• With: Kim Strassel, Jason Riley, Dan Henninger, Peggy Noonan, Collin Levy

    GIGOT: That was House Speaker John Boehner on Wednesday vowing to work with President Obama on the big challenges facing the nation. The first of which is to void the so-called fiscal cliff, a toxic combination of tax increases and automatic spending cuts, especially in defense, set to take effect January 1st.

    So, we pointed out in the last segment, Republicans held the House with minimal losses despite a big Democratic year. Can Boehner think, look, I've got as much mandate as the president?

    HENNINGER: I think he should absolutely think that, Paul. The president, it was made clear, didn't really run on his second-term agenda, didn't talk about it much. I'll tell you what the mandate is right now. The mandate is that fiscal cliff, the bipartisan mandate.

    GIGOT: To go off it, is that the mandate or to stop -- not to go off it?

    HENNINGER: Well, I think since the stock market went off --


    HENNINGER: -- in the last week, people are saying, pretty clearly, you've got to do something about this now.

    I think they have a lot of leverage here, because if something isn't done, the economy is going to decline, maybe go into recession. I think employment can get as high as 10 percent new year.

    GIGOT: If we had another recession, it would.

    HENNINGER: If you're the president of the United States in a second term, you do not want, as your legacy, an economy that had 10 percent unemployment --


    GIGOT: Well, what if --


    HENNINGER: -- for 10 years.

    GIGOT: But the left is saying to him, look, don't give in at all. you won --

    HENNINGER: Yes. And you know what?

    GIGOT: And if you go off a cliff, you blame them, and they'll get the blame.

    HENNINGER: He has no other term. I think Obama's going to start thinking about his legacy. And I predict, Paul, he may throw the left over the side to do a deal with the Republicans that enhances his legacy.

    GIGOT: Kim, is there any evidence from the first term that the president is about to slow the left over the side? And working -- he governs to the left in the first term. Is he going to change?

    STRASSEL: Yes. And he campaigned to the left, too. One of the problems was that he spent all of this election -- the only thing Barack Obama campaigned on, really, for a second term agenda was his vow to raise taxes on the wealthy. So, now we come back, the day after the election, the White House has already come out and said we're not negotiating on that principle at all. And Boehner said we're not negotiating on that principle at all. So we're going to find out in the next two weeks whether or not there's really any room here or if it's a repeat of the debt-limit talks in 2011.

    RILEY: Speaking of that, I don't think, Kim, that Boehner wants a repeat of that. There was a sense last year that he got out a little ahead of the caucus. Obama was able to exploit that.

    GIGOT: In negotiating ---


    RILEY: With negotiating.


    RILEY: This time, I think he's making sure that they present a united front. That's good. He's said he's open to some increased revenue. I hope he holds on the rates, though, Paul. I don't think we need marginal rate tax increases in this economy. But I think -- he wants to negotiate and cut a deal. And I'm with Dan. I think that Obama will be inclined to play ball.

    GIGOT: This is the thing. If you look at -- second terms are notoriously not very effective. What he needs is economic growth.

    The other thing is Democrats still control the Senate, Kim. Now they control the White House. The control the Senate with an enhanced majority there. Republicans are the minority of the government.

    STRASSEL: Right.

    GIGOT: They don't really have an obligation to govern --


    GIGOT: -- the way they did with the Tea Party coming in in 2010. they don't have to pass Medicare reform. They don't have to come in with any super agenda themselves. Doesn't the president and Senate Democrats have an obligation to say, here is what we would like to pass, and then see what -- if they can actually get it through?

    STRASSEL: And the president absolutely does that. And also, too, if there is a potential option in sight to get the Senate Democrats to go along with it.

    Here's one of the remarkable things, Paul, to me is that they're talking about this standoff. You have actually seen movement over the past year. Republicans, remember, started the debt-limit talks in 2011 saying no revenue, never. You will not get it. This needs to be solved through spending cuts alone. They've slowly changed that --

    GIGOT: Right.

    STRASSEL: -- saying, look, we're open to revenue, if it's done via larger tax reform in a way that doesn't hurt the economy.

    The question, the people who are now being incredibly obstinate about this, and in a totally ideological way, are the president and Democrats, saying we will not take any revenue unless it's from tax rate hikes.

    GIGOT: Right. And that's going to be part of the showdown.

    Dan, briefly?

    HENNINGER: Try to keep the capital gains at 15 percent. That would be the one thing I would take going into the negotiations because I think it would be the one tax break that would be most productive for the economy, if we start talking about looking for revenue elsewhere.