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Talks between Speaker Boehner and the Obama White House reached an impasse on debt ceiling and deficit reduction with strong opposition from members of their own parties.

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John Harwood provides an insight into the polarized positions of each side in the negotiations and the changes in the national scene that have led to a polarized political climate and a polarized Congress. The political positions on the Republican and Democratic sides in Congress and the Senate are different from any other time in many decades of government. Between Tea party members of the House and Pelosi Democrats in the House there is a serious divide. The senior leaders of each party command less support. Consider the loud "no" given by newly elected House Republicans led by Rep. Cantor to Senate Republican leader Mitch McConnell's backup plan. The written pledge for no tax increases has given the Cantor House Republicans little room for compromise. And as Harwood points out each side, the tea party House Republican group, the Democrats in Congress, and the President, all know there is every chance that they could be voted out of office in 2012.The media is also splintered with vocal positions on either side. As Senator Chambliss of the Gang of Six Senators said on a talk show a week before the August 2 deadline for raising the U.S. debt ceiling: "Frankly, we don't know what's going to happen for sure." ...

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Romney's advisors work to re-focus the campaign with more time spent by the candidate in the swing states and states too close to call- Iowa, Colorado, Wisconsin. This is in addition to Ohio, Florida and Virginia, which are seen as critical.

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Questions about the true cost of the Obama health care legislation and the assumption that the legislation cuts the deficit by billions of dollars. This WSJ editorial says one has to look at this closely, and not merely look at CBO projections, which may be based in a certain context and not reflect the true costs, especially because many accounting gimmicks and use of numbers to present a particular picture is taking place. The information this editorial cites is that: it uses 10 years of taxes to fund six years of subsidies, Social Security and Medicare revenues are double-counted to the tune of $398 billion, a new program funding long-tem care frontloads taxes but backloads spending, and the assumption of an automatic 25% cut to physician payments that Congress is unwilling to authorize. Rep. Rand Paul has tried to present an alternative view which needs to be studied just as closely, because of the enormous impact of a jump in spending at a time when the public finances are fragile. WSJ also cites the work of Richard Foster, the chief Medicare actuary, as an alternate perspective of how things could turn out, Doug Holtz-Eakin, and Eugene Steuerle. It calls for common sense in evaluating programs, entitlements, defense or other government spending. They not only cost money, but costs escalate over time as history has shown over decades, till they eventually are discovered to be not affordable unless the middle class is willing to dig deeper into its finances to pay for them. Alternate perspectives from a range of informed opinion, Howard Dean, Martin Feldstein, and the head of Harvard's Medical School show that the issue needs to be looked at closely and carefully and cannot be something in which CBO numbers can be trusted to tell the whole story. Especially when common sense, history, and informed opinion across a spectrum of thought advises caution, and fragile public finances also suggest caution. Howard Dean, former Governor of Vermont, says the health care bill is not real reform, and may do more harm than good. He says in a Washington Post article, December 17, 2009, the Obama health care bill does not insert competition into insurance markets, does not significantly reduce costs, and does not improve the delivery and use of health services. It was he says done with a political calculus and crafted for votes not real reform. Jeffrey S. Flier, Dean of the Harvard Medical School, gave the Obama health reform bill an "F" grade, saying in a Nov 18, 2009, WSJ article, that it was disingenuous to call this reform, Congress and the White House were simply deceiving the public. He said the bill will accelerate US health care spending, postpone most of the major health care problems, expecially the ones that drive cost, including the "fee for service" system and delivery of health care. He says in his discussions with economists and other health care leaders the opinion was unanimous that the bill will accelerate health care spending. He cites Massachusetts as an example, where access to care was expanded under the same dysfunctional system, and spending went up, and it doesn't work. Feldstein, who in early 2008 suggested proactive solutions to the mortgage debt crisis which were never adopted, says that the Obama health care law means higher taxes in the long run to pay for the $1 trillion cost of health care for the uninsured group over 10 years. Feldstein says that the Obama plan is to cut Medicare to cut spending, and will reduce the amount of medical services, as reduced spending comes from fewer services, not reducing payments to providers. And he asks if the cost reductions are weighted too heavily towards reduced services and not reduced payments to providers ,would this result in large cuts to services to affect the quality of healthcare for the 85% of the American people who are accustomed to a different pattern of healthcare. ...

