In the aftermath of President Obama's lopsided victory in the presidential election, there was a general consensus that he held a winning hand as he began negotiating a budget deal with the GOP to avoid going over the fiscal cliff. Obama campaigned on a pledge to raise taxes on households making more than $250,000 a year. A majority of Americans support that position. And Republicans were painted into a corner: If they didn't accept Obama's position, all the Bush tax cuts would expire at the end of the year, drastically raising taxes on all Americans. If the GOP blocked Obama, the thinking went, voters would blame Republicans for raising everyone's tax bill in order to protect the rich.

Obama was so firm on the $250,000 threshold that he reportedly told Speaker John Boehner (R-Ohio) that it was not even a part of the negotiations. "I get that for free," he said, referring to $800 billion in revenue that the tax hike on America's rich would generate. And yet, with the midnight deadline fast approaching, it appears that Obama has dropped his hardline stance on taxes. According to Politico, Vice President Joe Biden and Senate Minority Leader Mitch McConnell are hammering out a last-minute deal that would raise taxes on households with more than $450,000 in annual income, and individuals with $400,000.

That's not a lot of revenue. Indeed, as Jonathan Chait at New York notes, "the $250,000 a year threshold was too high to begin with." Now, in exchange for raising the threshold to $450,000, Republicans reportedly may agree to extend unemployment benefit insurance for two million out-of-work Americans. The fiscal cliff's automatic spending cuts would presumably be punted to another date (possibly setting up — ugh — yet another fiscal cliff scenario).

In other words, it looks like all Democrats will get are the unemployment benefits, which are temporary, and a tax rate hike on less than 1 percent of Americans.

What does the GOP get? A possibly permanent extension of almost all the Bush tax cuts. And a lot of leverage for future negotiations: Early next year, Congress will debate whether to raise the debt ceiling, and at that point Obama will not hold any cards. With the U.S. at risk of defaulting on its debt, Obama will come under immense pressure from Republicans to match a "dollar of spending cuts for every dollar of debt-ceiling increase," says Ezra Klein at The Washington Post.

The Obama administration has drawn a line in the sand on the debt ceiling, saying raising it is not up for negotiation. But what Republican will believe him after he caved on taxes? After he exchanged his strongest negotiating position in years for a trickle of revenue? Unsurprisingly, liberals are furious. "Suddenly that sinking feeling, the sense that you've got a leader you can count on to wimp out when it matters, is back," says Paul Krugman at The New York Times.