I am somewhat baffled by all the talk on this as it seems rather clear to me that we will go off the fiscal cliff. Let us consider the consequences:
1. All the Bush Tax Cuts will be null and void if we go off the cliff. Yes, that includes those that went to the middle class but more importantly those of the rich. The Democrats have long been the party of tax increases while the Republicans have been the tax cut party. Win for Democrats on this one.
2. "Drastic" defense cuts take effect. Though Obama managed to nullify the usual Republican supremacy in national defense in the late election, the Republicans are still viewed as the party eager to spend on the military whereas the Democrats still want to cut the military. Recall that Clinton got the Peace Dividend by cutting the military in the wake of our Cold War win. Again, win for the Democrats.
3. Payroll tax reinstated. Obama cut payroll taxes (the ones that fund Social Security) and those are set to come back. This comes as a break-even.
4. Unemployment benefits cut. The Republicans have generally argued against continued extension of unemployment and thus this is a win for them.
5. Sequestration budget cuts will 'slash' spending on 'discretionary' spending. Mostly meaningless but there will be much moaning over it. Win for Republicans.
6. Medicare Doc Fix ends. This makes it less likely for doctors to treat Medicare patients as they become unprofitable. No winners.
So, by going off the cliff, the Democrats get dramatic tax increases (which will be combined with the coming Obamacare taxes that are set to also start next year) and cuts to the military. The Republicans get some paltry cuts in discretionary spending. There is no way that Obama can get a better deal than this. Just going off the cliff is a huge win for him. Better still, he can reinstated tax cuts for the middle class next year and they will be called the Obama Tax Cuts! And just to put the cherry on top, the media will blame Republican intransigence for going off the cliff. Ditto for the resulting recession.
The Fiscal Cliff holds no threat from Obama's view. We already see this in the risible deal that Tim Geithner offered the Republicans. The car is going off the cliff and the Republicans will be held responsible no matter what they do. See, there is no downside for the Democrats so we're going to pull a Thelma & Louise. Buckle your seatbelts!