There’s good news for American taxpayers and bad news for the President and Democrats. Today, the President announced a tentative deal with the Republicans in Congress to extend the Bush era tax cuts at all income levels for two years. In return, the President secured Republican approval to keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy.

The tentative agreement highlights the chaos and strains that Mr. Obama faces in his own party as he plots a course between his desire to get things done and retreating on his own principles.

“It’s not perfect, but this compromise is an essential step on the road to recovery,” Mr. Obama said. “It will stop middle-class taxes from going up. It will spur our private sector to create millions of new jobs, and add momentum that our economy badly needs.”

The package would cost about $900 billion over the next two years, to be financed entirely by adding to the national debt, at a time when both parties are professing a desire to begin addressing the nation’s long-term fiscal imbalances.

The tentative deal would include the:

• Reduction of the 6.2 percent Social Security payroll tax on all wage earners by two percentage points for one year
• Continuation of a college-tuition tax credit for some families
• Expansion of the earned-income tax credit
• Provision to allow businesses to write off the cost of certain equipment purchases
• Top rate of 15 percent on capital gains and dividends would remain in place for two years
• Alternative minimum tax would be adjusted so that as many as 21 million households would not be hit by it
• Provision for a 13-month extension of jobless aid for the long-term unemployed

Perhaps the biggest concession by the President to the Republicans was on estate taxes. Mr. Obama agreed to a deal on the federal estate tax that allows an exemption of $5 million per person and a maximum rate of 35 percent. — a higher exemption and far lower rate than many Democrats wanted.

“The House Democrats have not signed off on any deal,” Representative Chris Van Hollen of Maryland, who has been representing House Democrats in formal negotiations on the tax issue, said Monday night. “We will thoroughly review and discuss the proposed package in the caucus.”

Some senior Democrats said an agreement by Mr. Obama to accede to Republican demands on the estate tax could lead to a revolt among lawmakers. Mr. Obama noted that he, too, still strongly disagreed with the Republican insistence on extending the tax breaks for the highest earners. “Ever since I started running for this office, I’ve said that we should only extend the tax cuts for the middle class,” he said, acknowledging that he had been thwarted in one of the chief goals of his presidency.

These major concessions by the President are substantial. They mark the beginning of a new trend – marked infighting between Obama and Democrats, increased compromise with Republicans on issues and less support by the American public.

And it’ll get worse. In January, the Republicans gain control of the House.

All politics aside, most Americans believe the extension of the Bush era tax cuts is essential to economy recovery – if just for the psychological lift it represents.

Source: nytimes.com