The incoming ranking Republican on the Senate Finance Committee, Orrin Hatch, is signaling that an extension beyond two years would be acceptable:
"A reasonable path forward should be on the table," Mr. Hatch said. "It would garner support from Democrats and Republicans alike. That path forward is an extension of all the tax relief well past the next election."
This notion was initially floated by Peter Orszag, who served as the White House budget director until he resigned in July.
Mr. Hatch rejected another compromise idea that has been floated of extending the lower tax rates for so-called middle-class Americans permanently, while only temporarily continuing the discounted rates for wealthier Americans.
President Obama has signaled that he will accept a two-year extension of tax cuts for the rich, and the first thing Republicans do is demand a foot. This is exactly why compromising before the fight does not work. Republicans intend to run down the clock, because President Obama has revealed his main fear:
Let’s start where we agree. All of us want certainty for middle-class Americans. None of us want them to wake up on January 1st with a higher tax bill.
The problem is that Republicans wouldn't mind at all if middle-class Americans woke up to a bigger tax bill. They want their tax cuts for the rich, or they'll happily engage in a full-scale political attack. They will do what they always do: rev up the noise machine to say that Obama is raising everyone's taxes. They are actually relishing the fight if that were to happen. Ezra Klein pointed this out in July:
The new Republican line is that there's a "Democrat tax hike" on the way. And it's a big 'un: "An unprecedented $3.8 trillion increase" that will affect -- and this is their bold and underline, not mine -- "every American who pays income taxes!"
Republicans are more than happy to run down the clock and increase the pressure. Can you see Senate Democrats shaking in their boots as December 31 nears? I can.
This is why President Obama should turn the tables on that argument by pointing out, repeatedly, the truth: It was President Bush and Republicans who created this expiring tax cut business in the first place. By making it clear that it is Republicans who created this mess, he can then step in with a new "Obama Permanent Tax Cut for the Middle Class." The only way to win this thing is to outflank the GOP and go on offense, not continuing to offer a weak posture that only encourages them to keep moving the goalposts.