Congress will fail again. Despite the election and the polls, Congressional Republicans will not vote to allow taxes on the top 2 percent to rise to Clinton-era levels. Republicans' proposed compromise -- to eliminate deductions instead of raising rates -- is not only a con-job, its numbers do not add up and it does not even prevent the "damage" they bogusly claim raising rates will cause because, on their own hypothesis, it takes the same money from the job-creators albeit by a different means.
President Obama has available a "plan B" that will save the middle class and, in the process, devastate the Republicans.
As we all know, tax laws are among the many that are only randomly enforced. There is, for example, an estimated $330 billion of uncollected taxes every year (if we collected half of that, we would have $1.15 trillion of the $4 trillion deficit reduction target). Indeed, more than 4000 of the wealthy, almost certainly including Mitt Romney, received amnesty from the IRS despite committing federal crimes using their Swiss no-name accounts.
Here is a scenario the President can employ when Congress fails. On January 1, 2013, when the Bush Tax Cuts ("BTCs") expire, the President can declare that America does not succumb to hostage-taking abroad, so we are certainly not going to do it at home.
To avoid letting the hostage-takers win, he can then declare that the IRS will not prosecute nor sue to recover money if anyone with less than $250,000 adjusted gross income (AGI) pays takes at the 2012 rate. He will also allow those with more than $250,000 AGI pay at the 2012 rates for the first $250,000, but they will have to abide by the new rates for AGI greater than $250,000.
Although obvious, it may be worth stating that a president could not demand more taxes from any income group than the levels enacted by law. Thus, the opportunity for employing this "plan B" is that the BTCs expire, raising the rates, and this proposed selective enforcement is lower than the legal rates for AGI less than $250,000. That said, I generally recoil at Congressional authority being assumed by the Executive; but politics abhors vacuums, so if Congress creates such a vacuum, it has only itself to blame if the Executive steps in.
Republicans, of course, will cry "impeachment" for not fully executing the law. It will be an interesting contrast with their silence on amnesties for the millionaire/billionaire crowd who committed federal crimes through their Swiss bank accounts, not to mention the $330B of uncollected taxes.
It will even be more interesting to watch how long they pursue "impeachment" over the issue of the middle class not being forced to pay more taxes.
It will be pure poetry to observe the entire country rallying behind the President for his strength and boldness, and for doing what more than 60 percent of Americans want. It will be akin to the support he received after declaring that the government would no longer support DOMA in federal court, and then again when he provided an administrative pathway for "dream act" qualifiers.
It would probably be a good strategy for this to be floated first from outside the Administration, e.g., by Harry Reid (D-NV). While doing that, he might also mention that the 14th Amendment renders votes on the debt-ceiling mere formalities. This would allow the initial media freak-out to occur, while the White House keeps its own counsel.
Republicans would discover that the President and Democrats will not allow hostage-takers to screw the middle class again.
That jig is up.