Countdown to Compromise

"I would prefer to have a bipartisan approach to solve the problem. If that is not possible, I and my Republican colleagues in the House are prepared to move on our own."

-- House Speaker John Boehner on “FOX News Sunday” with Chris Wallace

Washington has been overwhelmed with feverish speculation since House Speaker John Boehner walked out on debt-limit negotiations with President Obama on Friday over Obama’s request for larger tax increases.

Power Play readers, though, could pass an untroubled weekend knowing that this step is just another part of the long ballet that leads Obama and Congress to determine that there is nothing left to do but settle for less.

Obama has shown no appetite for tackling these issues and liberals were already preparing to torch the president if he gave away big changes to entitlement programs. And Boehner lacks the kind of iron-fisted control necessary to push a compromise package through the most conservative House since the 1920s.

The kind of grand bargain that sends thrills up Washington legs was just never going to happen with a deadline eight days away and the most consequential presidential election in a generation already underway.

There will be a deal, and it will be a deal based on the emergency provision whipped up by Senate Minority Leader Mitch McConnell in which the $14.3 trillion debt limit is increased enough to last through next year, but the funds are only released in contingent stages.

While President Obama briefly sought an avenue to political redemption through a grand bargain, the president seems quite content to return to the sidelines on this deal as Boehner and McConnell come to terms with Democratic leaders Nancy Pelosi and Harry Reid over a compromise plan.

The Republican House is working up a very short-term plan – something that would give the executive branch less than one year’s worth of borrowing in return for $1.5 trillion in already agreed cuts. The GOP plan will include some second step for a subsequent increase and fiscal reforms, but like all future promises in Washington, it’s mostly just wishful thinking.

The Democratic Senate, meanwhile, is working up a cuts-only package that would last through the 2012 election and spare Obama the political pain of seeking more borrowing in the heat of a general election campaign. Here, Senate Majority Leader Reid will use the agreed upon cuts, which already include some creative accounting, and add to them prospective savings from the end of the Afghan war.

Claiming savings from the fact that the U.S. will not be involved in a 20-year-long Central Asian land war is kind of cheeky. Why not forecast that there won’t be any tornadoes in 2021 and claim savings from FEMA?

It sounds bad for Democrats to be conditioning the increase on the date of the election, but remember that it will be deeply unsettling to lenders if this exercise must be repeated next summer. It’s bad PR for Democrats to express this concern, but a convincing argument on the Hill since Republicans fear the punishment of bond markets that the Obama administration has long threatened.

If the GOP forces a deal that causes inflation to rise through the stratosphere, incumbent House lawmakers know they will pay a price at the polls.

Anyway, the House plan and the Senate plan will start moving toward each other this week -- $1.5 trillion versus $2.7 trillion.

Boehner stands a much better chance of getting his package through the House than Reid does of getting a big debt hike based on accounting gimmickry through the Senate.

But as the deadline ticks closer, all Democrats and most Republicans will be amenable to a compromise that avoids the start of a government shutdown on or about Aug. 2.

And what’s the best way to fuse the Boehner and Reid plans? You got it, the McConnell plan, or some modification of it.

It’s hard for debt hawks to accept that this crisis will not spur the kind of big, systemic changes that they want for the federal government, but with a politically weak and defensive president, a divided Congress and a looming deadline, there just isn’t a way to make it happen.

The hawks who once vowed to vote against anything that wasn’t grand in scope will find themselves increasingly willing to shift their focus onto the next election and get ready for the mother of all political battles in 2012.

Markets, Schmarkets

“We may have a few stressful days coming up — stressful for the markets of the world and the American people.”

-- White House chief of staff Bill Daley on CBS’s “Face the Nation”

At some point, investors could start panicking over the U.S. debt-limit impasse, but that point doesn’t seem to be today.

Actually, the price for existing U.S. debt looks relatively stable and the dollar is on the rise. Stocks are off, but not in the form of a panicky selloff, but because of ongoing economic pessimism.

