Realizing that, House Republicans now seem ready to accept a deal that is large enough to hand the power of the purse to President Obama for the next two years, yet small enough to ensure that America’s long-term fiscal position remains frighteningly bad (PDF). Even Grover Norquist seems to be willing to support such a deal, in spite of the tax hikes that would inevitably be an important component of it.

Fortunately, House Republicans do not have to follow Norquist’s example and cave to President Obama’s wishes by accepting tax hikes in return for mostly symbolic spending cuts. There is a savvier way to go about it—they can exercise their power of the purse without risking default.

This is where the scorecard reward system comes in. Once current appropriations run out, House Republicans should demand serious fiscal consolidation in exchange for continuing resolutions. Without the threat of a debt-ceiling dispute backfiring against Republicans (as it did last summer), President Obama would be forced, time and time again, to show his willingness to make serious concessions, cut spending, overhaul entitlements, and put America back on a sound fiscal path. Only then would he receive more funding for discretionary spending.

Some may be concerned that a system along these lines would be inflexible. This concern is misplaced. Speaker John Boehner and his fellow Republicans could follow the example of credit-card companies and award bonus points for particularly desirable actions, such as agreeing to spending cuts in the near future as opposed to 2045, or to measures that are particularly hard to stomach for some of his fellow Democrats.

So with the holidays upon us, we thought we’d take a look at a few possible scenarios that might greet us in the new year:

1. Over the Cliff We Go

This is an idea that is growing in popularity among the outer edges of both the Democratic and Republican Parties. From the Democratic perspective, going over the cliff would result in the federal government finally being flush with revenue for the first time in a decade. Some nasty, politically distasteful military spending cuts would kick in, of the kind that would never be permitted to occur otherwise. Sure, there will be a world of pain in social programs—closed national parks, fewer food safety inspectors and the like—but Democrats think they will eventually get restored. What else to do, after all, with all that tax money now coming in? Plus, sacred entitlement programs will largely be spared. Hard-core Republicans have come around to this idea, too, since it will simultaneously provide them with a long sought after goal (cutting spending) and provide them with a way to avoid violating what they consider to be a sacred pledge (to never raise taxes.) This option is viewed with favor by members of Congress in both parties, since it allows them to do what they do best—nothing.

2. Going Over, Then Clambering Back

So step back and think of last night in this context: Plan B was a conservative plan with one little tiny dash of compromise, one small and mostly symbolic feather step outside the safe zone of hard-right ideology and toward...not even the center, but the far-right fringe of the center. And the Republicans could not vote even for that.

As Andrew Sullivan wrote yesterday, a word I re-used on television last night, they are vandals. They aren't legislators. They have nothing to contribute to the polity at all. All they want to do is destroy--the federal government; Barack Obama; the national economy as long as Obama is president might gain from good economic news. That is an agenda of destruction; of vandalism quite literally. This should be manifestly clear this morning even to the most monastic heirs of David Broder.

Obama was offering around $1.2 trillion each in taxes and cuts. He moved dramatically on the debt ceiling. He put a Social Security cut on the table that is bitter medicine indeed for a lot of his base. He came to the table. Boehner, for whom my sympathy is limited, lied about the president in every one of these particulars. Obama tried. The Republicans said clearly: sorry, we don't compromise. On anything.

What now? Obama should hold a press conference, I think, or even give a quick Oval Office speech and tell the American people all the above, tell them exactly where things stand, exactly what this alleged "political party" is doing in the name of 47 percent of them. He's been patient and more than fair. Besides which, he should not just assume that Americans will blame the GOP if we go over the cliff. He needs to do something to make sure they blame the GOP.

His predecessor, Nancy Pelosi, courageously risked her majority and her speakership to prevail in the landmark battle for health care as a right and not a privilege in America. For that, she did sacrifice her majority, but she will hold a high place in history. Boehner, in contrast, bows to the demands of the far right at the first sign of resistance in his ranks—even now, at a moment that could crash markets, cause a recession, and drive unemployment above 9 percent. Boehner makes Mitt Romney look like a guy with a backbone.

The president, too, is suddenly being reproached by dissident progressive activists for daring to offer a “betrayal” not a “compromise”—to start the top rate of income tax at $400,000 instead of $250,000 and to modify the cost-of-living formula for Social Security. I’m almost always on the progressive side, but the criticism here is wrong on the policy and the politics.

First, Obama, unlike Boehner, is serious about governing. He sees his office as a place to do his job, not just to cling to its title and trappings. He won the election, but he won’t win every point. And he—and Democrats—are in a much stronger position with the country when he seeks a solution instead of indulging pointless, purist politics at a price that, for example, could  leave millions of the jobless without benefits and throw nearly 2 million more workers out of work. Their suffering should count more than liberal psychic satisfaction.

What the president has offered may not be ideal, but it is entirely defensible in terms of the real, the possible, and the fair.

People in our world too frequently fail to take professionals at their words. The modern Republican Party doesn’t believe in raising taxes. Full stop.

