How Obama Could Play The GOP On Taxes

Andrew Sullivan —  Jun 13 2012 @ 2:42pm

Pete Orzag imagines a hypothetical approach to the 2013 "fiscal cliff" that might get Republicans to back down:

The Administration, having tried valiantly but failing during the lame-duck session to extend the tax cuts only for those with incomes below $250,000, allows all the tax cuts to expire at the end of the year. Taxes rise, the debt limit looms, and commentators on CNBC say the world is about to end. Rather than continuing the unproductive debate over extending part or all of the tax cuts, though, the Administration then steps forward with an entirely new tax cut, which could take many forms. One example would be a substantially larger payroll-tax holiday, combined with an increase in the standard deduction. The Administration also offers modest entitlement changes while dialing back the immediate spending cuts. Amid all the external demands for a deal that lifts the debt limit and resolves the uncertainty, it then dares the Republican House to vote against a large tax cut and some modest entitlement changes. Stranger things have happened.

This is a post-election take similar to Tomasky's daydream yesterday. Dan Drezner, noting significant pressure from Wall Street on the GOP to cut a deal, interprets the impasse as a key piece of evidence in understanding American politics:

 If money is the honey, then a deal will be cut, and well before December.

As the myriad articles suggest, what freaked out business wasn't just the rank partisanship during the last debt deebacle, it was how close things got to a breakdown.  They don't want to see that happen again. If ideology is what counts, however, then the House GOP won't budge, if at all, until the last minute.  They don't want to see taxes go up, but I'm not sure that they would be willing to make a compromise that would permanently eliminate tax deductions in order to preserve the status quo in income tax rates.