Will Republicans turn to brinkmanship again after getting nothing this time around?

Politics is not my forte, but the recent wrangling in the US Congress is going to be an important case study for future battles, which is again likely to be centre of attention for financial markets.  Although it must be said that markets reaction to the debate was not particularly large, especially compared to 2011.

While some may suggest the can has merely been kicked down the road for a few months, it seems unlikely that Republicans will go for the same strategy given they didn't get anything for the Government shutdown and approaching the debt limit except for tarnished ratings.

According to quite a few opinion polls, this episode has been so damaging for Republicans that if voting for the house took place today, Republicans would be at risk of loosing their grip on the House despite structural advantages.  The capitulation by Tea Party backed Republicans to the Senate negotiated plan suggests this is not just a liberal concoction.

The failure of this strategy maybe more about why and how Republicans brought the US government to the brink of the debt limit rather than the fact they did in the first place.

For the most part this seemed to be led by the Tea Party backed minority who wanted to "defund" Obamacare, which was never going to be taken seriously.  While other budget issues later became part of discussions as the debt-limit approached, perhaps the damage had already been done in the polls.

The next battle is over what to do about the ongoing "sequester" which emerged out of the original debt ceiling discussions back in 2011.  Some of these spending cuts cuts were delayed at the start of this year given they coincided with the end of tax cuts, the fiscal contraction would have sent the US economy into recession.  So the full-year impact of the sequester will be greater in 2014 but not dramatically so.

The default position  if no agreement is met is a composition of spending cuts neither party is happy with.  There is less at risk in these discussions compared to the "fiscal cliff" negotiations this year, because other aspects of the Budget are not as contractionary as they were in 2013.

So if both parties can only to agree to disagree and keep discussions ongoing while raising the debt limit and funding the government, then the fall out won't be so bad.

The big question for the Republicans is whether they will want to turn to brinkmanship to extract deeper cuts so some aspects of social security.

This may be an easier message to sell to the their constituents if it comes from leaders of the public and is done in a sensible way.  And compromise is more likely in these negotiations as Democrats would like to avoid the status quo.  That said, it won't be one way traffic, with the concessions on raising taxes on the wealthy at the end of 2011 an example of a win for the White House in similar discussions back then.

But at the heart of concerns for Republicans is that do they really want to pursue a strategy in a couple of months that clearly the public hated.  While they may be crafting a different message, it could just get lost in the memory of the debacle of the last couple of weeks.  Perhaps polling over the next few weeks will provide that answer, but it seems likely they will be much more sensitive to the risks in a House election year.