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The 'fiscal cliff' and the inertia scenario

Well, here we are on Dec. 3, and the two sides seem to be farther apart than ever.

President Obama visited a toy factory on Friday, but he’s not playing around. His offer, delivered through Treasury Secretary Tim Geithner, was a bone thrown to a Democratic base that has been urging him to get tough with Republicans ever since the first stimulus. The offer itself really isn’t a straight-faced proposal. Remember, he told the Des Moines Register before the election that the ratio of revenue to cuts he would seek would be $1 to $2.50. This thing they sent up Thursday claims credit for the money saved in ending the wars, which would not be spent  anyway, AND the cuts that were already signed into law the last time we went through this exercise in 2011.

Clearly, the president feels as though he has the political upper hand. At this point, there seems little chance that he doesn’t insist on most -- if not all -- of the tax hike on the wealthy. He caved two years ago. But that's not likely this time around, fresh off the election.

The only risk he runs is showing too much leg to Republicans on his willingness to make changes to entitlements. Then he loses Democrats. So last week was a display intended for Democrats on the Hill, too, not just Republicans.

In the long run it may help. House Speaker John Boehner can move the $1.6 trillion number back down in talks with the White House and look like he’s actually fought.

I know a lot of smart people who have been involved -- and are involved now -- with these things who have said all along that the period leading up to mid-December is going to be all about just the kind of chest thumping and pre-positioning we are seeing now. The behind-the-scenes consensus is that Obama shows some give on either the income level ($250,000) or the top rate (39.6%), and they are promised to one and other in their commitment to tax and entitlement reform sometime next summer.

For what it’s worth, I am in the camp that says they go over the cliff. I don’t see how Boehner puts a bill on the floor that raises rates on anyone. The party would explode, which might be what Obama has in mind.

In Boehner’s mind, it might be better to come back after Jan. 1 and vote to cut them back to where they were, with the top earners' rates going up.

Call it the inertia scenario. So instead of voting to allow rates to rise on the wealthy before the end of the year, let the rates rise, and then come back in January for a vote on cutting rates -- something Republicans might more likely support.