Let's Make a Deal: Obama Poised to Break Campaign Promise and Extend Tax Cuts

VIDEO: President seems ready to compromise on tax cuts for rich to extend unemployment.PlayABC News
WATCH Obama Expected to Break Tax Cut Promise

President Obama appears poised to break one of his biggest campaign promises and agree to extend tax cuts to all Americans, not just those who make $250,000 or less, something Republicans have been demanding for months.

The payback for the president: he will get an extension of unemployment benefits.

"I think it's pretty clear now taxes are not going up on anybody in the middle of this recession. We're discussing how long we should maintain current tax rates," Senate Minority Leader Mitch McConnell, R-Ky., said this morning on NBC's Meet the Press.

In exchange, McConnell said he could agree to an extension of jobless benefits as part of a tax cut package.

"I think we will extend unemployment compensation," he said. "We've had some very vigorous debates in the Senate. Not about whether to do it but whether to pay for it as opposed to adding it to the deficit. All of those discussions are still under way."

For Democrats, giving in on taxes to get unemployment benefits extended is a tough pill to swallow.

"We're moving in that direction," Senate Majority Whip Richard Durbin, D-Ill., said. "And we're only moving there against my judgment and my own particular view of things.

"It appears that the Republican position is ... we have to continue the Bush economic policies," he said on CBS' "Face the Nation." "And the Bush economic policies of tax cuts for the wealthiest individuals have led us into this recession, cost us 15 million jobs, have utterly failed."

Obama now admits he may give in -- or, as some Democrats say, "cave in" -- to Republican demands to continue the Bush tax cuts for the wealthiest of Americans.

"I'll admit, I am very disappointed that the Senate did not pass legislation that had already passed the House of Representatives to make middle-class tax cuts permanent," he said Saturday.

"Those provisions should have passed," he said. "I continue to believe that it makes no sense to hold tax cuts for the middle class hostage to permanent tax cuts for the wealthiest 2 percent of Americans -- especially when those high-income tax cuts would cost an additional $700 billion that we don't have and would add to our deficit.

"I've spoken with the Democratic leadership in Congress, and I look forward to speaking with the Republican leadership as well," he said. "And my message to them is going to be the same: We need to redouble our efforts to resolve this impasse -- in the next few days -- to give the American people the peace of mind that their taxes will not go up on January 1st. It will require some compromise, but I'm confident that we can get it done. And the American people should expect no less."

Without a compromise it's unlikely Democrats will get much, or any, of their to-do list accomplished during the lame duck session of Congress.

If, however, the president agrees to extend the tax cuts, at least for a few years, and Republicans agree to extend unemployment benefits, it's possible Congress could move forward to tackle other issues.

The compromise could open the door to a possible ratification vote on the START nuclear treaty with Russia or other generous tax credits that the president wants to see passed.

Meanwhile, the Jan. 1 deadline is looming. If Congress does not take action, someone making $62,000 a year could see their taxes go up by $2,200 starting next month. Extending all the tax cuts, however, means someone making $10 million a year will keep $450,000 of their income, that could have gone to Uncle Sam.

It's a costly deal. None of the cuts are paid for -- over the next 10 years they will add nearly $4 trillion to the national debt.

Democrats tried Saturday to extend tax cuts only to the middle class, but Republicans rejected legislation to extend tax cuts for Americans earning less than $250,000 a year, as well as another proposal that would end tax breaks just for Americans earning more than $1 million.

"They are demanding that the wealthiest Americans get a tax cut that is a thousand times the size of the average American," Sen. Byron Dorgan, D- N.D., said Saturday on the Senate floor.

The spin game has already begun with Senate Democrats trying to paint Republicans as protecting the rich.

Sen. Claire McCaskill, D-Mo., said Republicans aren't worried about average Americans, "they're worried about people that can't decide which home to go to over the Christmas holidays."

"What they want to do is drive up the debt by $700 billion," Sen. Bernie Sanders, I-Vt., added.

Republicans are having none of it.

"We don't need a dog and pony show," Sen. Charles Grassley, R-Iowa, asserted.