I think the President is bluffing on his veto threat. …
1. If there is no bill, the U.S. economy will probably dip into recession for much/most/all of 2013, and it’s impossible to predict whether such a recession would be short-lived.
2. A 2013 recession would be terrible for the country and terrible for the Obama Presidency. It would limit the President’s options across his entire policy agenda, economic and non-economic. And it could define and dominate his entire second term.
3. President Obama believes #1 and #2, and therefore avoiding the risk of triggering a recession with his veto is an even higher policy priority than his fiscal policy goal.
4. The President wants to get things done. He cares more about his own chances for policy success (across the entire breadth of his agenda, whenever he figures out what it is) than he cares about relative political blame. A scenario in which Republicans get most of the blame for a veto-triggered recession is still a loser for him if it means he can’t accomplish his second term goals.
If my assumptions are correct, then the President cannot afford to veto a bill and have no compromise enacted. Even if doing so increases dramatically the chance of getting his top fiscal policy priority, and even if he would bear only a small portion of the political blame for a legislative failure and the pain of broad-based tax increases, his veto would trigger a recession that would severely damage his agenda at least in 2013.