Republicans will also be able to point to a long list of news stories quoting Democrats to the effect that going over the cliff, and raising taxes on the middle class, would be fine because it would help them get their way.

Republicans may thus have some leverage after all. House Speaker John Boehner certainly seems to think they do. He has said he is willing to let the federal government raise more revenue from rich people by scaling back tax breaks. He is holding out for two conditions: He doesn’t want tax rates to go up, and he wants to reduce the growth of spending on Social Security and Medicare.

This package, he notes, would be “balanced” in the two senses President Barack Obama has demanded. It would involve both higher revenue and lower spending, and its burdens would mainly fall on the rich. Most proposals for reining in Social Security benefits, for example, concentrate on high earners.

If Republicans have leverage, and if Democrats want to avoid middle-class tax increases and any possibility of getting blamed for them, then there has to be a real deal. This is the third scenario: the “grand bargain” of Beltway hopes. If it happened, it would be Obama’s biggest bipartisan accomplishment. …

The most likely path to a deal involves Obama’s dropping the surtax idea and making some concessions on entitlements. The best bet for what actually happens, though, is gridlock, followed by competitive finger-pointing.