Some are saying it's just as well that Speaker John Boehner has abandoned hopes of striking a "grand bargain with the Obama administration on taxes and spending. The negotiations over future tax reform - that would have included revenue increases of a trillion dollars - were going nowhere fast. Most of the GOP caucus would have voted against such a package so Boehner was only facing reality when he backed off the deal.

Politico:

Boehner spoke with the president prior to making his announcement Saturday evening and continues to demand that the deficit reduction match dollar-for-dollar whatever debt ceiling is agreed to prior to the August 2 deadline set by Treasury.

That will not be an easy matter, given the Republican hard line against new tax revenues. Weeks of negotiations led by Vice President Joseph Biden have identified deficit-reduction savings in the range of $1.7 trillion to $2 trillion in savings. But that leaves a gap of $400 billion to $700 billion to be filled, and Democrats have argued strongly that revenues must be part of the mix.

"Despite good faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," Boehner said in his statement. "I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase."

White House communications director Dan Pfeiffer countered that Obama wants "a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree."

Considering that the "wealthy" already pay 80% of taxes, Pfeiffer may want to rephrase that statement. I'd hate to have him in charge of cutting my birthday cake, considering what he believes "fair share" means.

The tax reform proposals on the table were very complex, and all of them were not non-starters. Proposed corporate tax reform would close some tax breaks while lowering overall rates - a not unwelcome development as long as the reforms were revenue neutral. There were even some good ideas regarding individual rates - simplifying them and keeping the Bush-era tax rate for the highest bracket. But overall, there were not enough guarantees that Obama would keep his word about the tax portion of any agreement and Boehner - alone among GOP leaders in pushing the massive $4 trillion deficit reduction deal, now believes a smaller deal is all that could pass the House.

But can it? It appears that both the far left and far right in the House will band together in an unlikely alliance to kill any deal that involves cutting entitlements or raising taxes. It is likely that the first vote on the deal will go down to defeat. Then, like the TARP vote, the establishment politicians will twist the arms of their caucus members and a second vote will be successul.

It won't be near enough to make much of a dent in the deficit. But the continuing warnings from Wall Street and economic analysts who see no way that the government can pay its bills after August 2nd will carry the day and rather than take a chance on a worldwide financial meltdown, members will swallow hard and vote to raise the debt ceiling.