It's unfortunate that everyone now calls the tax increase part of the well-labeled "fiscal cliff," the fiscal cliff being an intersection of large tax increases from current levels and Pentagon spending cuts. the Bush tax cuts.
That part is unfortunate because about 30 per cent of the population hates the name Bush, whatever merits there are in any particular policy measure associated with that President.
As to the tax cuts in question, it is also unfortunate that because of budgetary scoring rules and what amounts to philosophical differences over the impact of tax cuts on government revenue, the original changes in tax rates by the Bush Administration had a cliffhanger element built into them by lapsing after ten years.
Thus, once that ten year period lapsed, every year at the end of the year we have the same debate over the dreaded "Bush" tax rates, although he's now long goine, which often have about as much to do with how one reacts to Bush as to the merits or demerits of said rates.
On the flip side of that, because the lapse of rates conjoined to the cuts in spending in the Pentagon would be truly large negative macroeconomic shock, there is an incentive even in an election year to avoid another economically harmful six months of speculation over the future of tax rates and military spending that is in the title of the post: the Simpson-Bowles commission appointed, by President Obama in 2010.
In essence, the results of the Commission were to compromise certain basic prinicples of taxation, maintaining progressivity in rates for obvious political reasons as to Democrats, while extending the tax base in order to have the government distort economic decisions less solely because of reasons of tax avoidance as to Republicans.
It's imperfect but reasonable, in which the alternative of smashing the economy out of some alleged principles and hoping putting the pieces together gets to be done by your side is unreasonable folly.
Since there is unlikely to be any budgetary plan that could be advanced in an election year that wouldn't be swamped by partisan envy as to who gets credit to save the day, given the statements of Speaker Boehner, it should be possible for the President and the Speaker to negotiate a deal on the basis of the original commission's report, since the President has the cover the bipartisan character of the report, as does the Speaker, and neither really has much incentive to leap off a fiscal cliff, and hope the net appears after the Presidential election.