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Harold Meyerson compares the continuing inhumanity of separating parents from children that president Obama has to face with the choice presented to Lt. Colonel Jager at the Berlin Wall in 1989. Jager decided to let both parents visiting West Germany to return to East Germany to their children, even though the father had a stamp on his passport banning a return. He says the Republican control of Congress could last till 2023 by which time current law would have separated millions of parents and children. In 2012 about 13% of schoolchildren in California and Texas had an undocumented immigrant as a parent, according to the Pew Research Center. And for the last 6 years of the Obama administration deportations have reached 400,000 a year, leading to a lot of broken families.

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The risks to Republicans of losing sight of their narrative by tea-party leader comments such as calling Latino voters "illiterate." This is balanced by the careful and considered respose of presidential candidates, Kasich of Ohio, Rand of Kentucky, and Jindal of Louisiana, and of senior party leaders such as McConnell and McCain.

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Bruni on the view that Obama has squandered his advantages of oratorical transcendence, poetry, serious thoughtfulness, in the U.S. presidential election of 2012. He does not mention the lack of a serious plan to turn the economy around, high rate of joblessness and declining incomes that are a basic issue in the 2012 election, and how oratorical transcendence has little correlation with getting the right policies implemented. The Des Moines Register's support in 2008 put Obama on the road to the presidency in 2008 with a victory in the Iowa primary. In 2012 it gave its endorsement to Romney to give him a chance to correct the problems with the economy and to do this with a new effort to forge the bipartisan consensus missing in the Obama first term.

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Indifference on the Republican side, and a sense that not much is going to get done on the Democratic side, as President Obama pitches a $447 billion second stimulus plan in a speech to both houses of the U.S. Congress on September 8, 2011. Dana Milbank documents the attitudes and skepticism with which members of Congress received the proposals- a general sense that President Obama was too weak and ineffective to get things done and has lost credibility. John Taylor, senior economic advisor on the Republican side pointed out in a Wall Street Journal column a few days before the speech, that the jobs proposals Obama and economic advisor Alan Krueger were presenting were similiar to old plans that have not produced results. Taylor viewed them as placing too much reliance on government and not enough on the private sector to generate economic growth and jobs.

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Estimates by the Congresssional Budget Office in January 2011 show the federal budget deficit in the US at nearly $1.5 trillion in 2011. The deficit would equal 9.8% of the US gross domestic product. In 2009 the budget deficit was $1.4 trillion or 10% of GDP. The CBO estimates show the debt held by the public increasing from 40% of GDP at the end of fiscal year 2008 to about 70% at the end of fiscal year 2011. Republican senators Orrin Hatch of Utah and John Cornyn of Texas called for a constitutional balanced budget amendment in an op-ed published in Politico.

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Republican Senators Corker and Blount are confident that a solution can be devised for the sticking points on a deal between the Republicans and the Democrats. The Republicans consider the savings in the Reid plan from the wars in Afghanistan and Iraq a "gimmick," but essentially the Reid and Boehner plans say analysts are similiar in the inital cuts in spending. The sticking point for Democrats is on the whole process of the debt ceiling extension having to be redone in early 2012. For Republicans the sticking point is in in tax increases which the Reid plan leaves out in the initial period for debt limit extension into 2013 when a new president takes office. House majority leader Boehner is facing opposition within his party and this restricts his leeway for striking a deal- the Boehner plan passed in the House by a vote of 218 to 210 on July 29, 2011, with 20 Republicans voting no. It was voted down in the Senate that same evening with a vote of 59 to 41, with 6 Republican senators joining all 53 Democratic senators. As it stands now, the weekend before the August 2 deadline, President Obama concedes that there is "rough agreement" about the size of the first round of spending cuts, and the "next step" to rein in borrowing. He went on to say that "if we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I'll support that too, if it is done in a smart and balanced way." Its the design of this enforcement mechanism that is the main point in the remaining negotiation. The nature of the committee selected from both parties for the next phase of savings, its powers and the trigger in the sense of what it can ensure happening if no decisions are taken by both parties. ...

