President Obama had opposed further tax cuts for the rich at the expense of the budgetary deficit, but would have allowed the tax cut to continue for those who could least afford to pay heightened taxes at this time, but this was not to be the case due to stern opposition from the Republicans.
The president agreed to a two-year extension of all Bush-era tax cuts in exchange for extending federal unemployment insurance.
The Republicans, since the 2010 mid-term elections now control the senate and are now in a position strongly oppose and almost cripple the government. The Republicans have therefore ran counter to the Obama administration in opposing tax cuts for the poor only, as they argue that all must be tax, or non at all.
Democrats had argued that any further extension of the Bush Tax Cuts, would have increased the budget deficit by some $700 billion.
Obama has since decided to continue the tax cuts for all for another two years. This will lead to a time of elections for the office of presidency. Will the Republicans be remembered for the imposition of the tax cuts for all, and therefore the large whole in the budgetary deficit? Or will Obama pay for not sticking to his guns on the issue.
Without the compromise, middle-income families would become "collateral damage for political warfare here in Washington," Obama said.
"This compromise is an essential step on the road to recovery," Obama said. He condemned Republicans for insisting on permanent tax cuts for the wealthiest Americans "regardless of the cost of impact on the deficit."
Federal Unemployment Insurance
The plan outlined by Obama would extend aid for the long-term unemployed for another 13 months. The payroll tax which funds Social Security and Medicare, would be cut by 2 percentage points during 2011, to help stimulate employment.
The Federal Unemployment Insurance programs provide unemployment benefits to eligible workers who become unemployed through no fault of their own, and meet certain other eligibility requirements.