Many Won't Want To Hear This, But...

It's possible that a combination of our dysfuntional Congress and the difficulty the GOP is having in choosing a candidate that will be the least bit competitive with the incumbent POTUS might work to the country's advantage...at least from a fiscal point-of-view.

Try this on for size...

• The failure of the Congress and then the super committee to agree on any combination of spending cuts resulted in "automatic" cuts to federal spending amounting to $1.2 trillion over the next ten years. The automatic cuts are blunt and undesirable to many, but they are automatic and they are going to happen.

• The "Bush Tax Cuts" of 2001 and 2003 will expire at the end of 2012. The result will be an increase in federal tax revenues amounting to about $3.9 trillion over ten years.

• As mentioned above, and what seems to be the opinion of many "politics watchers", President Obama will be very difficult to displace in the 2012 elections. Displacing incumbent presidents is famously difficult to accomplish and it seems it will be doubly difficult given the fractionalization of the Republican Party going into the primary election season. There appears no real good chance that the various factions within the GOP will come together soon enough and with sufficient policy agreement to beat Obama in the fall.

• There does appear to be a reasonably good chance that the GOP will gain control of the Senate and maintain it's majority control of the House of Representatives. While the GOP might gain the majority in the Senate, it appears impossible that they could gain a filibuster-proof majority of 60 seats in the Senate.

So what might the result of these developments be? In many respects, with the Congress controlled by the GOP and the White House still occupied by Democratic Barack Obama, the country will very likely face another four years of ideological gridlock, maybe even worse dysfunction than we saw in the last four years. But from a fiscal point-of-view there could be more progress than those elected to govern the country have been able to accomplish for decades.

It is unlikely that either the Bush Tax Cuts or the automatic spending cuts could be overturned by the Congress. Clearly both issues will be decided quickly in the House. But with GOP majority in the Senate insufficient to prevent filibuster, much legislation is likely to stall there. Even if conservative legislation were able to clear both the House and Senate, there is a good chance such legislation would be vetoed by the POTUS and die becuse of an insufficient majority in the Senate to overturn a presidential veto.

So it looks like the current political situation is going to result in over $5 trillion in deficit reductions. This is nowhere near sufficient to come anywhere close to balancing the budget, but at least it would be a step in a direction that the Congress has been unable to agree upon...a "grand bargain" without compromise, so to speak.