I think he wants a deal. I think he wants an end to crisis, partisan politics. But he also holds the cards and he knows it. If the republicans don't accept his deal, then yes, they will vote for an elimination of the Bush tax cuts across the board and spending cuts according to the sequestration plan. Republicans can negotiate and get compromises on about everything but the tax cut. They had to win the election to win that.
US taxes are low now ... a little over 15% of GDP. Lower than at any point since 1950 (14.4% of GDP). The US fought 2 wars and had a tax cut.
The republicans have been trying the Starve-The-Beast (STB) plan for decades. They know that they cannot reduce Social Security and Medicare by popular vote. So they have worked to create a fiscal crisis where economic triage will lead to cuts being viewed as necessary. But they lost this current election after they have spent a lot of time making the current fiscal crisis come due in the post-election window.
The republicans can make the US look bad and dysfunctional in the world, and they can keep the pot boiling, but the blame will fall on them. They can raise taxes, cut spending, and have say in the long term fiscal plan, or they can be the party that loses every election in 2014 and 2016.
Debt sucks. When you borrow and spend today, you have less money when you pay it back tomorrow. I'm paying for 30 years for the house I bought. I pay for most things as I go, but I use debt, and I recognize that paying it back takes money out of my income. The US has borrowed a lot of money. Paying it back is not a pleasant proposition. It may well be as we progress towards fiscal responsibility we choose to pare back the safety net (it shouldn't be a hammock).
If I had my 'druthers I would see the ENTIRE Bush tax cuts rolled back, over a 3 year period. 3% tax rate hikes at 1% per year. We would cut the heck out of defense and security. We would re-write the tax code to a simple progressive rate, using REAL demographic income distributions. But that should not be today's mission. Today should simply accomplish small increases in tax revenues, small cuts to spending, and a general outline of future spending totals and revenue totals.
I think it is a misread to say President Obama wants to see the expiration of the temporary tax cuts and the introduction of the sequestration spending cuts. I think he wants to see a functional political atmosphere more than just getting his preferred plan thru. He absolutely can force his plan, and he is not budging on bits of it. The republicans have no choice on the tax increases on the top 2%. What they have to decide is whether they want to lose gracefully (because they HAVE lost) or lose disgracefully. They can probably win some small concessions for a graceful loss. And they should understand that the debt ceiling is going to be a similar situation. They just CAN"T force drastic cuts to Social Security or healthcare.
The President wants a tax increase on the top 2%, and a set of mild spending cuts. And a general agreement to work together towards fiscal responsibility. In general, if the economy grows (and that looks promising) and the tax rates creep up (for everyone eventually), then the government can get to the budget surplus needed for debt reduction. We need to get back to the 20% of GDP tax revenues of 2000, and hold government spending in check as the economy grows. I think President Obama would like to leave office with a fiscal path to responsibility and a healthy economy. That requires some republican cooperation.
Obama was raised in a different mode than you and I. Wealth means nothing to him as he pursues his life long ambition to close the gap between those that have and those that don't.
Marx did it in Russia, Castro did it in Cuba, ... the list goes on... Venezuela, etc. The man is a left wing Socialist and can't see the European forest for the trees. He doesn't like or understand the free enterprise capitalist system that made this country the envy of the world. This country is polarized for sure. Old proven democratic values on one end and Obama values at the other end.
Be very afraid.