In fact, as a rule, its members believes that taxes are too high. When they get in power, Republicans try to cut taxes, regardless of the economic or fiscal situation. George W. Bush may have had a failed presidency in many ways, but you can’t deny his success at reducing taxes on income, capital gains, dividends, and estates. When they are out of power Republicans agitate to cut taxes and oppose tax increases. When they run for office, they promise to cut taxes and oppose tax increases.

And when confronted with the prospect of massive tax increases that will result from mere inaction, they have proven, thus far, unwilling to take evasive action if it means raising taxes on anybody.

It’s a widely held belief that Grover Norquist and the Club for Growth act as modern-day Komissars, enforcing a rigid anti-tax ideology. But for Republicans in general, and for the Republicans in the House in particular, the overwhelming majority of whom come from safe, conservative districts, their arms don’t need to be twisted.

But it would appear that the House Republican caucus wasn’t all that impressed with Boehner’s dance moves. Plan B is a huge step backward, a retreat away from negotiation and onto the safe but counterproductive territory of the ultimatum. After the House passes Plan B, he said Wednesday, “Then the president will have a decision to make. He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history.”

He knows that the Senate isn’t going to pass the bill, and he knows Obama won’t sign it. If this is where the Republicans stop the dance, then it’s obviously going to be the case that he’ll be right in a sense come Jan. 1, when there is no deal and marginal tax rates from bottom to top revert back to the higher Clinton-era rates.

But is he right that Obama is going to be seen by the American people as being “responsible” for that? Well, let’s take stock. Obama wanted tax increases on dollars earned above $250,000. Around 60 percent of the American people supported this view in poll after poll. Obama won the election campaigning on this position and won it handily.

On top of that, he then came around and proposed cuts to Social Security, indexing benefits to the “chained” consumer price index, to the vast consternation of his base and (undoubtedly) Nancy Pelosi. On top of that, he retreated on the debt limit from a position of taking it off the table forever to taking it off the table for two years. That’s a pretty big difference, forever to two years. On top of that, Obama made a totally ingenuous and common-sense appeal for a little reason and reciprocity in his remarks yesterday about how the events of the past week “should just give us some perspective” on fights that, by Monday afternoon, were really only about a few hundred billion dollars.

As if on cue, the stock market, which had been placidly treading water for most of the day, partly on expectations that a deal was imminent, fell out of bed. Stocks closed the day down more than 1 percent.

Meanwhile, the VIX index—which is a proxy for how much investors are freaked out at any given moment—spiked by 11 percent. Once again, investors faced the prospect of markets roiled by ultimate and maximalist demands.

Now, any discussion about the resolution of the fiscal cliff should start with a huge caveat. It’s entirely possible that House Speaker John Boehner won’t be able to come to terms with the White House, and that House Republicans will refuse to back any deal that Boehner and Obama strike. That said, it’s looking pretty good for the rich. President Obama over the weekend made an offer to resolve the fiscal cliff. Given his history, not to mention game theory, it’s likely that a final resolution will be somewhere between President Obama’s proposal and Boehner’s proposal. And that’s good news for the 1 percent.

AFirst, Obama has defined wealthy upwards. As I’ve been arguing for years, people who make more than $250,000 a year are rich, regardless of which rarefied ZIP code they live in. That’s five times the median income in this country. But President Obama has proposed leaving the Bush tax rates where they are for everyone earning more than $400,000. That spares a decent chunk of high earners from higher taxes. It also means that people who make, say, $500,000, or $700,000—who, again, are rich by any measure—would see the lion’s share of their income spared from any tax increase.

And there’s reason to think this may not be the end. Boehner has proposed setting the new bar for “rich” at $1 million in annual income. If the resolution is somewhere in the middle, or even much closer to Obama’s figure, and the top rate kicks in at $500,000 or $600,000, than many, many rich people won’t see their income taxes go up much at all. (They will be hit, it should be noted, by payroll taxes associated with Obamacare.)

But put all the congressional Kabuki theater aside and there’s still evidence that real progress is being made toward what could be a historic step toward bipartisan deficit and debt reduction.

President Obama and Speaker Boehner both deserve credit for making significant concessions in recent days, working toward a balanced plan.

On the Republican side, Boehner has offered to raise not just tax revenues, but tax rates—a risky violation of anti-tax theology as well as a concession to reality in the form of the sun-setting Bush tax cuts. The catch, of course, is that Boehner now wants to raise taxes only on families making more than a $1 million. More important for the country, Boehner has offered to take the debt ceiling off the table for two years, allowing for a degree of stability in the coming Congress.

On the Democratic side, Obama backed off his threshold for the top tax-rate of $250,000, which he’d used as a rhetorical red line throughout the campaign. Instead, the president offered to make the return to Clinton-era rates apply only to the money families earn over $400,000. He also agreed to a significant reform of Social Security with the obfuscating name “chained CPI,” which would adjust the benefit formula for inflation. This is a relatively painless form of entitlement reform that could have significant impact on bending the long-term cost curve.