Members of Congress from both parties are increasingly mulling the unthinkable: going home in December without acting to avoid the $4 trillion in tax hikes and deep spending cuts known as the fiscal cliff.
Neither Democrats nor Republicans claim this is their preferred option, as it could rattle global financial markets badly and anger their constituents.
But as they circle each other in an ever-more partisan atmosphere they see little prospect for a settlement acceptable to both parties in the lame duck session of Congress after the November 6 election.
That is when they confront the wave of fiscal cliff decisions including how to handle expiration of temporary tax cuts that originated during the presidency of George W. Bush, $1.2 trillion in automatic spending cuts and the need to raise the debt ceiling again.
Some members and partisan strategists are concluding that they might be better off doing nothing.
They would come back in January with a new Congress relatively flush with cash - at least on paper - from the impact of the tax hikes; hit reset and start over to structure a new series of tax cuts. Call them the "Obama tax cuts" or "Romney tax cuts," depending on the victor in the November election.
In other words, Republicans are confident they will win in November and figure they'll have the White House and Congress, and they'll do what they need to do in order to come up with a new set of tax cuts. That's a dangerous plan...because they fact of the matter is they can't do much of anything if the Democrats win.
On the other hand, they're betting they can block any Obama move to make middle class tax cuts without massive tax cuts for the rich. That's worked well so far. We'll see. BooMan's take:
It will be far easier to let all the Bush tax cuts lapse. This can be done easily. All Obama has to do is refuse to sign any deal or any short-term extension during the lame-duck. On the first of January 2013, the government would instantly get a $3.7 trillion boost on their books. This would free Congress up to redo the tax code in an more equitable way. In the worst case scenario, Romney would be in charge of this and would enjoy majorities in both houses. He might be able to use the budget reconciliation process to enact another Bush-like temporary (decade-long) tax cut, but it's unlikely that that would would work with the budget deficits we're facing. Bush had surpluses and still needed Dick Cheney to break the tie in the Senate for both his 2001 and 2003 tax cuts.
However, if, as now seems likely, Obama wins reelection, he will be in a great position to influence the new tax code. If Congress does nothing, everyone who pays taxes will see their taxes go up. Having won a second term, the president will have at least some initial political clout. And we've seen recently that the GOP will fold when put in a bad position, like letting student loan rates double or letting the payroll tax holiday run out.