The Washington Post is reporting this morning that several top Iraqi politicians no longer think that national reconciliation is an achievable near-term goal. According to the article, the politicians see little hope for passing legislation explicitly targeted at reconciliation. It also indicates that the current Shiite-led government is simply unwilling to take meaningful steps to share power with other groups.
The United States' current military surge strategy was put in place to buy time and provide the Iraqis with "breathing space" to make the hard political decisions necessary to mend their country. Without political reconciliation, the surge strategy is like sticking your hand in water--once you remove it, there is nothing to indicate that it was ever there. Absent reconciliation, animosity and the competition for political control will lead to a resumption in violence and possibly civil war.
If Iraqis have indeed given up on this process, the primary justification for the surge has evaporated, and the U.S. is faced with two terrible choices. The first is to continue to remain in the middle indefinitely, keeping troop levels near where they are to minimize the violence. The "success" of this strategy is far from certain, as the pressures for both civil war and Iraqi self-determination are likely to lead to increased violence. Moreover, without a fundamental shift in how we replenish the troops, such as a draft, we cannot long maintain the current force levels.
The second choice is to end the surge and reduce our involvement sooner rather than later. The mission of our remaining troops would be narrowed to fighting Al Qaeda in Iraq, helping to secure borders, and training troops. It's very likely that violence would increase, but again, without political reconciliation, violence is likely to be inevitable.
Until now, the administration has justified its surge strategy using an investment framework. The U.S. was to pay a substantial up front cost in terms of troop levels and lives in return for long-term benefits in terms of Iraqi stability. The prospects of such benefits were always chancy; more and more they appear to be wholly unobtainable.