Now, I'm kinda leaning toward Romney anyway, but let me lay this out:
If Obama wins, he can't touch the Bush middle class tax cuts (which account for most of the lost revenue), but he'll try to make the ones on earners with more than $250K expire. There are two strategies to get this result:
- Negotiate a full-blown tax reform package that gives the GOP enough cover to raise rates a little bit on everybody and a lot on the wealthy. I have absolutely no faith in Obama's ability to thread this needle--he and his staff are legislative incompetents.
- Let the Bush tax cuts expire in toto and then offer a new bill that restores the middle class portions of the tax cuts.
Suppose the GOP refuses to give in. Then we go over the taxation portion of the fiscal cliff, which will almost certainly send us into a double dip recession, just in time for the mid-term elections. Obama and the Democrats will certainly try to blame the Republicans for this, but being president trumps being a bunch of idiot legislators. The electorate will simply note that this happened--twice--on Obama's watch and punish him the only way available: by electing more Republicans to Congress. Then, in 2016, they'll elect Paul Ryan. Hillary won't have a prayer.
The problem is that the public perceives even a divided government as being controlled by whichever side owns the executive. So lots of disgust will be directed to Congress, but at the end of the day, the messaging that wins will be, "This happened on Obama's watch."
Now, maybe the Republicans will suddenly decide to put the best interests of the nation ahead of political power games. But the problem is that they honestly, truly believe that the endpoint of a successful second term for Obama results in national ruination. Compared to that, a double-dip recession seems a small price to pay. Furthermore, repeal of the middle-class tax cuts will mitigate the deficit caused by the recession, which will make the deficit hawks happy. Bottom line: the GOP is gonna play scorched-earth if Obama wins.
On the other hand, consider a Romney win. Congress is unlikely to be filibuster-proof, which means that the GOP has to negotiate a genuine tax reform package that is largely agreeable to the Democrats. My guess is that this means that Romney gets his reduced rates, but the price for them is that we revert back to the 20% top capital gains rate from the pre-Bush era. Then the GOP majority can use reconciliation rules to push through discretionary spending reductions, and we'll have an entirely proper battle royale over entitlement spending.
Note that this is an excellent outcome for almost everybody. Capital gains only affect small business owners if they try to sell their business, which is comparatively rare. On the other hand, the financial people, who by all accounts are the ones that are driving income inequality, will wind up paying more, since most of their income is predicated on capital gains.
I'd guess that Romney is going to prioritize growth and debt reduction about equally. There's a path to achieving both of these goals with a divided government, and he's very good at managing these kinds of priorities. The wildcard is ACA repeal/replacement/modification/what-have-you. Romney could spend as much political capital as Obama on this, and the result will be that he doesn't get to do what he wants to do for real. I think he's smart enough only to pay lip-service to health care, but he could get sucked into all kinds of nonsense there.
Either way, the only hope of avoiding a double-dip is to elect Romney. The reasons for doing so may or may not be entirely palatable, but the GOP has enough power to make a second Obama term a living hell for everybody.