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Your third scenario misses the mark (you are right with the first two). If the GOP gives him the tax he wants it will do nothing to improve the economy in any way. In fact things will slide further. The GOP could then run on the fact that they comprimised big time and look what happened. It might not work but it is the only chance for 2014.

Now there is a winning strategy, hope that the voters notice how bad the economy is in 2014. That worked real well a few weeks ago. The reality is that the majority of Americans are addicted to their entitlements. No amount of happy talk or myth will change that fact. The problem is that half this country has no skin in the game. Going off the so-called “Fiscal Cliff” will just reinstitute the rates of 2001 and cut spending now, not in the future, which means never. Some of those taking the government cheese will be asked to pony up. Both sides in DC have agreed to raise taxes on the producers, they are only fighting over how. The Dems want higher rates for the rich, the GOP wants to take away deductions from the rich, so no matter how you slice it the producers are going to pay more to the government, while the takers keep on taking. If those who want smaller government are serious, then going of the cliff is the only way to go, the other choices by both sides are just mental masturbation.

“Your third scenario misses the mark (you are right with the first two). If the GOP gives him the tax he wants it will do nothing to improve the economy in any way. In fact things will slide further.”

No, not off the mark.

The reality is that in America today, it doesn’t really matter to a large part of the voting population whether the economy is improving or not.

If it did, how did Obama persuade a majority of Americans to vote for him, in one of the worst economic environments (of his own making) in American history?

If it did, Obama would have lost. He did not lose. He won.

The “new reality” of American politics (in the new “divided America”) is that the successful promulgation of a theme is more important than reality. Because in the new America, we have a growing share of the population that has no idea of what economic “reality” even -is-. And wouldn’t be able to comprehend it in any case.

Perception has become “the new reality”.
Apply this to my scenario #3, and you’ll see how that will work for the ‘rats in 2014. It may even work BETTER for them than scenarios #1 and #2....

Aside: Who cares about unemployment when you’re gettin’ your free ObamaPhone?