One cheer out of a potential three is all anyone can logically give the "fiscal cliff" deal. On the day after the bargain was clinched, the stock market gave a 300-point cheer. So be it.

In the short run, extending tax cuts up to $450,000 probably saved us from a recession. If all the tax cuts had expired, we'd have a $500 billion tax hike, plus marginal rate increases, and that would have sunk the economy. So I'm going to bet that the big stock rally was a sign of relief that the final deal wasn't worse.

Despite all the media hullabaloo about the "fiscal cliff" and a potential recession if none of the Bush tax cuts are extended, stock markets have behaved calmly throughout this whole period. In fact, as of this writing, the Dow is up about 100 points.

I'm going to guess that stocks, in their wisdom, are correctly sniffing that there will be no calamitous falling off the cliff. By that I mean there will be no $500 billion tax hike, which would be an economy killer. (Read More: House Republicans Torn on Issue of Raising Taxes.)

Instead, after speaking with prominent Republican House and Senate members, I have come to believe the following: The GOP knows that President Barack Obama has the upper hand in this post-election battle. Therefore, they are preparing a strategic retreat.

Republicans are divided. President Obama won't budge. And more and more, it looks like the fiscal-cliff deadline of December 31 will be missed.

It's now clear that Team Obama wants higher tax rates and revenue-raising tax-deduction caps to meet their $1.6 trillion revenue target. Spending cuts and entitlement reforms are vague to non-existent. In fact, it could be that Obama not only rejects the across-the-board budget sequester, but that he actively seeks to raise spending, not cut it.

I guess it stands to reason that if you puff up his $800 billion revenue increase from last year, and double it to $1.6 trillion this year, the money will be spent. The government will grow larger.

All this should be unacceptable to the GOP.

(Read More: Boehner: Obama Walking Economy to Edge of 'Cliff')

Senator Rand Paul, who may have the best idea, told me in an interview this week that he's prepared to pin the tail on Obama's tax-and-spend donkey. "In the Senate," Paul said, "I'm happy not to filibuster it, and I will announce tonight on your show that I will work with Harry Reid to let him pass his big old tax hike, with a simple majority, if that's what Harry Reid wants, because then they will become the party of high taxes, and they can own it."

Other conservatives in the Senate and House agree with Mr. Paul. And some House members are talking about a "doomsday" scenario, or what might be called a strategic retreat. Just vote present on the Democrats' tax bill to extend middle-class tax cuts and raise tax rates on income and investment.

A couple dozen other Republicans have signed a bipartisan letter suggesting flexibility on tax rates in return for some kind of entitlement reform --perhaps moving the top rate from 36 percent to 37 or 38 percent, less than the 39.6 percent Clinton rate, and possibly raising the so-called rich people's threshold to $500,000 or $700,000 from $250,000. But with a vague and un-budging Team Obama, this sounds like a triumph of hope over experience.

Once again, President Barack Obama dodged the key "fiscal cliff" issues at a campaign rally/press conference Wednesday morning.

Campaign-style, he argued that the middle-class tax cuts (below $250,000) must be renewed in order to prevent a $2,200 average tax hike from hitting middle-class folks. He added that a middle-class tax hike would cost consumers $200 billion in spending power. (Read More: Obama: Let's Get 'Fiscal Cliff' Deal Before Christmas.)

Right after the election, it was all peaches and cream and conciliatory common-ground language when President Barack Obama met with congressional leaders to discuss the "fiscal cliff."

Of course, the president campaigned on tax hikes for the rich, by which he meant raising top income-tax rates and extending the Bush tax cuts for incomes below $200,000. (Read More: Obama: Ending Tax Cuts for Rich Resolves Half of 'Cliff.')

In the event the US goes off the Fiscal Cliff, don't expect the Fed to shield markets from the worst.

In a live interview on The Kudlow Report, the hawkish Dallas Fed President Richard Fisher said he'd resist that kind of intervention.

"I do not see us as that kind safety net," he said. "There's got to be a limit. In committee we'd have to decide what kind of limit, but there's got to be a limit."

Ahead of the election, Mitt Romney scored well on economic issues – with many polls saying Romney was viewed as better for the economy than Barack Obama.

It appears Democrats in the Senate and House are heeding those results.

A plan presented by Romney and embraced by the GOP to cap deductions appears to be gaining traction despite Romney's loss.

"Let's just say there's a renewed interest," said Senator Kent Conrad, Democrat of North Dakota and chairman of the Senate Budget Committee in a New York Times Report.

As Republicans return to Congress to tackle the "fiscal cliff", will they find a sincere attempt to compromise or just a sore winner?

That's a big worry among GOP leaders – as they attempt to negotiate a deal to avoid going over the edge.

Sorry OPEC. There's a new heavy hitter in the oil markets and it's not about to be pushed around by you.

According to a new report from the IEA, the United States will overtake Saudi Arabia as the world's top oil producer by 2017.

You read that right – the United States.

A federal budget deal to avoid the "fiscal cliff" can be achieved without raising tax rates, Senate Minority Whip Jon Kyl said Friday on CNBC.

"Tax revenues can be generated by two ways other than raising tax rates," he said. "One is to eliminate some of the deductions, credits, exemptions, special provisions in the code that end up producing more revenue but without affecting the rates. And the other is through economic growth."

On "The Kudlow Report," the junior senator from Arizona said he thought it likely a deal could be struck to avoid the so-called "fiscal cliff," a deadline by which the lack of a federal budget would result in the expiration of the Bush tax cuts and trigger automatic spending cuts.

Kyl saw additional revenues as the key.