Tea Partiers) who would counsel "never surrender" with respect, but firmness.  Perfect is a dismal enemy of good enough, and perfection is simply unattainable here.

I laid this line out for a few friends yesterday, and one offered that in order for the logic to hold up, Congressional Republicans have to actually WANT to solve this, rather than just weaken Mr. Obama politically.  While that is definitely a possibility, it is one so incredibly craven that were I to realize that as their ACTUAL strategy, I would become a loud and instant critic of the Republican caucus.  I simply cannot believe that they would hazard the full faith and credit of the country to score a dubious political victory.

But we shall see.....

UPDATE:  Things look even bleaker for Mr. Obama--he will fold like a cheap suit.