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The structure of the deal that is coming up for a vote in Congress on August 1st, a day before the August 2 deadline. A deal put together mainly by Senate minority leader Mitch McConnell and Vice President Biden after other deals failed. It gives the government $400 billion immediately and another $500 billion in the fall for raising the debt ceiling. Another 1.2 trillion will be added in 2012. The entire burden for raising it falls on Obama. Obama will be able to get the debt ceiling raised without another long struggle before 2012 elections. On spending cuts- agency spending will be cut by $900 billion over the next 10 years. A new legislative committe will be set up to come up with $1.2 trillion in additional savings by the end of 2012. The mechanism that would force the committe to act or make sure spending cuts were taken if the committee failed, was set up as one in which the trigger is to force automatic across the board cuts. The automatic across the board cuts would be for $1.2 trillion to agency budgets for the next 10 years, and split this half and half between domestic programs and defence. Programs aiding the poor including Medicaid and Social Security would be exempted, but Medicare payments to providers could be touched. No new taxes are part of this deal....

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Mortimer Zuckerman of U.S. News and World Report magazine expresses his disappointment at the Obama administration's performance. He points to a "competency crisis" of the Obama administration and the President. On the Simpson-Bowles Commission's recommendations and President Obama's complete silence on its proposals, Zuckerman like other observers expresses strong disappointment. He says that he and other early supporters are no longer excited by the novelty of his candidacy and his presidency. Obama's single minded focus on getting re-elected is disturbing for Zuckerman.

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Krauthammer tells U.S. presidential candidates stop saying that Social Security is a Ponzi scheme, because by its very definition it is a Ponzi scheme. Instead exercize common sense and take the simple steps to update Social Security for today's longer life expectancy, aging population and way fewer workers to support a retired person. In a Ponzi scheme payments by people joining currently are paid to those who joined earlier, with not enough to pay future entrants- which is what is happening to Social Security. In 1940, after Roosevelt signed Social Security into law, there were 160 workers for each retired person. That dropped to 16.5 in 1950, today there are 3 workers. In 1940 the life expectancy was 62, today it is closer to 80. Krauthammer says the writing is on the wall- simply have the courage to make the changes by raising the retirement age, means testing the rich for benefits, and adjust the cost of living measure.

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This WSJ editorial points out a big concern in the third quarter 2012 economic growth figures- the figure showing non-housing related investment contracting by 1.3%. It says the U.S. borrowed $5 trillion and all it got in return was 1.7% economic growth- 1.7% being the growth in U.S. GDP for the first 9 months of 2012. It also points out that the growth came from consumer spending and the Federal Reserve's money printing. The consumer spending would be hard pressed to continue if incomes remain stagnant without the capital investment and hiring from the private sector. Government spending accounts for 0.7% of the GDP growth, and estimates for private sector growth in output is about 1.3%.