Part of that is the result that the U.S. looks like a model of fiscal probity compared to the big economies of Europe and China (the Greek sickness continues to cripple the EU and inflation is burning down China’s tower of growth,) and another part is the understanding the U.S. will no how, no way default on its debts.

A possible, partial government shutdown for some number of days? Maybe. Failing to pay creditors? No chance.

Aside from the fact that there is a viable compromise on offer in Congress, creditors see this for what it is, an ideological struggle, not a problem with creditworthiness. President Obama will pay the debts in the event of an impasse either by ordering obligations or by simply invoking a new executive power for debt obligation by fiat.

Yes, the U.S. will pay more to borrow money if there aren’t substantial reforms as part of this deal, and yes, that could drive inflation, but so far the rest of the world is not panicking over the debt soap opera in Washington.

But the panic will come, especially given the overall weakness of the global economy. And when it starts, even the ideologically pure will be screaming for a fast-track deal.

Pentagon Report: Afghan Truckers Funnel U.S. Funds to Taliban

“…documented, credible evidence…of involvement in a criminal enterprise or support for the enemy”

-- Report on a military investigation obtained by the Washington Post that shows proceeds from U.S. trucking contracts with Afghan firms being funneled to the Taliban

Four of the eight Afghan trucking contractors serving the U.S. military were found to be directing some of the $600 million the Defense Department has paid out in contracts in illegal payments to the Taliban and highwaymen who routinely blow up U.S. convoys.

Taxpayer dollars are not only being used to pay protection money, but that money is being used to fund attacks on U.S. troops across Afghanistan.

Afghan truckers haul 70 percent of all food, fuel, weapons and construction material for U.S. forces in Afghanistan under an Obama administration initiative called Afghan First, according to the Washington Post.

The idea for Afghan First was to avoid paying out billions to the same American contractors who provided such services in Iraq. (Starts with an H and ends with alliburton…) Aside from avoiding politically embarrassing payouts to companies denounced by many of President Obama’s 2008 supporters as war profiteers, the Afghan First program was supposed to be in service of Obama’s larger goal of nation building in Afghanistan.

But the program has been a disaster, since most of the Afghan trucking companies have no trucks but are instead just conduits for payments to a group of subcontractors and to provide kickbacks to corrupt officials and protection money to American enemies.

While this kind of corruption is small and relatively banal compared to some of the high-flying allegations against the ruling Karzai clan, the trucking scandal is concrete and quantifiable thanks to a Pentagon report on the Afghan First program. This scandal will have staying power.

The Pentagon is promising an overhaul of trucking contracts in September, but for now, all of the companies are still U.S. contractors.

Pawlenty, Huntsman Try to Fight their Way into GOP Race

"Governor Pawlenty would have us believe that there is 'very little difference' between his positions and those of Michele Bachmann. But in fact, there is very little difference between Governor Pawlenty's past positions and Barack Obama's positions on several critical issues facing Americans.”

-- Statement from Alice Stewart, press secretary for Rep. Michele Bachmann’s presidential campaign

After weeks of dire poll numbers, former Minnesota Gov. Tim Pawlenty and former Utah Gov. Jon Huntsman have both sharpened their approaches to the Republican Presidential race.

Huntsman, who despite an establishment media serenade for months before his announcement, has mostly been an irrelevancy in the Republican field. He’s snatched up some top-tier consultants by deploying some of his massive family fortune, but has mostly been a marginal figure.

After parting ways with his campaign manager last week, Huntsman has reversed course from what he promised to be a campaign structured around lofty ideas and an absence of direct attacks on his fellow Republicans or President Obama and has started jabbing at Mitt Romney over policy issues. Romney, meanwhile, has no reason to rise to the bait.

There’s little reason for Romney to engage with Huntsman since the former U.S. ambassador to China has shown little ability to block Romney in New Hampshire or Florida, the two early-state keys to Romney’s strategy. Huntsman’s change in tone seems to be a step toward eventual withdrawal rather than a chance for relevancy.

Pawlenty, however, may be able to fight his way back in to the top tier.

