Wed, Dec 08, 2010 - Page 1 News List

Obama announces agreement on tax cut extensions

AP, WASHINGTON

US President Barack Obama and opposition Republicans agreed to extend expiring tax cuts for all Americans and to renew benefits for the long-term unemployed — a compromise that was distasteful to the US leader and angered many in his liberal base.

Obama campaigned for the presidency on the promise that he would leave lower tax rates in place for middle and lower-income Americans while canceling cuts for families earning more than US$250,000 a year. The reductions were put in place during the administration of former US president George W. Bush and were set to expire at the end of the year.

In announcing the compromise at the White House on Monday night, Obama said he did not like the deal, but had little choice.

Republicans were refusing to go along with reinstating higher rates for high income earners, forcing Obama to capitulate or see taxes go up dramatically for hard-pressed middle and lower-income Americans in a period of economic malaise and high unemployment.

“Make no mistake, allowing taxes to go up on all Americans would have raised taxes by US$3,000 for a typical American family and that could cost our economy well over a million jobs,” he said.

In return for the tax deal, Obama won Republican agreement to drop opposition to continued benefits for the long-term unemployed, which ran out last week. Those payments now will last 13 additional months.

The compromise foreshadowed US politics for the coming two years at least, after Republicans won a landslide victory in last month’s election that put them in control of the House of Representatives and significantly diminished the Democratic majority in the Senate.

Obama’s announcement marked a dramatic reversal of his long-held insistence that the nation could not afford continued tax breaks for the wealthy. He sought to put a good face on the deal, however, saying the agreement was temporary, not the permanent renewal that Republicans had long sought.

The tax compromise will now move through both houses of Congress in the so-called lame duck session of Congress, the few weeks of legislative activity between the Nov. 2 elections and the end of the year.

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