The President laid out his opening position on extending the Bush era tax cuts, making three major points.

1) That the lame duck session ought to make the Bush era tax cuts for the “middle class” permanent.

2) That we need to cut spending, and that his suggested three year freeze on discretionary spending ought to be adopted as the tool to do that.

3) That the nation cannot afford to make the Bush era tax cuts permanent for the top two percent (over $250,000).

And so the President offers his compromise to the Republicans, which is to make the bulk of the Bush tax relief permanent, and to extend the tax relief for the top two percent for a finite period of time. He chose his words carefully, but that is what I take from it. He also signaled a willingness to make a deal on spending, but prefers his “three year freeze” to the John Boehner approach of rolling back to 2008 levels. There will be a middle ground found that will serve both in the short term. The base will howl at the extension of the tax cuts for the top two percent, but it is the best deal the President will be able to make. Will John Boehner be able to deliver any Republican votes for this deal in the lame duck session? Will the President buckle if the Republicans hold out for making the tax cuts for the top two percent permanent? Let the negotiations begin.