The White House and Congressional Republicans have reached a deal that will extend the Bush tax cuts for all Americans for two more years.
In a statement this evening at the White House, President Obama spelled out the terms of a major agreement that will also extend unemployment benefits, among several other provisions.
"We have arrived at a framework for a bipartisan agreement. For the next two years, every American family will keep their tax cuts. Not just the Bush tax cuts, but those that have been put in place for the last couple of years that are helping parents and students and other folks manage their bills," Obama said.
Sources tell ABC News that the president pushed for several items in the deal, including a 13-month extension of unemployment benefits beyond the current limit of 99 weeks. That will help some 9 million Americans.
The deal also includes a one-year payroll tax reduction for employees, from 6.2 percent to 4.2 percent for individuals. The Child Tax Credit will also be extended, along with extensions of the Earned Income Tax Credit, and the tax credit for college tuition.
According to sources, the agreement will also allow businesses to deduct 100 percent of certain investments in the next year, an idea endorsed by Obama in September. The agreement also calls for holding the estate tax at 35 percent for two years, with a $5 million floor.
Some Democrats have argued that the deal, which has not yet officially been agreed upon, doesn't go far enough. They say that the president signaled too quickly that he was willing to cave on the issue of extending tax cuts for wealthier Americans.
"I think a lot of people are wondering why President Obama doesn't fight for what he believes in a lot more," said Rep. Anthony Weiner, D-N.Y. "It seems like it goes from zero to fold in pretty fast time."
President Obama acknowledged the political grumbling, but he argued that a compromise was necessary to protect the American economy.
"Make no mistake, allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family, and that could cost our economy well over a million jobs," Obama said.
"I have no doubt that everyone will find something in this compromise that they don't like. In fact, there are things in here that I don't like, namely the extension of the tax cuts for the wealthiest Americans and the wealthiest estates," Obama said. "But these tax cuts will expire in two years, and I'm confidant that as we make tough choices about bringing our deficit down ... it will become apparent that we cannot afford to extend those tax cuts any longer."
White House, Congressional Republicans Reach Tax Cut Compromise
Republican leaders reacted to the president's announcement more positively than some Democrats.
"I appreciate the determined efforts of the President and Vice President in working with Republicans on a bipartisan plan to prevent a tax hike on any American," said Senate Republican Leader Mitch McConnell in a statement.
All parties in the negotiations supported continuing the lower Bush tax rates on incomes under $250,000 per year for couples, and $200,000 for individuals, so the average U.S. household, with an income of $49,777, will continue to keep its tax cut of $2,142.
But President Obama originally told voters that taxes on income of more than $250,000 should increase.
On the campaign trail in Reno, Nev. in February 2008, Obama called for a rollback of the Bush tax cuts on the wealthiest Americans. This deal does not do that.
The family of an average Wall Street banker, with a wage of $311,330, will keep $9,318 as opposed to the $8,012 the president wanted them to keep.
The compromise follows days of nonstop negotiations between the White House and congressional leaders and two failed attempts by Democrats over the weekend to extend the tax cuts for everyone except high earners.
On Saturday, after the Senate vote, President Obama met with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to tell them he was open to any compromise that included temporary breaks for middle class families and an extension of jobless benefits. Jobless benefits began expiring last week for some two million Americans.
Senate Majority Whip Richard Durbin, D.-Ill., insisted Sunday that a deal with Republicans must include an extension of unemployment benefits. He called it "unconscionable" that benefits might expire before Christmas, and that at the same time tax cuts might be extended to people making more than $1 million.
Meanwhile, Utah Republican Orrin Hatch expressed willingness to accept something less than a permanent extension of the cuts for the wealthy. "We would like it permanent," he said, "but we don't have the votes." He said he could settle for a two- or three-year extension.
Obama met early Monday with his two chief negotiators -- Budget Director Jack Lew and Treasury Secretary Timothy Geithner -- to refine strategy before heading off to Winston-Salem, N.C., to deliver a speech at Forsyth Technical Community college.
"If we're willing to put aside short-term politics, if our objective is not simply winning elections but winning the future then we should be able to get our act together here, because we are all Americans, and we are in this race together," he said.
ABC's Matt Jaffe and Devin Dwyer contributed to this report.