At one level, this is a fight for power over the next two years. Re-elected by her colleagues after their epic defeat, Mrs. Pelosi is trying to show Mr. Obama who wears the pantsuit in the party. She thinks the law professor President lacks her streets-of-Baltimore grit. She’s sending him a message not to count on her support if he tries to do a Bill Clinton and cut deals with Republicans to win re-election…

Republicans would be fools to give Democrats a single new concession, even a token one. They certainly shouldn’t let Mrs. Pelosi think she can get away with such blackmail in the next Congress. If Democrats defeat the current deal in the House, Republicans can return as a majority in January and write a bill that is better tax policy and more popular with their voters. Democrats will have been responsible for the tax increase, and Mr. Obama and Senate Democrats will have much less leverage. That’s why we think the Pelosi Democrats are really hostage fakers and will fold if their bluster is called.

Apart from the near-term economic damage, the stakes in this debate are highest for Mr. Obama. In November voters repudiated the policies of his first two years, but the polls show a reservoir of respect for him as a leader. If he can be pounded into retreat by a soon-to-be-former Speaker whose approval rating is barely north of 10%, Mr. Obama is headed for the unhappy resting place for failed Presidencies known as Carterville.