Washington (CNN) - House Speaker John Boehner and President Barack Obama insist they're not giving up on the - currently stalled - one-on-one talks to avert the fiscal cliff, but regardless, sources in both parties now believe that with Boehner's Plan B having bombed, the next move will now start in the Senate.
A senior Democratic Senate source laid out three scenarios Democrats in the Senate are considering: either go over the cliff; push for a fall back measure, an alternative to going over the cliff; or push for a broad deal, such as the deal Obama offered Boehner last weekend, which Democrats said included $2 trillion in tax increases and spending cuts.
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More on the thinking behind each possibility, from the senior Democratic Senate source:
1) Go over the cliff – When the new Congress convenes on January 3rd, Democrats will have more seats - and they see themselves having a stronger hand. If we go off the cliff December 31st, the markets don't open again until Wednesday January 2nd. Yes – the move could produce a bad psychological reaction, but the hope would be to correct that by passing a deal as soon as the new Congress is sworn in on January 3rd.
In this scenario, the politics of the vote in the new year would be much easier because the politics of the tax vote would be turned on its head: instead of voting to raise taxes, the vote will be to cut taxes, since the Bush era tax cuts will have already expired at the end of 2012.
Democrats will have 55 votes in the Senate, and would only need 5 Republicans to cross party lines and back their measure. The Democratic hope in this scenario is that the pressure on Senate Republicans would be so intense that it would be hard for at least five GOP Senators to vote no on any package that includes keeping taxes low for the middle class, as well as other important elements.
2) Fallback scenario – The Senate would take the bill it already passed earlier this year to keep Bush tax cuts in place for households with income below $250,000, and add other important items which will include sweeteners for Republicans, including the alternative minimum tax (AMT) fix, "doc fix" (delay in payments to Medicare providers), and estate tax extension at current rate.
This would be harder for Senate Democrats to pass since they will need seven or eight Republicans in the current Congress to cross party lines. The Democratic source said this would entirely depend on whether Senate Republican Leader Harry Reid and Obama could line those GOP votes up. They also want to be sure whatever they pass could also pass the House. What Reid is privately telling people is that he does not intend to have Senate Democrats take a tough vote that will go nowhere in the House.
3) Pass big package - The Senate would take the latest offer from President Obama to Boehner with tax increases on household income over $400,000 and the spending cuts he proposed, or something close to it, and turn it into a piece of legislation and try to pass it, the Democratic source suggested. Again, the same political imperative for the fall back scenario would apply to this – Senate Democrats would have to be sure they could get enough Republicans, seven or eight, to cross over and pass this. They also want to be sure it pass the House before going this route.
Needless to say, options two and three would have to be done sometime next week after Christmas. The window is small – just a few days.