No decision has been reached, but this is the first test of the President's resolve with the new Congress -- and he should be tough as nails. The economics and politics both dictate it.
Taxpayers in the top 1 percent don't need it (they are now getting almost a quarter of all national income, the highest percent since 1928).
They don't deserve it (they got the lion's share of the benefits of the 2001 and 2003 Bush tax cuts, and have had no reason to expect a continuation of their windfall).
They won't spend it to stimulate the economy (top earners save a much higher proportion of their income than the middle class).
And giving it to them blows a giant hole in
the budget (the Joint Tax Committee estimates the cost of extending the
Bush tax cuts for the top 1 percent to be $61 billion in 2011 alone.)
In political terms, a strong stand enables the President to clearly demonstrate whose side he's on (the working and middle class that's still bearing the brunt of this lousy economy) and whose side the Republicans are on (the powerful and privileged who brought much of this on, and who are now doing just fine).
The only compromise he should be prepared to make is to extend the Bush tax cuts to the bottom 99 percent (rather than the bottom 98 percent), and for two years rather than ten. The top 1 percent begins at around $500,000 rather than $250,000.
This would allow the President to even more sharply illustrate the extraordinary concentration of income at the top, while robbing Republicans of their debating point about small business (just about all small business owners with payrolls earn under $500,000).