If CNBC thought it would boost ratings, they would put live rooster fights" on television, Potomac Research Group's chief political strategist Greg Valliere told attendees at this year's Financial Services Institute conference in San Diego.
Though CNBC and the rest of the media will make a big deal over the sequestration fights later this year, Valliere told the audience to ignore all the noise. Unity among Republicans in Congress will ensure that the U.S. has seen the last of tax hikes, he said, while predicting that the American economy will display surprising strength in the second half of 2013, with GDP rising 2.5% or more. This means that businesses can plan with some "level of certainty" for the first time in years, he added.
Valliere predicted that unemployment could fall to 7.0% by year-end, and there will be little pressure for further deficit reduction from the financial markets. "There are no bond vigilantes and the markets are fat and happy," he declared.
Tax reform odds are below 50%. "I don't see a climate in Washington for radical deficit reduction," he said, pointing out that it would take strong negotiators in both parties. "About 45 of 50 Democrats in Washington will tell you that Barack Obama gives great speeches and is a good family man, but he is not a good negotiator."
Meanwhile, House Speaker John Boehner finds it very difficult to force concessions out of his "fiesty" group of Republican congressmen. "What does it say when the strongest negotiator [in Washington] is Joe Biden?" he said.
The 2012 election left most Republicans dispirited and engaged in a process of self-examination. But Valliere believes they have three reasons to declare victory.
First, "98% of the Bush tax cuts," which Democrats railed against for the last four years, "have been enshrined by Democrats. Republicans should take credit for that," Valliere remarked.
Second, budget deficits are falling sharply. Next year, they could fall to 6% of GDP and by 2015 could reach 3%, which is the post-World War II average.
Finally, a culture of spending restraint "is ingrained" in Washington. In the state of the union speech, President Obama will "call for new investment" in things like high speed rail.
It won't happen," Valliere said. "Solyndra took care of that."