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Feldstein's thoughts in April 2009, on Treasury's Public-Private Investment Plan. First, he says this plan will only remove $500 billion of impaired assets. The banks he says now own $3 billion of residential mortgages, $1.5 trillion of corporate real-estate loans, and $1 trillion of consumer debt. Not all of this is impaired but the banks will have to sell much more than $500 billion to regain confidence in their solvency. And with one third of all residential mortgages exceeding the value of the houses, and thie many homeowners under water, likely to default, the negative feedback loop of foreclosures begetting falling prices begetting foreclosures, threatens the whole effort to shore up the defences. If no workable solution is executed quickly to prevent this then even larger pools of mortgage debt will be impaired irretrievably. Feldstein suggests that the Obama administration seriously look at his plan suggested in March 2008 to provide government loans at low rates of interest like 1- 2% for 20% of the principal amount of the mortgage and then reduce the mortgage principal by 20%, thus keeping millions of homeowners above water. But this needs to be done quickly. All voluntary efforts have failed and have become asmokescreen for banks and lobbying groups with support from Congress to make it appear that this problem is being addressed. Thirdly Feldstein says that if banks sell these impaired mortgage assets at a loss- say 40-60 cents on the dollar on the upside with government and the FDIC picking up alot of the risk and financing for private investors under the new plan- they will now have to show the loss whereas they could have previously shown these assets at unrealistic price levels but still not taking losses. This might push banks into insolvency, so banks will need more injection of capital by the government to make this possible. What are the risks in this situation? Without an effective plan to prevent the negative feedback loop of foreclosure waves and falling houseprices, the quantity of impaired assets will simply grow larger. In effect even if some private investors take out some of the impaired assets from the banking system, it is possible that a new set of assets equal to or larger than these assets that are taken out are added to impaired assets in the banking system as house prices fall steeply from new foreclosures. That only means the economy is in the same hole as before, or in a slightly larger one, even with all the well intentioned steps. At some point the private enterprise argument has to be seen in the correct light. It is not that there is any argument that private enterprise can function better or far superior, it is only that the banks as private enterprises are in such an enormously stressed situation that the bank executive's cannot execute a way out of this mess. ...

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Bill Clinton, says about his foundation, in talking to voters in Detroit- " all we have done is save lives. If creating jobs and saving lives is bad, I guess you can zing me with it." He told another crowd in Durham, N.C, that he was tickled by Trump's comment that the Clinton Foundation was a "criminal enterprise." The criticism of the foundation hurts Mr. Clinton because of the lifesaving work it has done for AIDS, malaria and saving lives. The Clinton Foundation made the error of taking donations from overseas in the zeal for donations, which gave some critics an opportunity to smear the foundation. Another error was not to strictly separate the work of Bill Clinton from Hillary's work at the State Department. Even though in its activities it has been exceptional in its work. In poor countries like Haiti it has helped people overcome poverty. On one achievement alone the Foundation's work is exceptional- bringing HIV/AIDS medication at affordable prices to 11.5 million people in 70 countries. It has also worked to reduce obesity among American school children, and improved lives through its health initiative, including lives of farmers in African countries. George W. Bush did exceptional work in Africa for AIDS/HIV. Clinton's activities continue an American tradition of helping people in Africa's poorest regions.  In this case the funds raised aggressively by Bill Clinton during speeches, were used to save lives or improve lives. This has been lost in the criticism of the Clinton foundation, as if the good work done by George W. Bush for AIDS in Africa can ever be fairly diminished in the slightest way by criticism of the Bush family. ...

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The Wall Street Journal in this editorial says President Obama is negotiating deficit reductions with Republicans to gain an advantage in the 2012 presidential elections. Its view is that President Obama is offering Republicans a Hobson's choice: if they agree to raise taxes they would be giving up on a campaign pledge, and if the government shuts down and seniors do not get retirement checks in August letting the Republicans take the blame. For this reason it supports Senate Minority leader Mitch McConnell's proposal to give the President the authority to make the debt limit increase, and for Republicans to withdraw from talks on the deficit reductions that involve tax increases.

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Feldstein, adviser to the Romney campaign, refutes the assertion based on computer models that the Romney Tax Plan of a 20% across the board cut in taxes cannot be paid for by limiting the deductions of high income tax earners. His own analysis based on IRS data, shows taxpayers with adjusted gross incomes of over $100,000 made itemized deductions of $636 billion in 2009. By taxing these deductions at a 30% marginal rate, additional revenue of $191 billion can be raised to pay for the Romney Tax Plan's static revenue loss of $181 billion. A smaller revenue loss of $148 billion is predicted based on increased incomes and taxes from the behavioural effects of lower taxes on earners. He says this was the thinking behind the Reagan tax cuts of 1986 and the Simpson-Bowles commission plan that would generate economic growth by reforming the tax system's distortions.