Where Is Washington Headed?

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July 22 (Bloomberg) -- Potomac Research Group's Greg Valliere discusses President Obama's mew initiative and the U.S. Tax overhaul deadline with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

Accomplish with this initiative?

He will make good speeches.

That is something he does well.

He has two objectives.

The first is to try to get a head start on what could be a nasty battle this fall on a budget.

Maybe talk of a government shutdown, a big fight over the debt ceiling, maybe a sequester for the next year there you want to get a head start in winning the debate to his advantage.

I think he wants to get a head start on us and i believe he will try to portray the republicans is obstructionists and outside of the mainstream -- mainstream.

What is the point?

I read a story about how republicans want to slash the epa budget by one third.

You hit the nail on the head.

Even if the president is successful, his poll numbers are not bad.

Congress's poll numbers are horrible.

Even he gets -- even if he gets people on his side, he has to do with the house.

, -- the ultimate brick wall.

It will not go along with any new initiatives he proposes this week.

They will not spend an extra dime.

Because of the way the districts are drawn, the chances of the republicans losing the house are very slim.

The tax reform debate is starting to heat up again.

Any chance he can gain traction on capitol hill?

That is an interesting story that is starting to emerge.

Both committees, senate finance and house ways and means will mark of a bill in the next few weeks.

And we will come into a problem.

The problem being the senate wants to raise revenues.

The house says no tax increase.

That is where i think the tax reform battle will grind to a halt.

There will be progress.

For all the lobbyist's and industries in the town, they need to pay attention to see which tax breaks are popular and which breaks eventually, later in the decade, could go when we really get tax reform.

I am speaking with the chief political strategist.

The deficit is starting to come down, not just i a little.

Is this an unintended consequence of the sequester, the automatics and cut it when into effect in the spring?

It is part of it.

Part of three phenomenal reasons why the deficit is in freefall.

You have real ending cuts, as you point out.

There is no new spending.

That will not happen.

Receipt growth is a doesn't surprise.

It is not just because freddie and fannie have had profits.

Right across the board, individual and corporate receipt growth is strong.

We will have, believe it or not, a drop in the deficit of or hundred million dollars between last year and this year.

If this trend continues, the deficit could get close to zero by fiscal 2015. what will that mean or the drag we have been seeing on the economy?

All of the indications is that the economy is heading in the right direction, i'll be its drop -- sluggishly.

I think a factor, maybe not the factor, is this fiscal drag with fiscal restraint firmly in place.

I would argue as long as the republicans keep a house, and that is really likely for the next two years, we will see more fiscal restraint, another sequester next year.

This trend of a declining deficit is very much in place.

Our colleague , megan hughes, was on before you.

She was talking about the president going around the country this week trying to restart the conversation about the economy.

One of the themes will reportedly be that the economy works best from the minute -- middle out, not from the top down.

How does he sell that?

It makes common sense.

He needs to make a recovery more inclusive.

I think he can spin it very well.

That is not the issue.

The issue is, can his spin really yield results on capitol hill?

As good as he is as a speaker, he is not good at cutting deals there that is not his strong suit your why?

I think it is in his dna.

I have seen tip o'neill and ronald reagan, and they were great.

They had it in their dna.

They were gregarious or they know how to deal with people on capitol hill.

This president is very cerebral.

It is not his strong suit to go twist arms and slapped backs.

He is different.

Because of that, -- there are other reasons, but his inability to cut deals on the hill have heard him.

He is certainly not lbj with a finger in your chest.

There it was an article in forbes magazine.

It is written there is no better qualified candidate to fit -- phil ben bernanke is choose.

Is she right?

What about larry summers?

Hans nichols reported earlier he has reported interest in the fed chair.

They have reform -- others have reported about summers.

If you let it be known you are interested, that often backfires.

Sommers has a problem getting along with people.

He has got an astronomical iq and knows the issues.

Within the fed, his appointment would not be greeted positively.

The other claimant would be greeted ecstatically.

People like her and respect her.

She is the overwhelming choice to be the next chairman.

This text has been automatically generated. It may not be 100% accurate.

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