The Betting

My guess is that a significant majority of the GOP and a fair number of Democrats are betting that the following will happen on an unclear timeline, but certainly before Christmas:

• Obama will lose the Syria vote and will emerge from the legislative tussle bruised, humiliated and ineffective. 
• Obamacare Exchanges will open in a bit more than three weeks, and the"train wreck" pundits have been talking about will occur. Even where Exchanges have reasonably smooth openings, the fundamental flaws in the program's architecture will soon become obvious - that young, healthy people would rather pay the penalty than sign up, and the resulting "older, sicker" insurance pool will doom the program.
• Obama is desperate to kill the sequester. He may not agree to defund Obamacare, but he will accept significant entitlement cuts and other discretionary reductions in order to cancel the sequester.
• Obama says he won't negotiate over the debt ceiling. GOP negotiators will seek a 45-60 day extension for both the budget and the debt ceiling, moving the drop dead dates on both to late November/early December. Keeping the two dates close together allows Obama to say he did not negotiate over the debt ceiling, that all cuts are related to the new Budget - although anyone with half a brain will see right through this.
• Obama may ask for tax increases as part of an agreement, but in his weakened state he will be unable to get them.
• The country still has a serious debt and deficit problem, even if the soft recovery has dropped deficit levels a bit. Obama is a big-spending President that still needs to be firmly reined in.
• Obama has lost every negotiation he has engaged in, so this Fall will be a walk in the park for GOP negotiators.

If you're part of the House Tea Party contingent, a member of the Rand Paul libertarian wing, or even a member of Republican leadership, you are most likely licking your chops. I could well be wrong on my Syria call - that the President will secure at least a conditional resolution from Congress, but other than that I think all the major "betting" assumptions listed above are wrong. Here's what I see:

• Obamacare will have some implementation bumps, but looking at the October 1 - December 31 Exchange opening period, predict it will go fairly well. Signups will be strong, and they will hit the 7 million signup targets by March 31, as scheduled. And here's what matters: the under 30s' will sign up in strong numbers, sufficient to put an economic, balanced-pool base under the program.
• A 45-60 day CR extension will be passed before September 30. The Rand Paul/Mike Lee/Ted Cruz "Don't Pass any CR that Funds Obamacare" effort will fail. A similar resolution will be passed for the debt ceiling, moving the showdown to late November/early December.
• Obama will propose canceling the sequester, reallocating about half of the $1.2 trillion over ten years to spending cuts, and the other half ($600 billion) to tax increases generated through tax reform and closing loopholes. If this program is accepted, Obama will indicate a willingness to make chained-CPI changes to entitlement programs.
• The GOP will counter with no tax increases, sequester rebalancing away from defense cuts and towards further cuts in social programs, and big entitlement cuts.
• Obama will make a clear case that with the sequester (dumb as it is) in place, the country has achieved the $4 trillion in cuts that made sense all the way back to Simpson-Bowles; that all that's needed is to have a more balanced program (planned cuts, new tax revenues); and that there is no need to increase the amount of the cuts, since the deficit problem has already been solved.
• Long term deficit discussions will not get started, because the Dems will insist on new taxes, and the GOP will say no.
• Obama will hold firm - any deal changing the sequester will require new taxes. And we will have a stalemate. Everyone will assume Obama will cave. He won't.
• And Government will shut down. The GOP will be 100% confident that the President will cave on the debt ceiling, assuming it occurs two weeks later than the budget deadline. And Obama will not cave on this either. If the GOP doesn't blink, we will have a default, although I predict the President would, under these circumstances, use his constitutional powers under the 14th Amendment to protect the integrity of US debt, and direct the Fed to keep printing new money for the Treasury General Account, allowing Treasury to keep paying the country's bills.
• If we have a 14th Amendment event, the GOP might well move to impeach, an effort that might clear the House but would be ridiculed in the Senate.
• And on what Budget basis would the Government be restarted? My guess: either a 12month CR continuing the sequester, or a deal similar to what Obama will propose: adjust the sequester from $1.2 trillion in automatic cuts to $600 billion in planned cuts, plus $600 billion in new revenues from closing loopholes, and chained-CPI for Medicare and possibly Social Security. In either case, a stunning defeat for the GOP. And come November, 2014, the House will change hands, breaking every precedent in the books.

Why do I think this will happen? Because the GOP does not know their opponent, and because they don't realize that, with the sequester, $4 trillion in cuts and new revenues have been put in place, enough to solve the short and medium term budget problem. $4 trillion has been the target since Simpson-Bowles came in during December, 2010, or almost 3 years ago. With the summer 2011 Budget Control Act, plus the "fiscal cliff" January 2013 tax hike on the wealthy, plus the sequester triggering in April 2013, $4 trillion has been taken out of future deficits. The work is done! What Obama wants to do now is make the last $1.2 trillion of this $4 trillion more sensible: replace arbitrary cuts with a combination of planned cuts and new revenues giving the same $1.2 trillion in deficit reduction.

The GOP doesn't have a clue what's coming. Mark my words.