White House threatens veto of 'fiscal cliff' bill without tax hike for rich

Harry Reid and President Obama strategize. Administration officials are playing a bit of pre-lame-duck session chicken with Republicans, telling them President Obama is ready to veto any "fiscal cliff" solution that does not include tax hikes for the wealthy, according to the Washington Post.

Freed from the political and economic constraints that have tied his hands in the past, Obama is ready to play hardball with Republicans, who have so far successfully resisted a deal to tame the debt that includes higher taxes, Obama's allies say. [...]

Obama has never explicitly said whether he is prepared to let the new year arrive without taking action to avoid the cliff. Some Republicans, noting that the president has backed off demands for higher taxes twice in the past, are skeptical that he will stand firm now. But his veto threat challenges Republicans to a dangerous game of chicken over a fiscal event that would raise taxes for nearly 90 percent of households, slice deeply into military and domestic budgets, and probably spark a brief recession.

Not taking action is a very real option: letting the Bush tax cuts expire, then coming back with just a middle-class tax cut, which Senate Majority Leader Harry Reid has in hand. The Senate has already passed a bill that would allow the Bush tax cuts to expire for top earners, undercutting the House's ability to take middle-class tax cuts hostage to the tax cuts for the wealthy. It also gives Democrats more bargaining power to leave out other concessions, like cuts to entitlements.

In fact, for the first time in forever, there's no discussion at all about Democratic concessions on entitlements in this Washington Post article. At this juncture, Democrats have the upper hand in these negotiations, without making any concessions. They actually have had that upper hand all along. The easiest thing to do has always been to let the tax cuts expire, and then put Republicans in the position of having to block restoring them for the middle class in order to protect the wealthy. With the Senate having already passed the middle-class bill, that path is even clearer.

It would be the politically smart thing for Obama to not just let this veto threat hang out there, but to take entitlements off the table as well. A strong commitment to protecting Medicare and Social Security could go a long way toward making sure he's the one setting tax and spending policy next January.

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