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Why Obama might compromise on Bush tax cuts for the rich

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Chris Usher/Reuters

(Read caption) Senate majority whip Richard Durbin of Illinois and Senate minority whip Jon Kyl of Arizona discuss the Senate's lame duck agenda on CBS News' 'Face the Nation' Sunday in Washington.

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President Obama and Congressional Republicans are close to a big economic compromise: Obama would agree to extend Bush-era tax cuts at all income levels, while GOP leaders would relent and allow passage of extended benefits for the long-term unemployed.

"They are making progress," said White House spokesman Bill Burton on negotiations surrounding the deal on Monday on negotiations surrounding the deal.

Such a deal would mark a profound turnabout for Obama, who campaigned hard on the idea that extending tax cuts for the wealthy would be wrong. What caused him to change his mind?

After all, Democrats still control both chambers of Congress. Republicans made big gains in midterm elections, but most of the GOP reinforcements won’t be seated until next session, after the Bush tax cuts are set to expire.

Many liberal Democrats want to take a stand on this issue. If Republicans persist in blocking efforts to extend the cuts only for those making less than $250,000 a year, let them, goes the liberals’ argument. Sure, everyone’s taxes would then rise – but it would be on the GOP’s head.

The White House won’t go along with this position for at least two key reasons. First, they know Republicans are willing to call the left’s bluff on this issue. They showed that on Saturday when Senate Republicans blocked Obama’s plan to end the tax cuts for top earners. And for the administration, the consequences of a standoff on this issue are unpalatable.

It’s true that polls show a plurality of Americans prefer not to extend tax cuts for the wealthy. But that’s an abstract issue for most – because most voters aren’t rich. Polls also show that voters don’t want their own taxes to go up. And that’s personal. If the White House allowed all the Bush cuts to expire rather than extend them for the wealthy, the screams of financial pain from around the nation would drown out any “attaboys” the administration might get.


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