As part of the deal, expiring unemployment benefits for millions of Americans will be extended for 13 months. Just as important, there is now a real prospect that the Senate will act on repeal of the "don't ask, don't tell" policy and ratification of the START treaty before this month's lame duck session ends. Is extending tax cuts for the richest Americans (and blowing another hole in the deficit in the process) a steep price to pay for all of this? Absolutely. But that's politics: Obama took the best deal he could possibly get...
...Note that the deal also includes a reduction in the Social Security payroll tax and an expansion of the earned income tax credit and the college tuition tax credit. This is on top of the extension in unemployment benefits. These measures have one thing in common: They are stimulative in nature.
McConnell and Kyl, being the odious, nihilistic saboteurs that they are, held the entire lame duck session hostage over rich people's tax cuts. Among the things held hostage? Unemployment insurance, meaning that if Obama played chicken with the Republicans and they didn't blink, millions of people could have had their last monetary lifelines cut just in time for Christmas. Obama could not let that happen.
Was there really a chance the GOP would have let unemployment insurance expire? Well, Republicans did just get elected partly on angst over entitlement spending. Besides, Republicans and conservatives are ideologically unfriendly toward such generosity in the first place. You tell me.
And besides, what's the endgame there? The Republicans could always just let the lame duck session end and then bludgeon the Democrats over letting everyone's tax cuts expire. Then when the new Congress convenes, pass the tax cuts all over again and dare the Democrats and Obama to vote against them. Democrats get hammered several times on the same issue and get nothing in return. No unemployment insurance, no additional stimulus, no START treaty, no DADT repeal, nothing.
By admitting Republicans have the upper hand and compromising on tax cuts, however, Obama was able to extract a fair amount of stimulus out of the deal and broke the logjam for potential work on DADT and the START treaty. I'm not a fan of tax cuts as stimulus, but when the choices are stimulus via tax cuts and nothing at all, you take what you can get. If either of the other things passes, so much the better.
Furthermore, Obama kept the tax cuts from becoming permanent. Will relitigating the issue in 2 years just mean Obama loses again? Maybe, and yes a 1 or 3 year extension would have been better politically, but at least there's a chance sanity could win out next time.