The guy who blinked when asked to reprise his “Obamneycare” line when standing next to Romney at the CNN New Hampshire debate is now engaged in a range war with Michele Bachmann across the state of Iowa.

Huntsman doesn’t have a rhetoric problem, he has an ideology problem. Huntsman’s views aren’t in keeping with Republican values, and his opacity only reinforces to conservative primary voters that he isn’t worth a second look.

Pawlenty, however, is struggling with externalities. He’s more conservative than front-running Romney and in step fiscally and socially with the Republican mainstream, but he has seemed unable to show the kind of fight that GOPers believe will be needed to stand up to the Obama juggernaut.

But with less than three weeks until the next debate, hosted by FOX News, the Washington Examiner and the Iowa Republican Party on Aug. 11, Pawlenty is scrapping with the surprise second-place candidate, fellow Minnesotan Michele Bachmann.

The two are locked in a duel over Iowa, with both badly needing a win there to vault their campaigns into subsequent campaigns. Pawlenty has been betting that long-term investment of time and campaign resources will outdo Bachmann’s Tea Party fame and the deep ardor of social conservatives for her outspoken positions on gayness and other hot-button issues in the state.

But Pawlenty is also looking to use Bachmann’s current sizzle and to allay concerns about his fighting spirit by tussling with her in public. He questioned Bachmann’s fitness for office due to debilitating migraines and has been calling her out for having impractical policies and questioning her lack of executive experience.

Team Bachmann went almost immediately to total war, calling Pawlenty the worst thing in the GOP lexicon: like Obama. Taking it right to scorched earth shows either anxiety or intemperance in the Bachmann organization, and it helps Pawlenty stay in the conversation in Iowa. “Did you hear…” She would have been better off to not waste her ammunition on a guy who is currently at the bottom of the pack in every poll.

If you’re Pawlenty, it has to be a little disheartening to have to be trying to tap into the star power of a three-term congresswoman from your home state in order to stay on the front page. But if you’re a Pawlenty backer, it must be heartening to know that he’s not going to just look on with regret while his campaign circles the drain. The guy is ready to fight.

He’ll have his chance to prove it to everyone else on Aug. 11.

Pitching Wu

“With deep disappointment and sadness about this situation, I hope that the Ethics Committee will take up this matter.”

-- Letter from House Minority Leader Nancy Pelosi referring the case of Rep. David Wu, D-Ore. to the House Ethics Committee

Why would one need an investigation into the claim of unwanted sexual advances by a seven-term congressman against the teenaged daughter of a campaign supporter if the congressman admitted to at least having a sexual liaison with the young woman?

Furthermore, if that congressman had admitted to aberrant behavior during a period of psychological distress, saw almost his entire staff resign in frustration and despair, admitted to improper, coercive sexual conduct in college and had emailed about photos of himself dressed up as a tiger, what would the purpose of the investigation?

Washington news outlets are treating the decision by House Minority Leader Nancy Pelosi to seek an investigation of Rep. David Wu, D-Ore., as her lowering the boom on the chronically weird lawmaker. But, as was the case with former Rep. Anthony Weiner, D-N.Y., the Pelosi ethics move is mostly a play for time in the hopes that the lawmaker buckles under public scrutiny.

After all, would Pelosi accept an eventual finding on Wu that found his behavior morally repellant and disconcerting but ethically blameless? If the young woman was (just barely) legally of age and only came to see the encounter with the 56-year-old congressman as non-consensual after the fact, would Pelosi welcome Wu’s continued service?

The behavior to which Wu has already admitted (and photographed) doesn’t suggest a lawmaker ready to tackle the tough issues but a man on the brink of even more serious problems. This isn’t an ethics thing, it’s a judgment and fitness thing.

***Today on “Power Play Live w/Chris Stirewalt” at 11:30 EDT: Ohio Senator and former OMB Director Rob Portman, Republican strategist and former Mitt Romney spokesman Kevin Madden and former Bill Clinton pollster Doug Schoen. Watch at live.foxnews.com. Tweet your questions to @cstirewalt ***