'World News' Political Insights: Democrats, President Obama Set to Cave on Taxes

Major concession comes on eve of Republican House takeover.

ByAnalysis<br/>by Rick Klein
December 05, 2010, 4:38 PM

WASHINGTON, Dec.05, 2010 -- Even a shellacking couldn't leave enough gloss to make things move on Capitol Hill.

The slow-motion lurch toward a conclusion of the current session of Congress has hardly provided surprises -- including the failed weekend Senate votes on tax cuts that all involved agreed were only symbolic anyway.

While the final results of negotiations between the White House and congressional leaders won't be known for another week or two, the broad outlines have become clear -- and are testing the relationships among Democrats who are set to cede control over the House in a month's time.

The worst kept secret in Washington right now is that President Obama is set to cave on tax cuts. This marks a reversal of a long-held position, dating to the early months of Obama's presidential candidacy, to allow tax cuts for couples making more than $250,000 a year to expire.

The best kept secret is what Democrats might get in return. The White House is pushing for a range of other priorities -- everything from an extension in unemployment benefits to an agreement to vote on a nuclear treaty with Russia -- to be packaged as part of a deal on the expiring Bush tax cuts.

As the recent votes, particularly those in the Senate, make clear, the White House realistically has little maneuvering room when it comes to the tax cuts. A small handful of moderate Democrats are joining all Senate Republicans in insisting that all the tax cuts are extended, even if that means holding up tax cuts that would benefit primarily the middle class.

Viewed from that perspective, Democrats are making the best of a difficult political situation that's set to get tougher in January.

The White House views the current lame-duck session of Congress as the last best chance to get the kind of priorities, on unemployment insurance and targeted tax relief, that will be near-impossible when Republicans take over the House and control six additional seats in the Senate.

But the fact that the president is pressing his party to give in on a central Democratic tenet even before the new crop of Republicans takes office has liberals angry. It has some on the left worried about what to expect when Republicans do control the votes on Capitol Hill.

Liberal voices and interest groups are imploring the president and his fellow Democrats to stick to their principles on taxes.

"The guy who stands for all the people and is not gonna let himself get pushed around," one Obama supporter says in an ad being run by MoveOn.org, urging the president to let higher taxes be imposed on the wealthy.

Such groups' position also happens to coincide with the new emphasis on fiscal responsibility, at least on paper, since extending the tax cuts digs an even deeper deficit hole for the nation to dig out of. While the president's deficit commission outlines stark choices ahead on taxes and spending, Washington appears poised to make the gap between spending and revenue even wider.

The numerical realities are such that Democrats have to expect less success in pushing their priorities than they've enjoyed over the past two years. The push for tax cuts will only grow in the new Congress, and Republicans will seek to wield budget knives after an election where they see voters having endorsed fiscal discipline.

But seeing a loss on a major priority now, while Democrats retain full control of the levers of power, is deeply disappointing to a chunk of the president's base. It reinforces perceptions among Democrats that even the president's seemingly firm stands wind up being quite malleable.

The compromises will help move some long-sought priorities, and -- most importantly in the current economy -- are likely to prevent a broad-scale tax increase from going into effect.

Yet to a president who is seeking to reassert his authority after a rough midterm election, the lame-duck session could prove counter to his longer-term goals. If he's forced to give on a position where he can claim the backing of the public -- taxes paid by upper-income earners -- he could wind up moving far more on issues where his opponents have the upper hand.

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events