The President and key Republican Congressional leaders met yesterday, and while concrete progress was not made on specifics there appeared to be some dialing back of the hostile rhetoric that has been abundant for some time now. Both sides have been maneuvering for position on key legislation, and I think the outlines of some deals have begun to take shape. What are they?

1) The extension of the Bush tax cuts. The very best deal Democrats will get is to “decouple” the tax cuts for the top tier from the tax cuts for everyone else. If the President manages to extend the top tier for a finite period of time while permanently extending the cuts for everyone else it would be a major coup, and Democrats should be willing to settle for that. Such a deal would bring howls of protest from right and left.

2) Extension of unemployment benefits. If a deal is struck on the tax cuts look for a quick deal on another extension of unemployment benefits, with some tip of the hat by Democrats to finding budgetary offsets to the cost of the extension.

3) The ratification, in the lame duck session, of the START treaty with Russia. This is a major issue for the President and the Country. It is also the area in which the Republicans are most easily moved by direct contact with the President. He has the right arguments on the Treaty, and the Republicans know it. But I believe that their opposition has been a “hold the Treaty hostage” action until progress is made on domestic issues that they have a concern over. If ratification occurs in the lame duck session then it will be a major victory for the President, and will enhance his prestige internationally. He cannot afford stalemate on this Treaty.

So the “new atmosphere” will be put to the test immediately. No question that the Republicans are in a much stronger position, but the Presidency has extraordinary powers to shape events if utilized properly. If both sides crash and burn on these items in the lame duck session you will necessarily have to have bitter recriminations and posturing, which will start the new session off real badly. Both sides need a deal. Will the grown ups step up to the plate?