That’s why going over the fiscal cliff is so critical this time. Here’s what happens if we head into 2013 without a deal: Taxes will rise on every American. Thanks to the PR offensive the administration has waged—month after month of accusing the GOP of holding middle-class tax cuts hostage to cuts for the wealthy—and to the president’s structural advantages during a showdown with Congress, the public will immediately and overwhelmingly blame the GOP. “If we go over the cliff,” Bill Kristol wrote Monday, “what Republicans will have done is to make Democrats the party of tax cuts and Obama a president fighting for economic growth.” (Polls currently show that Americans will blame Republicans by a 53 to 27 margin; it will surely get worse every hour of 2013 that the standoff lingers). Which is why, within a few days or weeks of January 1, the GOP will almost certainly throw in the towel—“Republicans will fold with lightning speed,” is how Kristol put it. Democrats will propose a bill allowing rates for the top 2 percent to return to their Clinton-era levels and restore the Bush tax cuts for everyone else.
And what of the economy? It will come through just fine. As others have pointed out, the “cliff” is a lousy metaphor. The effect of the tax increases and spending cuts scheduled to begin next year is more like a mildly uncomfortable slope, with the toll on the economy accumulating only gradually. A few weeks down this slope—which is likely to be the outer limit of how long the GOP can hold out—will do no damage to speak of. And while financial markets may get jittery, I’d caution against overstating even that. It turns out some savvy investors are treating the cliff as an attractive buying opportunity and hoarding cash accordingly.
But the real key here is the political upshot of going over the cliff: Republicans will see in defeat that it’s not Obama who has somehow pulled one over on their leadership or simply played his hand better. Instead, they will see that they have been completely repudiated by the public in a way that even the election didn’t impress on them. It will, in other words, be as close as you get in politics to a total victory for one side. It will highlight the perils of following one’s base too slavishly, a lesson that will come in handy not just on future fiscal policy fights (there will in all likelihood still be a debt ceiling to raise next year), but, one can imagine, also on an issue like immigration. Which is to say, it’s only by forcing the GOP off the cliff that Obama will find the space he needs to govern.
The bolded part is the key to getting what he describes in the last paragraph. I have a hard time seeing how Democrats wouldn't look better in that situation. And it's not a difficult argument to make. Even Democrats shouldn't have too much of a problem making it. They just have to take from the Republican playbook and make it loudly and often.
This would also serve to be a symbolic battle, pitting the rich and powerful on one side (the Republican side) and everyone else on the other (the Democratic side). Democrats should stoke that symbolism into a populist frenzy. You can bring other issues in on this aside from taxes. I'd throw in medicare and social security. Say Republicans want to make it harder to get those things, and make them less lucrative when you finally do get them. And they want to do that all so they can give more money to the rich and spend more money on unnecessary defense.
I said previously that Obama and Democrats should be willing to bargain away higher taxes on the rich. I still believe that. But I'm willing to go over the curb or cliff if we don't get a really good deal before that because of the scenario Scheiber lays out. And if that scenario plays out like he says and how I believe it would, I'd still be willing to bargain away tax cuts for more things, the big one I think being the debt ceiling.
If Republicans are as insanely devoted to rich people as they appear, maybe they would be willing to agree to raise the debt ceiling (or better yet, just get rid of it) in exchange for keeping the lower rate on taxes for the rich. I'd pull the trigger on that deal happily because I think it helps the economy and Democrats more than raising taxes. Also, being willing to budge on tax increases primes you for the unlikely scenario that Democrats lose the public in this battle and Republicans don't cave after we go over the curb. If that happens I think we can still save face by getting something like an extension of the payroll tax holiday and unemployment insurance.