The old game show was called “Let’s Make A Deal.” Monty Hall would ask you which door do you want, Door #1, Door #2, or Door #3? Sometimes it worked fine, other times not such a good deal. President Obama should not play this game. Behind Door #1, there is House Speaker John Boehner refusing to consider allowing income taxes to return to the Clinton-era marginal rates – not even for just the top tax bracket. Behind Door #2, Senate Minority Leader Mitch McConnell is saying no to any tax increases on anybody, ever – whether by raising rates or eliminating loopholes. Behind Door #3, House Majority Leader Eric Cantor is threatening to take the debt ceiling hostage again.

Paul Krugman:

President Obama has to make a decision, almost immediately, about how to deal with continuing Republican obstruction. How far should he go in accommodating the G.O.P.’s demands?

My answer is, not far at all. Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a “grand bargain” on the budget that snatches defeat from the jaws of victory.

In saying this, I don’t mean to minimize the very real economic dangers posed by the so-called fiscal cliff that is looming at the end of this year if the two parties can’t reach a deal. Both the Bush-era tax cuts and the Obama administration’s payroll tax cut are set to expire, even as automatic spending cuts in defense and elsewhere kick in thanks to the deal struck after the 2011 confrontation over the debt ceiling. And the looming combination of tax increases and spending cuts looks easily large enough to push America back into recession.

Nobody wants to see that happen. Yet it may happen all the same, and Mr. Obama has to be willing to let it happen if necessary.

Why? Because Republicans are trying, for the third time since he took office, to use economic blackmail to achieve a goal they lack the votes to achieve through the normal legislative process. In particular, they want to extend the Bush tax cuts for the wealthy, even though the nation can’t afford to make those tax cuts permanent and the public believes that taxes on the rich should go up — and they’re threatening to block any deal on anything else unless they get their way. So they are, in effect, threatening to tank the economy unless their demands are met.

Mr. Obama essentially surrendered in the face of similar tactics at the end of 2010, extending low taxes on the rich for two more years. He made significant concessions again in 2011, when Republicans threatened to create financial chaos by refusing to raise the debt ceiling. And the current potential crisis is the legacy of those past concessions.

Well, this has to stop — unless we want hostage-taking, the threat of making the nation ungovernable, to become a standard part of our political process.

So what should he do? Just say no, and go over the cliff if necessary.

It’s worth pointing out that the fiscal cliff isn’t really a cliff. It’s not like the debt-ceiling confrontation, where terrible things might well have happened right away if the deadline had been missed. This time, nothing very bad will happen to the economy if agreement isn’t reached until a few weeks or even a few months into 2013. So there’s time to bargain.

More important, however, is the point that a stalemate would hurt Republican backers, corporate donors in particular, every bit as much as it hurt the rest of the country. As the risk of severe economic damage grew, Republicans would face intense pressure to cut a deal after all.

The wealthiest 2 percent of Americans can afford to pay more taxes. As a member of the middle class, I see no problem in letting all the Bush-Obama tax cuts expire. The only way to handle this situation is let the “fiscal cliff” happen, and ignore the debt ceiling (which is unconstitutional anyway). When federal deficits disappear, nobody in Washington can use deficit hysteria to attack Social Security, Medicare, and Medicaid.

What about our economy? The Congressional Budget Office predicts that if the Washington politicians went over the so-called “fiscal cliff,” we would experience a shallow recession and take about a year to recover. The U.S. economy would shrink about 0.5 percent over the year before bouncing back and growing at a rapid clip of 4.3 percent annually between 2014 and 2017.

UPDATE: Obama Calls On Congress To Extend “Middle Class” Tax Cuts Now

Of course, what President Obama is really talking about is extending all the Bush-Obama Tax Cuts For The Rich – except the income tax rate on those making over $250,000 a year. In other words, keeping about 80 percent of the Bush tax cuts.

UPDATE: Bill Kristol: ‘It Won’t Kill The Country If We Raise Taxes’ On Millionaires

UPDATE: Congressional Republicans’ ‘Compromise’: Everyone Should Accept Romney Tax Plan

UPDATE: Fiscal Cliff Scare Talk Follows Shock Doctrine Script

All of the people who had been hysterical about the budget deficit “crisis” are now hysterical that taxes will go up and spending will go down. Go figure. Maybe — just maybe — I shouldn’t even say it — these “serious people” weren’t … serious … when they said they were worried about the deficit.

UPDATE: Obama On Tax Cuts: President Rejects Republican Plan To Close Loopholes

UPDATE: Obama Breaks It To GOP: Tax Rates Are Likely Going Up

“This should not be a surprise to anyone…. The majority of voters agreed with me,” Obama said. “More voters agreed with me on this issue than voted for me.”

UPDATE: Obama Rejects Boehner’s Fake Tax Compromise

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