I'm coming around to Ezra Klein's thinking on how Democrats should proceed on the tax cuts. Klein said that the Dems should go ahead and extend everything, but package it with UI and a debt ceiling extension. I think he might be right, but only if they go whole hog, which means adding whatever else the Democrats want to pass in this Congress, beginning with DADT repeal.
I know they put repeal on the defense bill, but that is perhaps too clever by half; it's a must-pass for Democrats as well as Republicans, so it doesn't really give the Dems as much leverage as they might have thought. But Democrats would certainly be willing to bluff that they'll let the tax cut bill go down over DADT, no? Seems like the perfect vehicle -- Democrats would be able to claim they support the tax cuts, and that Republicans are blocking tax cuts because of their (highly unpopular) obsession with gays and lesbians.
Basically, I see two reasonable paths for the Dems in how to package votes in the lame duck session moving forward. One is that they could tough it out on taxes. No question but that the Democratic position polls well, and perhaps they might have the votes to get it done -- or at least put the Republicans in a position to spike it in the Senate. The other path is to surrender in some way on taxes (three year extension on everything, for example), and then toss everything else Democrats want onto that bill.
Which one is the better path? I'm really not sure. It depends in part on whether the Democrats actually have the votes to pass their preferred tax plan. It also depends, if they don't have the votes there, whether they actually care about the possibility of passing no tax bill at all. If they're willing to take that risk, however, it may make sense to give it a try.