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It's not iron-clad reasoning that is readily expressible. There's a need for a proper narrative. The story has to go well. If the Admin pardons Libby I think it will hurt the GOP worse than letting the scandal simply decay.
I think that the internal party pressure not to pardon him will outweigh the pressure to pardon him. If Libby's pardoned it kind of seals the GOP as the party of corruption for a few more years. And after Nixon, Iran-Contra, and the Iraq debacleS, to have such a high profile wrongdoer pardoned just makes for the wrong story- one that's too hard to sell.
Just MHO. I have no facts to back it up [nor am I sure where to look for such]; however, I am willing to take small bets on it.
I agree with everything you've said however Bush is well known for basically not giving a fvck what others think and he has no problem doing unpopular things. He also seems pretty loyal towards those in his circle regardless of how unpopular they are. I'd say it could go either way depending on Libby's sentence. Has he been sentenced yet?