Robert Gibbs in Thursday's press briefing:
Q. I’m sure yours are much better than mine, but I do want to come back to tax cuts because you were making a distinction this morning between temporary and permanent tax cuts. I gather the President is still adamantly opposed to permanently extending the upper-income tax cuts, which Republicans campaigned on.
MR. GIBBS: The President believes, and I think there’s common agreement on extending permanently the middle-class tax cuts. And as I said earlier, I think it’s important to understand what happens if we don’t act by the end of the year -- those tax rates will go back up. I think there’s common ground to be found in how to move forward. The President does not believe and I think would not accept permanently extending the upper-end tax cuts, which we know the cost of that is borrowing $700 billion over 10 years.
But that having been said, I think there’s something that can be come to between that.
Basically, the strategy here is to decouple the Obama tax cut -- that's the tax cut that everybody, including wealthy people, get on their first $250,000 of income -- and the Bush tax cuts that only go to wealthy people making over $250,000.
Republicans want to keep the two different tax cuts joined at the hip, so that the first one -- the one that everybody gets -- can be held hostage in order to pass the second tax cut that only goes to wealthy people. They don't want to permanently extend the first tax cut without also permanently extending the second tax cut because then they'd have no leverage to continue the second tax cut when it expires.
President Obama doesn't think the second tax cut is wise policy, but he's willing to discuss a temporary extension in order to get the votes he needs to enact the first tax cut. But based on what Gibbs is saying here, that's where Obama is likely to draw the line.
How this ultimately plays out is going to be very revealing: will Republicans in the House insist on holding the first tax cut hostage in order to get a second "bonus" tax cut for wealthy people (remember, everybody gets the first tax cut, Republicans just want wealthy people to get a bigger tax cut than anybody else), or will they decide to compromise with President Obama and get something done?