President Barack Obama on Monday unveiled a compromise deal to extend all Bush-era tax cuts for two years, giving ground to emboldened Republicans who won big in last month's congressional elections.
After meeting Democratic leaders, Obama announced what he called a "framework" agreement with Republicans that would renew tax cuts not just for the middle class -- as he had sought -- but also for wealthier Americans, as Republicans wanted.
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The tentative plan is expected to draw resistance from some liberal Democrats, who have expressed disappointment that the president was bending to Republican demands while not gaining enough in return.
The tentative tax-cut deal, which is expected to extend breaks on dividends and capital gains as well, also calls for a 13-month extension of unemployment benefits, which could placate some Democrats.
But Obama conceded to Republican demands on the estate tax, by proposing a 35 percent tax with a $5 million individual exemption level.
"We cannot play politics at a time when the American people are looking for us to solve problems," Obama told reporters. "I am confident ultimately that Congress is going to do the right thing."
Obama insisted that compromise was necessary before Congress adjourns later this month to avoid allowing the middle class to face higher taxes when all of the Bush-era cuts expire on Dec. 31.
In a speech at a community college in North Carolina, Obama had hinted at a possible agreement that would at least temporarily extend Bush-era tax cuts for wealthier Americans -- as Republicans want -- rather than strictly for families making less than $250,000, as he and his Democrats preferred.
Liberal supporters accuse Obama of being willing to compromise in the tax battle in a bid to find common ground with Republicans, who have been emboldened by big gains in the Nov. 2 congressional elections.
New York Times columnist Paul Krugman argued in a column on Monday that Obama should simply let taxes rise for all Americans rather than agreeing to allowing tax cuts continue for the wealthy.