Donald Lambro

The economy has slowed to a feeble 2-percent growth rate, unemployment is stuck at nearly 10 percent, Democrats had their clock cleaned in the elections, and a discouraged President Obama wants to compromise with the Republicans on tax cuts.

In what appears to be the start of a policy-making reversal on the economic centerpiece of his 2008 campaign -- raising the top tax rates on incomes of $200,000 or more -- Obama is crying uncle and sending signals that, in the words of the Republicans and even some Democrats, "this is not the time to be raising taxes."

Certainly not on struggling small-business owners, entrepreneurial risk-takers and much-needed venture capital investors in the midst of a mediocre recovery.

Changing his tone in the aftermath of the GOP's sweeping gains in Congress, Obama said on CBS's "60 Minutes" that a GOP proposal to extend the Bush administration's full array of tax cuts for another two years is a "basis for conversation."

For the past two years he has been arguing that the government cannot afford to retain the Bush tax cuts for millionaires, even though the two top tax rates also apply to millions of small employers, working couples, anyone who has a capital gain, or those who live on dividends.

Now he is shifting to a fallback position, saying, "My No, 1 priority coming into this (congressional debate) is making sure that middle-class families don't see their tax rates go up on January 1."

That is the date when the 2001 and 2003 Bush tax cuts will expire if the president and the Republicans cannot agree to continue them, either permanently as Republicans would like, or for an extended period of time.

Obama has the ultimate presidential weapon, the veto, but he has also signaled that he does not want to be the one blamed for letting all the tax rates rise on low-, middle- and upper-income Americans.

The Republicans, however, hold the stronger hand, even in this Democrat-run, lame-duck Congress. As many as 30 to 40 House Democrats, many of whom were defeated, either signed a letter to Speaker Pelosi urging temporary extension of the tax cuts, or expressed in their campaigns opposition to any income tax hike at this time.

In the Senate, at least four Democrats are on record as opposing tax increases now, and others, who will be among the 23 Democrats facing re-election in 2012, will likely join them out of self-preservation.

Obama and Democratic leaders have blamed the Republicans for blocking a vote on the tax cuts. But it was a divided White House and opposition from Democrats in both chambers that has led to the end-of-the-year tax showdown.

Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.