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Washington’s Pending Perfect Storm

Occasionally you really can see over the horizon. Washington’s November 15 “lame duck” session and the first few months of the 112th Congress that begins on January 3, are worth at least a squint.

The Players

- Obama’s team will be filled with second tier staffers who have moved up with the departure of Peter Orzag at Budget, Christina Romer at the Council of Economic Advisers, Larry Summers at the National Economic Council, National Security Adviser General Jones, crisis loving Rahm EmanuelDavid Axelrod (early in 2011), and perhaps even Robert Gates at Defense. None of the replacements is perceived to add strength or business, military, or foreign policy experience.

- The House will likely be in the hands of John Boehner who has been excluded by Nancy Pelosi and vilified by Obama. There will be a small army of energized conservatives with a mandate, and many fewer “blue dogs”. Darrell Issastands ready to investigate everything.

-  The Senate will be deadlocked with the filibuster strengthened even if the Republicans do not take over.  Moderate Republicans and Red State Democrats will understand what the Tea Party has done to their absent liberal colleagues. With 23 of the 33 Senate seats up in 2012 belonging to Democrats, look for an effort to recruit a party-changer or two before the high tide.

-  President Obama will stand ready with his newly-activated veto pen.  Fresh off of his 50 Democratic fund raisers in 2010, the post-partisan president will soon be in full 2012 campaign mode for himself – the one thing that he knows how to do. Look for a class warfare theme.

The Issues

-  The Democrats adjourned without passing a FY 2011 budget (not unusual) or a tax structure for 2011 (income; capital gains; dividends; estate), leaving those details for a lame duck session starting November 15. (Conspiracy theorists look for all types of mischief, but Congress will be lucky to get the tax issues settled.)

-  The Bowles/Simpson Deficit Reduction Commission is to make its recommendations by December 1, with an “every-thing’s on the table” approach – Social Security; health care; whatever. With 14 of 18 votes needed for a recommendation, nothing substantive will emerge, but the effort does provide a vehicle for shaping discussion in the new Congress where “fiscal responsibility” will be the watchword. Repeal of Healthcare will be tried and quickly changed to a major effort at modification.

-   The Afghan War strategy review is set for December, with the  National Security Adviser, Tom Donilon - earlier called a “disaster” by the Defense Secretary - leading the “we need to focus on domestic politics” camp. Pity our Afghan allies.

-  Meanwhile, the “blame it on China” camp has Congress calling for a major appreciation of the value of the yuan as the solution to our employment problems. And free trade agreements … forget it.

The Outcome

It is hard to imagine the downgraded administration and the new Congress doing anything other than muddle contentiously toward the 2012 elections. Along the way, there are, however some real risks:

1. Unless the Tea Party Republicans can really grab the fiscal responsibility moment, the national debt will push past the $14 trillion Gross Domestic Product. Look to Paul Ryan’s leadership for any hope.

2. The push to devalue the dollar and otherwise antagonize China, could lead to the end of the dollar as the international reserve currency. Refinancing our debt will become very expensive.

3. The military community (domestic and NATO) will become highly critical of Obama’s strategy of sending our kids to die in a war that he had no intent of winning.

This might be a good time for that extended trip to Australia.

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