Always read David Leonhard

 NYTimes: In Tax Cuts, the Options Run Short 

His main point is that the democrats have once again painted themselves in a corner. If they can't convince two republicans in the senate to support the extension of the under-$250,000 tax cuts, or some sort of compromise, the the GOP can let all the cuts expire and pass retroactive legislation extending them all permanently once they have the house majority in January. Then the burden would be on the Senate or Obama to reject or veto the extension, expiring all the cuts.

This would be a huge political blow, one that almost all democrats of influence want to avoid (Obama pledged to not raise taxes on those making less than $250,000), and so the real question is how big the Democratic retreat will be to avoid being in this position.  Or, what can they negotiate for to allow them to give the GOP all they want without totally losing faith.

My bet? Tie it to DADT repeal and unemployment extension. But no one cares about the unemployed anymore so I wouldn't be surprised if the democratic "win" would be to extend all the cuts temporarily for 3 years, so it wouldn't be an election year issue (the GOP will push for a 2 year or permanent extension. They'll float 3 years as a compromise.)

So I'm betting the Democrats are not so totally divorced from their base and economic conditions that they won't do their best to get unemployed benefit extension through. Obama's pay freeze announcement gives me very little confidence here; all I've got to go on is the audacity of hope.