Debate over: Obama rules out extending Bush tax cuts for richest taxpayers

Message from The One to Peter Orszag: I won.

President Obama will rule out on Wednesday any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.

Mr. Obama’s opposition to allowing the high-end tax cuts to remain in place for even another year or two would be the signal many Congressional Democrats have been awaiting as they prepare for a showdown with Republicans on the issue and ends speculation that the White House might be open to an extension. Democrats say only the president can rally wavering lawmakers who, amid the party’s weakened poll numbers, feel increasingly vulnerable to Republican attacks if they let the top rates lapse at the end of this year as scheduled.

It is not clear that Mr. Obama can prevail given his own diminished popularity, the tepid nature of the economic recovery and the divisions within his party. But by proposing to extend the rates for the 98 percent of households with income below $250,000 for couples and $200,000 for individuals — and insisting that federal income tax rates in 2011 go back to their 2001 levels for income above those cutoffs — he intends to cast the issue as a choice between supporting the middle class or giving breaks to the wealthy.

Right. This is his way of baiting the GOP into opposing him so that Democrats can go back to screaming about how Republicans are the “party of the rich.” It ain’t much, but it’s a little something that might peel off a few populist independents before the midterms. The question is, what do the Blue Dogs do? Stick with the party and spare The One an awkward veto? Or defect in the Orszagian name of temporary tax cuts for everyone to provide a little extra stimulus? If the latter, they’ll spoil the whole partisan “party of the rich” attack. Exit question: Would an Obama veto be that awkward, really? It’d prove he was serious about keeping his campaign promise not to extend the cuts for wealthy taxpayers, but I wonder if the class warfare bonanza will outweigh the horrible optics of vetoing any sort of tax cut right now.

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