This is just about the last week that you can expect not to be pummelled by politics. After Monday all eyes are on the November elections. Since the economy, or more precisely the lack of a good one, is front and center on the voters minds there is going to be a lot of speculation about an October surprise — a move by the Obama administration to do something dramatic to either sway the elections in their favor or more likely mitigate the damage.

You may remember the rumor that was running around a couple of weeks ago which held that the administration was going to have Frannie unilaterally reduce mortgage balances for large numbers of borrowers. That one was quickly disavowed by Treasury which may mean that there was an element of truth buried somewhere in all of the talk.

Today’s rumor as reported by the Business Insider is that tax reduction will be the big surprise.

The line from Tim Geithner has been: the US needs to show a credible commitment towards deficit reduction.

But with the yield on the 10-year dipping below 2.5%, and the market now CLEARLY more worried about a double-dip than the US debt, Geithner’s justification for hiking taxes sounds silly.

Barron’s Steve Sears Tweeted that “trading desk chatter” he’s heard is that Obama will reverse course, and actually we can see it happening.

Obama needs a shock & awe kind of move to restore confidence in the economy and his administration, and a reversal on tax cuts would actually do it. All the claims about the administration being anti-business (and thus creating an uncertainty that was preventing hiring, etc.) would vanish.

Well at least it makes for an interesting end of the day post. Frankly, I think that the administration is too freaked out by criticism from the Left to do anything radical when it comes to taxes, and coming out in favor of full scale cuts would be radical. They need to hew to the “tax the rich” theme just to give themselves some room to back off on the pledge to rescind the Bush tax cuts in full.

It may be way too late to do anything that’s going to make much of a dent in their declining poll numbers. Next Friday will bring the latest unemployment number which may be North of 10% — a big psychological number. The existing home sales number today was almost as bad and unless reversed in the next month (highly unlikely) is going to make a lot of homeowners squirm. If Case-Shiller and other home value indices start turning negative then it will get really ugly. In a nutshell there’s a lot of economic stuff that is going against Obama and this election will be all about that stuff.

I’ll go against the conventional wisdom and suggest he won’t do anything major. If he tries to move to the center right now, he risks a beating from his Left and likely induces them to stay home. Even if he wants to make a move, it’s likely to be cynically received. Better to wait this one out, accept whatever lumps he has to take and have cover with a more conservative Congress for a move away from the Progressive line.

Of course, I’m speculating about the likely actions of politicians which is a fools errand of the first order.