Time Is Running Out on a High Stakes Showdown

We are in a most unpleasant quandary. No win-win in the offing. Lose-lose maybe. At best minor win-win or lose-win. I can't see the financial markets anywhere responding well tomorrow -- except for the golden goldies (GLD).

If Obama folds and accepts cuts on the middle class and old folks without tax increases on the rich, history will denigrate him for being a weakling and supporting the notion that this nation is for rich people first and foremost -- and everyone else can fend for themselves. They are not being represented.

If Obama accepts a short-term solution just to get the debt limits raised, he will be caught in the political meat grinder -- and so will all of us -- when the BIG deal needs to be worked out during election year. We will be criticized for holding up a high stakes game by settling for low stakes.

Even if there is a partial solution the credit rating agencies may decide to lower the nation's rating from triple A to some lower level, setting off tremors in the bond market, and making the foreign holders of Treasuries like the Chinese and the Japanese extremely nervous Nellies.

There are repercussions no matter the outcome -- and I can't see they are positive. A small deal shows a divided country. A big deal cuts into safety net programs meant to help our older citizens, our sicker members of the aged. Keep on eye on AARP to see how they respond.

The prospect of less revenues of say $400 billion a year reduced the budget about 3% a year for 10 years. That's why raising taxes by $800 billion over 10 years adds back $80 billion or 20% of the $400 billion lost.

In other words, decide what dose of castor oil you are willing to live with. None of the alternatives are certain to improve the nation's health.

As the late Senator Daniel Patrick Moynihan might have said, quoting a famous line from poet William Butler Yeats; "The best lack all conviction, while the worst are full of passionate intensity."