- Associated Press - Tuesday, December 7, 2010

WASHINGTON (AP) — President Obama scheduled a short-notice press conference Tuesday to sell a new tax cut compromise that makes big concessions to Republicans as the White House scurried to assuage angry Democrats.

Vice President Joseph R. Biden Jr. traveled to the Capitol to lobby senators as liberal groups attacked the proposal that would extend Bush-era tax cuts for all Americans, including the richest, for two years. They argued that Mr. Obama had abandoned a long-held position in fashioning the compromise.

Mr. Obama promised in his 2008 campaign — and many times since — that these breaks would be continued only for the middle-class. But some in his own party and liberal groups attacked it, and even the Democratic leadership in Congress gave it a cool, noncommittal reception.

Mr. Obama’s question-and-answer session was scheduled to take place before a closed House Democratic caucus, where liberal lawmakers were all but certain to lambaste it.

Besides holding current tax rates in place for all, the proposal would extend unemployment benefits and reduce payroll taxes for a year, which would help many lower-income Americans.

The liberal group MoveOn said its 5 million members oppose the plan, saying the wealthiest Americans don’t need tax cuts that were scheduled to expire this month. “The president’s commitment to bipartisanship should not mean leaving principles behind,” MoveOn said.

Mr. Biden urged congressional Democrats to quickly embrace the plan, saying Congress needs to move on to other issues before the Democrats lose control of the House in January.

House Speaker Nancy Pelosi said the compromise plan shows that Democrats want to help low- and middle-income workers while the GOP’s chief concern is the wealthiest Americans.

“We will continue discussions with the president and our caucus in the days ahead,” Mrs. Pelosi, California Demorat, said in a statement issued 18 hours after Mr. Obama laid out his plan.

Top Democratic staffers speculated that, for now, more than half of House Democrats seem inclined to oppose the plan. Republican aides said many GOP members probably would back it, because it grants their chief goal of extending income tax cuts for all Americans.

Mr. Obama has said that he still prefers to let the tax cuts expire for households earning more than $250,000 a year. Mr. Obama, while acknowledging Democratic unrest, agreed to extend all the tax breaks for two years, noting that Republicans wanted a permanent extension.

Mr. Obama said Monday the concession was the only way to prevent a congressional impasse that would cause the tax cuts enacted in 2001 and 2003 to expire, as scheduled, for all taxpayers. With 9.8 percent of Americans unemployed, he said, that would be “a chilling prospect.”

Liberal groups were furious at his willingness to bend, but Mr. Obama said he rejects “symbolic victories” that hurt average Americans.

His plan also would renew jobless benefits for the long-term unemployed, and grant a one-year reduction in Social Security taxes paid by workers but not by employers.

The president had barely stopped speaking Monday before top Republicans applauded his proposals, while most Democrats kept a sullen silence.

Senate Minority Leader Mitch McConnell, Kentucky Republican, thanked Mr. Obama for “working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth.”

Because they hold solid majorities in both chambers, Democrats must provide many votes for the tax package to become law, even if Republicans overwhelmingly support it.

Some Democrats quickly denounced the plan. “Senate Republicans have successfully used the fragile economic security of our middle class and the hardship of millions of jobless Americans as bargaining chips to secure tax breaks for the very wealthiest among us,” said Sen. Tom Harkin, Iowa Democrat.

Urging his colleagues to quickly back the compromise was Sen. Joe Lieberman, Connecticut Independent, who caucuses with the Democrats. “This tentative agreement is an example of Washington working across party lines to confront the challenges facing our nation,” said Mr. Lieberman, who is up for re-election in 2012.

The emerging agreement includes tax breaks for businesses that the president said would contribute to the economy’s recovery from the worst recession in eight decades.

The proposed Social Security tax cut would apply to virtually every working American. For one year they would pay 4.2 percent of their income, instead of 6.2 percent, to the government retirement program, fattening U.S. paychecks by $120 billion in 2011.

Someone earning $40,000 a year would receive a $800 benefit, and a $70,000 earner would save $1,400, officials said. More than three-fourths of all Americans pay more in these so-called payroll taxes than in federal income taxes.

The White House said money from other sources would be shifted so the Social Security trust fund loses no revenue.

Mr. Obama said he reluctantly made another concession to Republicans, concerning the estate tax. It would tax estates worth more than $5 million at a rate of 35 percent, a GOP goal. Democrats favored a $3.5 million threshold, with a 45 percent tax on anything higher.

Mr. Obama’s willingness to compromise with Republicans comes a month after the GOP won resounding victories in congressional, gubernatorial and state legislative elections.

Addressing his liberal critics Monday, Mr. Obama said, “Sympathetic as I am to those who prefer a fight over compromise, as much as the political wisdom may dictate fighting over solving problems, it would be the wrong thing to do.”

“I’m not willing to let working families across this country become collateral damage for political warfare here in Washington,” he said.

Under his plan, unemployment benefits would remain in effect through the end of next year for workers who have been laid off for more than 26 weeks and less than 99 weeks. Without an extension, 2 million individuals would have lost their benefits over the holidays, the White House said, and 7 million would have done so by the end of next year.

Mr. Obama’s proposal also would extend a variety of other tax breaks for lower and middle-income families, including the Earned Income Tax Credit and the child tax credit.

Associated Press writer Julie Pace contributed to this report.

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