2012: Small, Smaller, Smallest

"So to repeat, this is not a distraction.  This is what this campaign is going to be about." 

-- President Obama at a May 21 press conference in Chicago when asked about the misgivings of his fellow Democrats over attack ads his campaign was running against Republican Mitt Romney's work as the CEO of private equity firm Bain Capital. 

It is fitting that as America staggers out of 2012, its government is grinding its gears over a suite of tax increases and spending cuts set to kick in eight days hence.

In a year that saw the most expensive but least expansive presidential election in history -- an election contested over character attacks and base-pandering politics -- it is appropriate that Americans get to see their leaders unable to protect them from a disaster those leaders designed themselves.

Small, cynical politics gives you small, cynical governance.

Federal Reserve Chairman Ben Bernanke dubbed the automatic hikes and cuts the "Fiscal Cliff" in February, warning that if lawmakers did not find a way to avert it, the consequences would be dire for the already weak economy.

Ten months and one $6 billion election later, the government is no closer to a deal. It's hard to imagine, but President Obama and members of Congress cannot find a way to avoid what they themselves designed as a fate so hideous for the country that no one would allow it to happen.

All along, those well versed in the ways of Washington assumed that a deal would be done after the election because, well, it would be crazy to do otherwise.

Instead, the president began the negotiations with bid to break the back of the Republican Party. He refused an opening-round concession from Republicans to have top earners pay more taxes by limiting their deductions. Obama said that rich people had to pay more because of higher rates, not smaller loopholes.

When the president stood firm on this ideologically narrow and semantic point, he went out on the campaign trail in a bid to shape Republicans into meeting his demand. To make the pill even more bitter for the GOP, Obama added in a demand for more stimulus spending and to essentially eliminate any limit on federal borrowing.

As the president likely hoped, his unyielding demand on tax rates and his goading produced real anger among the already embittered conservatives in the House. Having just seen the president they assumed would join Jimmy Carter in the annals of doomed Democratic liberalism re-elected, the right wing of the House were not exactly feeling like giving Obama a triple win on the Fiscal Cliff. And Obama decided to twist the knife.

The president is so far getting what he wants as Republicans divide not so much on ideological lines (none of them think that raising anyone's taxes is a good idea) but along tactical lines.

Some very conservative members of Congress want to give Obama his comeuppance by allowing the country to fall off the cliff and having voters suffer the pain of recession uncertainty, believing that the country will turn on the president and his liberalism. Let him take the oath a second time with the economy in tatters, they think.

Those commonly called moderate Republicans are arguing that once the president has a massive tax increase on the wealthy, he will keep that and then get credit for pushing for a massive tax cut for most Americans. These members believe that they will be in a better position to get cuts passed when the fight over the debt ceiling crops up in January.

As the end of the year nears, though, folks are getting very nervous and the call has risen up for a small deal -- a patch, a Band-Aid, anything to avert the worst part of the disaster.

The president has dropped his debt-ceiling demand and Republicans are warming to the idea of getting whatever tax extensions they can, rather than giving Obama the chance to proclaim in his State of the Union that he has proposed the largest tax cut in American history.

But the smart money in Washington is still on the government throwing taxpayers over the cliff.

Having observed this year's election, though, we might have known we would end up here with our leaders shrinking their horizons and "small" being the operant word.

Programming Note 

Power Play the political note and "Power Play with Chris Stirewalt" the Internet television show will be on hiatus until Jan. 2.

Many thanks to all of those who have made this another successful year for us -- those who have encouraged and sustained us through a long journey that started in Iowa with the caucuses there and closes with this incredibly lame duck session of Congress.

Every reader and every viewer should know two things about the Power Play team and everyone at the Washington Bureau of Fox News: We feel a great sense of responsibility to provide you with the best-quality news and analysis that we can and secondly, that we have a lot of fun doing it. Thank you for giving us the opportunity.

Merry Christmas and Happy New Year.

And Now, A Word From Charles 

"It is a fair, even-handed, noble adjustment of things, that while there is infection in disease and sorrow, there is nothing in the world so irresistibly contagious as laughter and good-humour." 

-- Charles Dickens in "A Christmas Carol" (1843)

Chris Stirewalt is digital politics editor for Fox News, and his POWER PLAY column appears Monday-Friday on FoxNews.com. Catch Chris Live online daily at 11:30amET  at  http:live.foxnews.com.