The conventional wisdom is that the re-election of President Barack Obama presages four more years of legislative deadlock on fiscal matters. At best, consensus opinion is bracing for more feckless "can kicking" and an indefinite extension of America's deficit and debt crisis; at worse, it is feared that the US could fall off of a "fiscal cliff" in the short term.
The rationale for this pessimism is not difficult to comprehend: The US has reelected the same president, and essentially the same personnel in the House of Representative and Senate that produced the sovereign debt crisis in mid 2011. Given this almost identical political configuration, why should the outcome be any different than it was in mid 2011?
In the context of the very understandable pessimism regarding the US's long-term fiscal health, I believe that the real possibilities of a "Grand Bargain" being achieved in the next few weeks / months are perhaps being overlooked. In this regard, it is important to remember that in July of 2011, a Grand Bargain that would have done a great deal to rectify the US's deficit and debt situation was almost reached. I believe that today, while the players may be the same, the historical circumstances are different - and in my view more favorable for achieving a Grand Bargain than they were in July of 2011.
Eight Reasons Why A Grand Bargain May Be Reached
There are eight reasons why I believe that a Grand Bargain could surprise financial markets and the public at large.
1. Historical perception. History is driven by context. Context, in turn, is driven by historical perception. In this regard, the breakdown of negotiations to achieve a Grand Bargain in July 2011 is widely perceived today by the public as having been a tragic historical "missed opportunity." As a result, is a profound and broad built-in
