White House Correspondent
Ending weeks of speculation, President Obama on Monday night announced that he had reached an agreement with Republican leadership to extend the Bush-era
tax cuts for both middle-class and upper-income earners for another two years. Speaking to disaffected Democrats who have long been opposed to such a move -- estimated to add $60 billion
to the deficit each year they are in place -- the president said, "As sympathetic as I am to those who would rather fight, it would be the wrong thing to do." The American people, Obama asserted, "are looking to us to solve problems" rather than engage in "political posturing."
In exchange for the extension of the tax cuts for individuals earning more than $200,000 per year and families making over $250,000 per year, Republican leaders agreed to extend unemployment insurance for another 13 months -- reaching an estimated 2 million Americans
whose insurance expired on Nov. 30.
The president was also able to secure temporary extension of stimulus-related tax cuts including the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit, which provides tax relief for students. According to senior White House officials, both sides agreed to extend the Alternative Minimum Tax for two years.
President Obama also announced a 2 percent employee payroll tax cut, which will go into effect next year. (Under current law, employees pay 6.2 percent of their income toward Social Security. With the new provision, they will pay 4.2 percent). Businesses will also receive an extension on tax credits that allow them to write off new investments, in a bid to encourage job growth.
Obama said he was forced to cede ground on the Estate Tax, which he had agreed to set at 35 percent rather than the White House's preferred 45 percent rate. For his part, he characterized the compromise as "a more generous treatment of the tax than I think is wise."
Obama was frank in his assessment of the compromise, saying he "completely disagreed" with the largely Republican-held view that the Bush tax cuts should be extended for upper-income earners. But he sounded a pragmatic note in his assessment that the GOP would block an extension for middle- and working-class families unless they secured an extension for the wealthy. "Without a willingness to give on both sides," said Obama, "there's no reason to believe this stalemate won't continue into next year. I'm not willing to let that happen."
He offered that the compromise was "not perfect" but that it was "an essential step on the road to recovery." Given the fact that the Bush tax cuts remain temporary, it is clear that debate will be taken up again in two years -- likely in the middle of the 2012 presidential election. Despite this, the president maintained that time -- and further economic recovery -- might lessen the controversy around the issue.
"I'm confident that as we make tough choices about bringing our deficit down, as I engage in a conversation with the American people about the hard choices we're going to have to make to secure our future and our children's future and our grandchildren's future," he said, "it will become apparent that we cannot afford to extend those tax cuts any longer."