A. Concede to most of the president's demands.
B. Take the economy over the cliff, and get blamed for it.
As a result, the logic goes, they will end up doing A, because B is so much worse.
Keith Hennessey points out that there is also option C: Extend the tax cuts, except at the top, for one year. Apparently (and I was not aware of this), Senate Democrats passed a bill doing exactly this back in July. If the House passes it now, it goes to the President's desk, and he would have a hard time vetoing it.
This is not great policy, as it sets up another fiscal cliff one year from now, and it does not address all the spending cuts that are part of the fiscal cliff. But from the Republicans' point of view, it may be better than either A or B. Keith argues that the ability of Speaker Boehner to fall back on this option should give him more bargaining power as he negotiates with the president. That is, because the president won't like option C either, the possibility that it could occur may make him more willing to compromise. From the president's perspective, it is better to make concessions today than having to do this whole fiscal-cliff thing again a year from now.