President Barack Obama on Monday announced a bipartisan agreement with opposition Republicans on extending current tax rates for all Americans, while continuing government compensation for unemployed Americans and providing tax credits to help businesses and strengthen the economy.
The compromise comes after a week of intense negotiations between the White House and Republicans on Capitol Hill on the issue of tax rates approved by Congress in 2001 and 2003 under former President George W. Bush.
Republicans had threatened to bring end-of-year work in the U.S. Senate to a halt, unless they received an assurance that lower income tax rates would be extended for the wealthiest two percent of Americans as well as the middle class.
For months, President Obama insisted that permanently extending tax cuts for the wealthy would be unfair to middle class Americans and add $700 billion to the government deficit.
What the president calls a framework agreement involves a two-year temporary extension of all Bush-era tax cuts, continuing unemployment benefits for 13 months, and reducing payroll taxes for workers to encourage businesses to hire new employees.
Citing what he called real and profound differences between Democrats and Republicans, Mr. Obama said he decided to move to break a stalemate that could have continued into the new year.
"I know there are some people in my own party, and in the other party, who would rather prolong this battle, even if we can't reach a compromise," said President Obama. "But I am not willing to let working families across this country become collateral damage for political warfare here in Washington. I am not willing to let our economy slip backwards, just as we are pulling ourselves out of this devastating recession."
The president spoke after intense negotiations, headed on the White House side by Vice President Joe Biden and Treasury Secretary Timothy Geithner. Mr. Obama also met late Monday with House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and other fellow Democrats who, reports, say urged him not to endorse a compromise.
On Capitol Hill, Democrats and Republicans stressed that the deal was not yet final. Lawmakers will be holding additional conversations with the White House, and the compromise would be subject to votes in the House of Representatives and the Senate.
The president said he is confident that in two years, as Americans make tough choices about bringing down the $1.3-trillion federal government budget deficit, it will become apparent that tax cuts cannot be extended again. But for now, he said, the compromise is critical to support the nation's economic recovery.
"It offers us an opportunity that we need to seize," said Obama. "It's not perfect, but this compromise is an essential step on the road to recovery."
The president says he wants a final agreement and congressional approval before lawmakers leave Washington for the Christmas break. Mr. Obama vowed that his focus next year will be on continuing the economic recovery and creating more jobs.