Though there's still a lot of back and forth over it, Republicans realize that the top marginal tax rate is going up. This isn't even a matter of them 'caving' or the President 'winning'. Current law says they're going up. And there's no way to prevent that without a new law and the President's signature. So it's not just happening. For all intents and purposes it already has happened.
The only question is how quickly and under what circumstances everyone else's tax cuts will be extended. Indeed, made permanent. House Republicans can prevent those tax cuts by preventing such a bill from being voted in the House. But that's no more than the power to put a gun to your own head and threaten to shoot.
Given this defeat, House Republicans are saying they'll regroup around the debt limit and force the president's hands when they have all the power -- probably late next month or in early February. This assumes a replay of 2011. But the President says he won't negotiate under any circumstances. And his top advisors say he's adamant on the point -- not just because of the current impasse but to take hostage taking over the national debt off the table for good.
They're sending out this message through every channel, official and unofficial.
Yet this may be easier said than done. You can say you won't negotiate with hostage takers but when you see the hostage taker with a gun at your kid's head, just how far are you going to take that? With a leader on the other side as weak as Speaker Boehner, it's not at all clear what will happen. Boehner is already reeling both from the defeat over tax rates and from attacks from his right. Trying to retake ground, dignity and power by starting another round of hostage taking will likely be irresistible. The President says he won't negotiate. And I believe him. But he did little more than a year ago so House Republicans likely think that if they threaten enough damage to the national economy, he'll give in. Hill Republicans believe this president always caves. So if the president won't agree to negotiate, that means a major showdown and perhaps genuine crisis will arise as early as January and certainly by February.
Even if you question whether the President has the stomach for that showdown or whether he'll be ready to allow the scope of damage to the national economy Republicans are threatening to inflict, the point to recognize is that he is dramatically raising the stakes for himself.
We'll be aggressively reporting on this from here forward. Are Democrats fully onboard with the hard line the President is drawing? Will Republicans' core supporters in corporate America have the stomach for another economy-damaging round of hostage taking over honoring the national debt of the United States. How much political vulnerability do Republicans feel to polls that show them clearly on the wrong side of public opinion?
My sense is that the President is dead serious about this. But that doesn't necessarily equate to Republicans surrendering the hostage, certainly not quickly. And this could make for a harrowing ride for the national economy and the core functions of government for the next few months.